As filed with the Securities and Exchange Commission on November 20, 2020.
Registration No. 333-249417
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
AMENDMENT NO. 1
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________________
Virpax Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
2834 |
82-1510982 |
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(State or other jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer
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1554 Paoli Pike, #279
West Chester, PA 19380
(484) 880-4588
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
_________________________________
Anthony Mack
Chief Executive Officer
1554 Paoli Pike, #279
West Chester, PA 19380
(484) 880-4588
(Name, address, including zip code, and telephone number, including area code, of agent for service)
_________________________________
Copies to: |
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Michael J. Lerner
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Jeffrey J. Fessler
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_________________________________
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement is declared effective.
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. £
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
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. £
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 statement number of the earlier effective registration statement for the same offering. £
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 £ |
Accelerated filer £ |
Non-accelerated filer S |
Smaller reporting company S |
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Emerging growth company S |
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 to Section 7(a)(2)(B) of the Securities Act. £
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to Be Registered |
Proposed
|
Amount of
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|||||
Common Stock, $0.00001 par value per share(3) |
$ |
17,250,000.00 |
$ |
1,881.98 |
|
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Underwriter’s warrant(4) |
|
— |
|
— |
|
||
Common Stock underlying underwriter’s warrant(5) |
$ |
1,078,125.00 |
$ |
117.62 |
|
||
Total |
$ |
18,328,125.00 |
$ |
1,999.60 |
(6) |
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(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”).
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
(3) Includes shares of common stock which may be issued on exercise of a 30-day option granted to the underwriters to cover over-allotments, if any.
(4) No separate registration fee required pursuant to Rule 457(g) under the Securities Act.
(5) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. We have calculated the proposed maximum aggregate offering price of the common stock underlying the underwriter’s warrants by assuming that such warrants are exercisable at a price per share equal to 125% of the price per share sold in this offering
(6) Previously paid.
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 which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary 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 NOVEMBER 20, 2020 |
1,363,637 Shares
Common Stock
Virpax Pharmaceuticals, Inc |
This is a firm commitment initial public offering of 1,363,637 shares of Virpax Pharmaceuticals, Inc. common stock. Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price of our common stock will be between $10.00 and $12.00 per share.
We have applied to list our shares of common stock for trading on the Nasdaq Capital Market under the symbol “VRPX.” If our common stock is not approved for listing on the NASDAQ Capital Market, we will not consummate this offering. No assurance can be given that our application will be approved.
We are an emerging growth company under the Jumpstart our Business Startups Act of 2012, or JOBS Act, and, as such, may elect to comply with certain reduced public company reporting requirements for this prospectus and future filings.
Investing in our common stock is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 13 of this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.
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.
Per Share |
Total |
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Initial public offering price |
$ |
$ |
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Underwriting discounts and commissions(1) |
$ |
$ |
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Proceeds to us, before expenses |
$ |
$ |
____________
(1) Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the public offering price payable to the underwriters. We refer you to “Underwriting” beginning on page 128 for additional information regarding underwriters’ compensation.
The underwriters may also exercise their option to purchase up to 204,545 additional shares from us at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus to cover over-allotments, if any.
The underwriters expect to deliver our shares in the offering on or about , 2020.
ThinkEquity
a division of Fordham Financial Management, Inc.
The date of this prospectus is , 2020
1 |
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10 |
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12 |
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13 |
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50 |
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52 |
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53 |
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54 |
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55 |
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56 |
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58 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
60 |
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71 |
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98 |
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105 |
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112 |
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113 |
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115 |
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118 |
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122 |
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS |
124 |
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128 |
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136 |
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136 |
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136 |
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F-1 |
We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
We and the underwriters are offering to sell, and seeking offers to buy, our common shares only in jurisdictions where offers and sales are permitted. Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our common shares and the distribution of this prospectus outside of the United States.
i
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes thereto and the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the risks materialize, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment. Unless the context otherwise requires, we use the terms “Virpax,” “company,” “we,” “us” and “our” in this prospectus to refer to Virpax Pharmaceuticals, Inc.
Our Company
We are a preclinical stage biopharmaceutical company focused on becoming a global leader in pain management by developing and delivering innovative non-opioid and non-addictive pharmaceutical products using new drug delivery systems and technology. We are developing branded pharmaceutical product candidates for pain management by using advanced technology in an effort to enhance patients’ quality of life.
We have exclusive global rights to develop, sell and export (among other rights) a proprietary patented nonsteroid anti-inflammatory Topical Spray Film Delivery Technology for acute musculoskeletal pain (“DSF100” or “EpoladermTM”) and for chronic osteoarthritis of the knee (“OSF200”). We also have exclusive global rights to a proprietary patented injectable, long-acting “local anesthetic” Liposomal (Hydro) Gel Technology for postoperative pain management (“LBL100” or “ProbudurTM”). Additionally, we have exclusive global rights to a proprietary patented Molecular Envelope Technology (“MET”) that uses an intranasal device to deliver exogenous enkephalin for the management of acute and chronic pain, including pain associated with cancer, (“NES100” or “EnveltaTM”) and for the management of Post-Traumatic Stress Disorder (“PES200”). Enkephalins are pain-relieving pentapeptides produced in the body, and function to inhibit neurotransmitters in the pathway for pain perception, thereby reducing the physical impact of pain.
We believe the Topical Spray Film Delivery Technology could provide a pathway for additional proprietary spray formulations, with strong adhesion and accessibility properties upon application, especially around joints and curved body surfaces. Our belief is based on, in part, a recent ACP/AAFP (American College of Physicians and American Academy of Family Practice) national guideline for the treatment of non-Low Back Musculoskeletal Pain which recommends topical non-steroidal anti-inflammatory drugs (“NSAIDs”) as the first-line therapy in patients with acute pain from non-low back, musculoskeletal injuries. According to the new guideline, evidence shows that topical NSAIDs were among the most effective for pain reduction, physical function, treatment satisfaction, and symptom relief and were not associated with any significant side effects. The guideline was based on a systematic evidence review of the comparative efficacy and safety of non-pharmacological and pharmacological management of acute pain from non-low back, musculoskeletal injuries in adults in the outpatient setting and a systematic review of the predictors of prolonged opioid use.
Pursuant to a Research and Option Agreement we have entered into with MedPharm Limited (the “MedPharm Research and Option Agreement”), MedPharm will conduct certain research and development activities of proprietary formulations incorporating certain MedPharm technologies and certain of our proprietary molecules. These proprietary molecules relate to indications which include, but are not limited to, treatment of estrogen levels, Alzheimer’s disease, dementia, Parkinson’s disease, neuropathic issues, and acute and chronic pain. Under the agreement, we were granted an option to obtain an exclusive, world-wide, sub-licensable, royalty bearing, irrevocable license to research, develop, market, use, commercialize, and sell any product utilizing MedPharm’s spray formulation technology. See “Material Agreements” below for more information concerning this research and option agreement.
We believe NES100 and PES200 would support the current effort among prescribers, regulators, and patients to seek non-addictive treatment options to combat the opioid epidemic. We plan to utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and new chemical entity (“NCE”) product candidates for commercialization.
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While we are currently focused on the development of our non-opioid and non-addictive pain management pipeline of product candidates, we also plan on using our proprietary delivery technologies to develop anti-viral therapies as an anti-viral barrier to potentially prevent or reduce the risk or the intensity of viral infections in humans, including, but not limited to, influenza and SARS-CoV-2 (COVID 19). As of the date of this prospectus, activities related to our anti-viral therapies have not commenced. We plan to finance our anti-viral-related activities through the use of grants and do not plan on using any proceeds from this offering.
Our Portfolio
Our portfolio currently consists of multiple preclinical stage product candidates: Epoladerm, OSF200, Probudur, NES100, PES200 and MMS019. In the accompanying section we will describe each product candidate, its benefits, and our market strategy for each product candidate. The dates reflected in the below table are estimates only, and there can be no assurances that the events included in the table will be completed on the anticipated timeline presented, or at all.
____________
* We are also developing Epoladerm for a second indication, OSF200, which utilizes the same transdermal delivery system as Epoladerm, as a twice daily topical treatment for chronic osteoarthritis of the knee. OSF200 development plan is pending the approval of Epoladerm. In addition, we are also developing NES100 for a second indication, PES200, which utilizes the same delivery mechanism as NES100. PES200 enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain for post-traumatic stress disorder. PES200 development plan is pending a grant approval. Further, we recently entered into a Collaboration and License Agreement with Nanomerics Ltd. for the exclusive North American license to develop and commercialize a High-Density Molecular Masking Spray (“MMS019”) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. We plan to develop MMS019 primarily through grants and do not plan on using any proceeds from this offering.
Diclofenac Epolamine Metered-Dose Spray Film (EpoladermTM)
We plan to develop and market Epoladerm as a topical nonsteroidal anti-inflammatory drug (“NSAID”) treatment for acute pain. We believe Epoladerm’s proprietary spray film technology may lead to adhesion capabilities superior to those of transdermal patches (e.g. Epoladerm does not require any tape reinforcement), while maintaining comparable skin absorption capabilities to transdermal patches currently on the market. Specifically, because the Epoladerm technology does not require a patch to deliver the drug through the skin, we believe Epoladerm may have better adhesion to the skin and may have better accessibility, particularly around joints and other curved body surfaces. Additionally, because Epoladerm is a spray, we believe it will be more aesthetically appealing than transdermal patches. As a spray, Epoladerm and OSF200 (as defined below) were studied in ex-vivo skin studies (skin from abdominoplasty) and demonstrated drying times of between 60 and 90 seconds. Unlike other topical NSAIDs, Epoladerm does not require physical handling of the actual drug and enables metered dosing that provides an accurate amount of active ingredient per spray application.
When discussing nonopioid treatments for chronic pain, the Centers for Disease Control (“CDC”) notes clinicians should consider topical agents as alternative first-line analgesics, thought to be safer than systemic medications. In an August 18, 2020 article appearing in the Annals of Internal Medicine, the American College of Physicians and the
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American Academy of Family Physicians announced a joint clinical guideline, “Nonpharmacologic and Pharmacologic Management of Acute Pain from Non-Low Back, Musculoskeletal Injuries in Adults,” whereby they recommend topical NSAIDs as first-line therapy for patients experiencing pain from non-low back, musculoskeletal injuries. The clinical guideline also recommends that clinicians not prescribe opioids for these injuries except in cases of severe injury or if patients cannot tolerate first-line therapeutic options. We believe this creates a unique market opportunity for Epoladerm within the $3.3 billion (as of 2019) transdermal and topical non-opioid pain market. We plan to target our marketing and selling efforts to pain management clinics and high-prescribing healthcare practitioners, including orthopedic surgeons, rheumatologists, physical medicine and rehabilitation specialists and primary care physicians (“PCPs”).
The below image is a concept design for our metered-dose spray canister for the delivery of Epoladerm for the treatment of acute pain:
We believe Epoladerm represents a novel technology that administers a metered dose film based on our proprietary spray formulation. We are not aware of any other metered dose spray film product, on the market or in clinical development, that utilizes the same delivery mechanisms as Epoladerm. We believe that this transdermal delivery system could provide a pathway for additional proprietary spray formulations for us going forward. As a result of the Pre-Investigational New Drug (“IND”) review, the U.S. Food and Drug Administration (“FDA”) has indicated that it is reasonable for us to pursue a 505(b)(2) accelerated New Drug Application (“NDA”) for Epoladerm to conduct a study to assess bioavailability and bioequivalence, and then move into Phase III clinical trials. A “505(b)(2)” NDA refers to an application for a new drug filed under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (“FDCA”). There can be no assurance that we will be successful in securing regulatory approval under the 505(b)(2) pathway or that we will be successful in mitigating risks associated with the clinical development of this product candidate.
The following is the planned development activity and status to bring Epoladerm to market:
Activity |
Status |
|
GLP Pig Tox 28 Day |
Planned |
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IND Filing with FDA |
Planned |
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Pilot/Pivotal BE HV Study vs competitor transdermal patch |
Planned |
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Phototoxicity, Irritation & Sensitivity |
Planned |
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Phase III Clinical Trials |
Planned |
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NDA, 505(b)(2) filing with FDA |
Planned |
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NDA Approval |
Planned |
We are also developing Epoladerm for a second indication utilizing the same transdermal delivery system as Epoladerm as a twice daily topical treatment for chronic osteoarthritis of the knee (“OSF200”). OSF200 will use the same formulation as Epoladerm; however, OSF200 would be applied twice daily. OSF200 is also covered under the same intellectual property as Epoladerm. As a result of the IND review, the FDA has indicated that it is reasonable for us to pursue a 505(b)(2) accelerated NDA for OSF200. There can be no assurance that we will be successful in securing regulatory approval under the 505(b)(2) pathway or that we will be successful in mitigating risks associated
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with the clinical development of this product candidate. OSF200 would be marketed as a topical NSAID treatment for chronic osteoarthritis of the knee. We believe OSF200’s adhesion capabilities and attributes are the same as listed for Epoladerm above. Our plan would be to file a supplement to our potential NDA approval of Epoladerm for OSF200. If we are able to obtain approval of the NDA for Epoladerm, we plan to conduct Phase III clinical trials for OSF200 with an anticipated NDA approval in approximately 18 months following a potential approval for Epoladerm. However, there can be no assurances that Epoladerm receives FDA approval.
Long-acting Bupivacaine Liposomal-gel 3.0% (LBL100 or ProbudurTM)
Probudur is a drug product candidate based on a unique liposomal delivery system utilizing large multi-vesicular vesicles (“LMVVs”) encapsulating a high dose of the local anesthetic bupivacaine. These drug-loaded liposomes are composed of lecithin and cholesterol which are generally recognized as safe (“GRAS”) by the FDA. These LMVVs are embedded in hydrogel beads to form a Lipogel. The system delivers a local anesthetic/analgesic medicine from the Lipogel. Early non-clinical animal studies produced data which suggests that Probudur may be able to provide improved onset, duration and peak performance properties as compared to a similar product on the market. Data from these animal studies demonstrated that after treatment with Probudur (50 mg/kg), statistically significant analgesic activity (measured as threshold pressure at the withdrawal of the animal’s treated extremity) was observed in comparison to a control (vehicle), for as long as 96 hours post-treatment, which is 24 hours longer than the leading product on the market. These animal studies were conducted by administering Probudur by local infiltration of the surgical site, which resulted in keeping the active ingredient localized at the surgical site for a longer period of time. Four trials were conducted using three animal models.
If we are able to demonstrate a successful Phase III clinical trial, we believe Probudur may represent the first long acting local anesthetic with an opioid sparing label. The slow release of the drug from the liposomal depot reduces the peak plasma levels. We believe this property may permit administration of higher bupivacaine doses (3% versus 1.3% in leading market product); however, there can be no assurances, based on these animal studies, that Probudur will be safe or effective. Further, there can be no assurance that Probudur will receive FDA approval.
We plan to market Probudur to general surgeons, anesthesiologists, and orthopedic surgeons within the $577 million (as of 2019) local anesthetic post-surgical market. If the product candidate is used appropriately, we believe this product candidate could potentially eliminate the need for opioids for post-operative pain relief. As a result of our IND review, the FDA has indicated that it is reasonable for us to pursue a 505(b)(2) accelerated NDA for Probudur. There can be no assurance that we will be successful in securing regulatory approval under the 502(b)(2) pathway or that we will be successful in mitigating risks associated with the clinical development of this product candidate.
Probudur has completed IND Enabling studies “in vitro,” “in vivo efficacy” and “in vivo toxicology.” Based upon discussions with the FDA, we intend to move Probudur directly into dose escalation studies in targeted patient populations. We believe the completed IND Enabling studies allow us to transition directly to a Phase II study. The following is the planned activity and status to bring Probudur to market:
Activity |
Status |
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Preclinical Studies: Bunionectomy
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Planned |
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Preclinical Studies: GLP Tox 28 Day |
Planned |
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Phase II Patient Studies |
Planned |
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Phase III Clinical Trials vs leading market indicator
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Planned |
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NDA, 505(b)(2) Filing with FDA |
Planned |
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Launch |
Planned |
Molecular Envelope Technology Enkephalin Intranasal Spray (EnveltaTM or NES100)
EnveltaTM is a nanotechnology-based intranasal spray drug product candidate which enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain. It is manufactured using high pressure homogenization and spray drying. There is pharmacological evidence of activity of MET enabled enkephalin in morphine-tolerant animals. Preclinical studies were conducted in animals for between 6 and 28 days through intravenous, oral and intranasal dosing.
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Twelve studies were conducted using three animal models whereby the animal studies were aimed at determining safety pharmacology and genetic toxicology. The preliminary data from these early animal studies of NES100 have shown that NES100 exhibited pain control in morphine tolerant animals, without the development of tolerance itself. These animal models tested the anti-hyperalgesic effects in rats against evoked stimuli in a model of chronic inflammatory pain and against ongoing neuropathic pain in a conditioned placement preference model with spinal nerve ligation. NES100 and morphine were compared at the same dose level of 7.5 mg kg-1 in this model and NES was determined to have a similar analgesic effect. With respect to respiratory depression, delta opioid receptor agonists actually reverse the respiratory depression caused by morphine agonists, meaning that we believe NES100 will be unlikely to cause respiratory depression. However, there can be no assurances, based on these preclinical animal studies, that NES100 will be safe and effective. Further, there can be no assurance that NES100 will receive FDA approval.
We believe we have identified a large unmet need and market opportunity for current prescribers of opioids, including pain and hospice treatment centers. Currently, these prescribers may be using morphine-like opioids, which target three opioid receptors: mu, delta and kappa. Most analgesics used clinically target mu receptor, however, this receptor is also responsible for the majority of undesirable side effects associated with opioids. Currently, enkephalins are limited in their therapeutic potential by their pharmacokinetic profiles due to their inability to cross the blood-brain barrier to reach opioid receptors located in the central nervous system. However, we believe NES100’s novel nasally delivered formulation, based on early animal studies, enhances enkephalin transport to the brain by protecting the drug in a molecular envelope (MET), facilitating its crossing of the blood-brain barrier. Enkephalins bind predominantly to the delta-receptor which is typically not associated with the dangers associated with opioids. We believe NES100 may have analgesic potential without opioid tolerance, and has not exhibited any indications of withdrawal, respiratory depression, euphoria, or addiction in the early animal studies. A new study published in Proceedings of the National Academy of Sciences (PNAS) indicates, “Delta opioid receptors have a built-in mechanism for pain relief and can be precisely targeted with drug-delivering nanoparticles, making them a promising target for treating chronic inflammatory pain with fewer side effects.” There can be no assurances, based on these preclinical animal studies, that NES100 will be safe and effective in human trials.
Additionally, we believe NES100 may significantly reduce constipation and early animal clinical trials have not demonstrated any opioid dependence, drug seeking or respiratory depression. We plan to use the endogenous NCE regulatory pathway to bring this product candidate to market. We plan to target our marketing and selling efforts to pain specialists, anesthesiologists, orthopedics, surgeons, PCPs, Nurse Practitioners (“NPs”), oncologists, and neurologists within the $7 billion (as of 2019) analgesic narcotics market.
NES100 is a neuroactive peptide drug product (enkephalin) with a proprietary composition formulated for administration by all routes except the topical route. A preassembled device and cartridge would be used to propel the enkephalin formulation through the nose to the brain via the olfactory nerve/bulb route of transmission. A MET will encapsulate the drug product, protecting it from degradation, and help to carry the drug across the blood-brain barrier to promptly suppress pain.
NES100 has completed IND enabling studies “in vitro,” “in vivo efficacy” and “in vivo toxicology.” The following is the planned activity and status to bring the product candidate to market:
Activity |
Status |
|
28-day Toxicology Study |
Planned |
|
Submit IND for Phase 2 dose escalation and Phase 3 clinical safety and efficacy study |
Planned |
|
Phase III Clinical trials: v/s Morphine |
Planned |
|
NDA, Endogenous NCE filing with FDS |
Planned |
|
FDA Action |
Planned |
We are also developing NES100 for a second indication utilizing the same delivery mechanism as NES100. PES200 enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain and is also covered under the same intellectual property listed elsewhere in this prospectus for NES100. We believe PES200’s capabilities and attributes are the same as listed for NES100 above. Our plan is to validate proof-of-concept followed by IND-enabling studies for the development of a novel enkephalin-based formulation to treat Post-Traumatic Stress Disorder.
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On August 25, 2020, we entered into a cooperative research and development agreement with the National Center for Advancing Translational Sciences (NCATS) (the “CRADA”), an institute/center of the National Institutes of Health (NIH), U.S. Department of Health and Human Services. This collaboration is for the continued development of Virpax’s product candidate, NES100, an intranasal peptide, for the management of acute and chronic non-cancer pain. The term of the CRADA is for a period of four years from the effective date of the agreement and can be terminated by both parties at any time by mutual written consent. In addition, either party may unilaterally terminate the CRADA at any time by providing written notice of at least sixty (60) days before the desired termination date. The agreement provides for studies that are focused on the pre-clinical characterization of NES100 as a novel analgesic for acute and chronic non-cancer pain, and for studies to further develop NES100 through IND enabling studies.
High-Density Molecular Masking Spray Formulation for the Prevention of Respiratory Viruses (MMS019)
MMS019 is high-density molecular masking spray we plan to develop as an anti-viral barrier to potentially prevent or reduce the risk or the intensity of viral infections in humans. We intend for this formulation to be delivered using a preassembled device and cartridge to propel the High-Density Molecular Spray formulation into the nose. MMS019 will be used as a nasal powder spray to potentially prevent viral binding to epithelial cells in the nasal cavity and the upper respiratory tract, potentially reducing respiratory related infections.
We believe MMS019 may offer another layer of protection, in the form of a Molecular Mask, to be added to standard personal protective equipment to protect healthcare workers, and those at-risk of serious disease, from viral infections. MMS019 has completed IND-enabling toxicology studies and intends to demonstrate that pre-treatment of nasal mucosal cells in vitro prevents, or reduces, the number of cells that get infected. We intend to finance activities related to MMS019 with grants and not with any proceeds from this offering.
We continue to seek opportunities to exploit our product portfolio through licensing and other strategic transactions to further develop our drug product candidates. This includes seeking potential partners in further developing our drug product candidates and responding to inquiries of interest we have received concerning our product portfolio.
Our Strengths
We are working to create and advance novel non-addictive treatments for the management of acute musculoskeletal pain, chronic pain, mononeuropathy, pain associated with cancer, and post-operative pain. Our goal is to develop and commercialize product candidates that improve the clinical outcomes of the treatments currently on the market. There can be no assurance that we will be able to execute on this strategy. With the support of the President, the U.S. Department of Health and Human Health Services (“HHS”), the National Institutes of Health (“NIH”) launched the initiative Helping to End Addiction Long-term (“HEAL”), to provide solutions to the national opioid crisis. Pursuant to this initiative, we have been awarded grants related to NES100 and have filed for additional grants that are currently pending. We believe HEAL and recent FDA guidance has made it more efficient to bring novel non-opioid medication to market.
We believe the below product candidates have novel technologies that could improve pain management. We believe these product candidates also have the following individual strengths and differentiators as compared to similar product candidates that we believe could make these product candidates more desirable if approved:
• Epoladerm’s quick-drying spray film technology may permit consistent 12-hour dosing without the messy handling of much slower drying liquids, gels and spray foam formulations that must be rubbed into the skin on application. We believe this may allow for improved patient compliance, which may enhance therapeutic outcomes compared to the inconsistent adhesion of patch technology.
• Probudur may eliminate the need for opioids and catheters after surgery and may reduce the associated costs and length of stay.
• NES100 has exhibited pain control in morphine tolerant animals, without the development of tolerance itself.
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Also, three of our product candidates (Epoladerm, Probudur, and OSF200) could potentially be developed using the FDA’s 505(b)(2) regulatory pathway. This type of submission differs from the FDA’s standard 505(b)(1) NDA clinical development pathway typically used for most pharmaceutical new chemical entities (“NCEs”) in that the development candidate contains similar active ingredients to a previously approved drug. Consequently, the data included in the submission can rely, at least partially, on the FDA’s findings of safety and effectiveness related to the prior approved product, and as a result can mitigate many of the drug development risks faced by the drug developer. Companies utilizing the 505(b)(2) accelerated NDA regulatory pathway typically experience a shorter drug development program that requires less resources than the standard regulatory pathway. Under the 505(b)2 pathway, the FDA allows the use of data from a prior application that can be referenced by a new sponsor that can include part of the required preclinical or clinical studies for approval. Consequently, this alternative pathway can significantly lower the development cost and shorten the timeline to NDA approval.
We are focused on applying our spray film and liposomal gel technologies to already-approved pharmacological actives. We intend to seek to leverage the 505(b)(2) accelerated NDA pathway to accelerate our development timeline and potentially lower our clinical and regulatory risk for not only our Epoladerm drug candidate, but for the OSF200 and Probudur product candidates as well. However, there can be no assurance that the 505(b)(2) accelerated NDA pathway will lead to a faster development process or a faster regulatory review. While the 502(b)(2) pathway may potentially expedite development or the approval process, it does not change the FDA’s standards of approval or increase the likelihood that a product candidate will receive approval.
Our Team
We have assembled a highly experienced management team, board of directors and scientific advisory board to execute on our mission to develop product candidates that effectively manage pain in all its complexities, while minimizing risks to patients and society. Our team has a proven track record in developing, launching and marketing multiple pain products.
Our Founder and Chief Executive Officer, Anthony Mack, is a business leader with over 25 years of experience in the pharmaceutical and finance industries. Our Chief Medical Officer, Jeffrey Gudin, M.D., is a Clinical Associate Professor in Anesthesiology at the Rutgers New Jersey Medical School and is Board Certified in Pain Medicine, Anesthesiology, Addiction Medicine and Hospice and Palliative Medicine. Our Commercial Operations Officer, Gerald W. Bruce, has spent over 30 years, including 20 years in senior leadership roles, in the Pharmaceutical and Medical Nutrition industry. Our Chief Financial Officer, Christopher M. Chipman, CPA, has more than 25 years of industry experience assisting public companies with financial reporting, forecasting, preparation of periodic reports required to be filed with the Securities and Exchange Commission and compliance with Section 404 of the Sarbanes Oxley Act of 2002 including pharmaceutical clients. Gerald W. Bruce EVP, Commercial Operations, has spent over 30 years, including 20 years in senior leadership roles, in the Pharmaceutical industry.
Our Strategy
We are focused on becoming a global leader in pain management by developing and delivering innovative pharmaceutical products to patients. We are developing branded pharmaceutical product candidates for pain management by using cutting-edge technology to enhance patients’ quality of life.
According to data from the CDC, in 2016, approximately 20% of adults in the United States had chronic pain (approximately 50 million people). Further, CDC data indicates that the prescribing of opioids by clinicians has increased threefold in the last 20 years, contributing to the problem of prescription opioid abuse. Accordingly, there is a push among prescribers, regulators, and patients to seek non-opioid and non-addictive treatment options to combat the opioid epidemic. We plan to utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and NCE product candidates for commercialization.
We have developed a marketing and sales strategy tailored to each individual product candidate within our portfolio which will be deployed if each product candidate is approved and brought to market. With a dedicated sales team, and niche non-opioid and non-addictive pain management product candidates, we believe once these strategies are put into place, they can produce products with greater pain management than opioid competitor products, potentially without any of the side effects caused by morphine/opioid related products.
7
Summary of Risks Associated with Our Business
Our business and an investment in our company is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks include:
• We are a pre-revenue company with a limited operating history;
• Our independent registered public accounting firm’s report for the fiscal years ended December 31, 2018 and December 31, 2019 includes an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern;
• We may not be able to successfully develop or commercialize new product candidates or do so on a timely or cost-effective basis;
• Our business may be negatively affected by the ongoing COVID-19 pandemic;
• We depend on a limited number of product candidates and our business could be materially adversely affected if one or more of our key product candidates do not perform as well as expected and do not receive regulatory approval;
• Our profitability depends on our major customers, and if our relationships with them do not continue as expected, our business, prospects and results of operations could materially suffer;
• We are, and will continue to be in the future, a party to legal proceedings that could result in adverse outcomes;
• Our competitors and other third parties may allege that we are infringing their intellectual property, forcing us to expend substantial resources in resulting litigation, and any unfavorable outcome of such litigation could have a material adverse effect on our business;
• We may experience failures of or delays in clinical trials which could jeopardize or delay our ability to obtain regulatory approval and commence product sales;
• We face intense competition from both brand and generic companies which could limit our growth and adversely affect our financial results;
• We are subject to extensive governmental regulation and we face significant uncertainties and potentially significant costs associated with our efforts to comply with applicable regulations;
• We may not be able to develop or maintain our sales capabilities or effectively market or sell our products;
• Manufacturing or quality control problems may damage our reputation, require costly remedial activities or otherwise negatively impact our business;
• Our profitability depends on coverage and reimbursement by third-party payors, and healthcare reform and other future legislation may lead to reductions in coverage or reimbursement levels;
• We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented;
• We currently, and may in the future need to, license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms;
• 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, manufacture and market our products and product candidates;
• If we fail to comply with our obligations under any of our third-party agreements, we could lose license rights that are necessary to develop our product candidates; and
8
• After this offering, our directors, executive officers and certain stockholders (one of which is an affiliate of our Chief Executive Officer) will continue to own a significant percentage of our common stock and, if they choose to act together, will be able to exert significant control over matters subject to stockholder approval.
Our Corporate Information
We were incorporated under the laws of the State of Delaware on May 12, 2017. Our principal executive offices are located at 1554 Paoli Pike, #279, West Chester, PA 19380. Our telephone number is (484) 880-4588.
Our website address is www.virpaxpharma.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, enacted in 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
• being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;
• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;
• reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
• exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We may take advantage of 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, including if we become a large accelerated filer, our annual gross revenue exceeds $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 stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
In addition, 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. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to “opt in” to this extended transition period, which will ensure us additional time to adopt these new accounting standard updates.
Reverse Stock Split
On November 19, 2020, we effectuated a 1-for-4.944260256 reverse stock split of our common stock (the “Reverse Stock Split”). Except where the historical context specifically requires otherwise, disclosures in this prospectus reflect the Reverse Stock Split.
9
Shares being offered |
1,363,637 shares of common stock |
|
Number of shares of common stock outstanding immediately before this offering |
|
|
Number of shares of common stock to be outstanding after this offering(1) |
|
|
Use of proceeds |
We expect to receive net proceeds, after deducting underwriting discounts and commissions and estimated expenses payable by us, of approximately $13.2 million (or approximately $15.3 million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus. |
|
We intend to use substantially all of the net proceeds from this offering to fund research and development of our Epoladerm and Probudur indications and other development programs, to satisfy our obligations under certain of our convertible promissory notes, pay fees and expenses associated with this offering, and for working capital and other general corporate purposes. See “Use of Proceeds”. |
||
Lock-up |
In connection with our initial public offering, we, our directors, executive officers, and certain stockholders have agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of nine (9) months following the closing of the offering of the shares. See “Underwriting” for more information. |
|
Underwriters’ over-allotment option |
We have granted the underwriters a 30-day option from the date of this prospectus to purchase up to an additional 204,545 shares (15% of the total number of shares to be offered by us in the offering. |
|
Representative’s warrant |
Upon the closing of this offering, we have agreed to issue to Think Equity, the representative of the underwriters for this offering, warrants exercisable for a period of five years from the effective date of this registration statement entitling the representative to purchase 5% of the number of shares of common stock sold in this offering, at an exercise price equal to 125% of the public offering price. The warrants shall not be exercisable for a period of six months from the date of effectiveness of the registration statement. For additional information regarding our arrangement with the underwriters, please see “Underwriting.” |
|
Proposed stock exchange symbol |
We have applied to list our common stock on the Nasdaq Capital Market under the symbol “VRPX.” |
|
Risk factors |
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 13, and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock. |
____________
(1) The number of shares of our common stock to be outstanding immediately after this offering is based on 3,145,153 shares of our common stock outstanding as of September 30, 2020, which excludes:
• 486,101 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share;
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• 5,056 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share;
• 68,181 shares of common stock issuable upon the exercise of the warrant to purchase shares of our common stock issued to the underwriters in connection with this offering; and
• 334,695 shares of our common stock that are available for future issuance under our Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”) or shares that will become available under our 2017 Plan.
Unless otherwise indicated, this prospectus reflects and assumes the following:
• no exercise of outstanding options or warrants described above after September 30, 2020;
• a 1-for-4.944260256 reverse stock split of our common stock effected on November 19, 2020 (no fractional shares were issued); and
• no exercise by the underwriters of their over-allotment option.
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SUMMARY SELECTED FINANCIAL DATA
You should read the following summary selected financial data together with our 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 statement of operations data for the years ended December 31, 2019 and December 31, 2018 from our audited financial statements appearing at the end of this prospectus. We have derived the statement of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 from our unaudited interim condensed financial statements appearing at the end of this prospectus. Our historical results are not necessarily indicative of results that should be expected in any future period.
Year Ended
|
Nine Months Ended
|
|||||||||||||||
2019 |
2018 |
2020 |
2019 |
|||||||||||||
Statement of Operations Data: |
|
|
|
|
|
|
|
|
||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
General and administrative |
$ |
2,559,127 |
|
$ |
1,483,786 |
|
$ |
2,321,509 |
|
$ |
2,050,193 |
|
||||
Research and development |
|
622,741 |
|
|
1,142,176 |
|
|
1,187,333 |
|
|
468,369 |
|
||||
Total operating expenses |
|
3,181,868 |
|
|
2,625,962 |
|
|
3,508,842 |
|
|
2,518,562 |
|
||||
Loss from operations |
|
(3,181,868 |
) |
|
(2,625,962 |
) |
|
(3,508,842 |
) |
|
(2,518,562 |
) |
||||
Other income (expense): |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
(124,644 |
) |
|
(14,976 |
) |
|
(129,600 |
) |
|
(87,937 |
) |
||||
Other income |
|
— |
|
|
— |
|
|
4,000 |
|
|
— |
|
||||
Net loss |
$ |
(3,306,512 |
) |
$ |
(2,640,938 |
) |
$ |
(3,634,442 |
) |
$ |
(2,606,499 |
) |
||||
Net loss per common share – basic and diluted(1) |
$ |
(1.13 |
) |
$ |
(0.93 |
) |
$ |
(1.18 |
) |
$ |
(0.90 |
) |
||||
Weighted average common shares outstanding – basic and diluted(1) |
|
2,929,005 |
|
|
2,838,709 |
|
|
3,091,108 |
|
|
2,904,540 |
|
____________
(1) See Note 2 to our audited financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per common share.
Actual |
As Adjusted(1) |
|||||||
(Unaudited) |
(Unaudited) |
|||||||
Balance Sheet Data: |
|
|
|
|
||||
Cash |
$ |
256,505 |
|
$ |
13,476,505 |
|
||
Working capital |
$ |
(3,992,781 |
) |
$ |
9,227,219 |
|
||
Total assets |
$ |
450,952 |
|
$ |
13,494,561 |
|
||
Notes payable and related party notes payable |
$ |
1,565,580 |
|
$ |
1,565,580 |
|
||
Accumulated deficit |
$ |
(9,942,633 |
) |
$ |
(9,942,633 |
) |
||
Stockholders’ (deficit) equity |
$ |
(3,846,433 |
) |
$ |
9,197,167 |
|
____________
(1) After giving effect to our issuance and sale of 1,363,637 shares of our common stock in this offering at an assumed initial public offering price of $11.00 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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An investment in our common stock is speculative, illiquid and involves a high degree of risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below and the other information contained in this prospectus. The risks set forth below are not the only ones facing us. Additional unanticipated or unknown risks and uncertainties may exist that could also adversely affect our business, operations and financial condition in ways that are unknown to us or unpredictable. If any of the following risks actually materialize, our business, financial condition and/or operations could suffer. In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you pay for our common stock.
Risks Related to Our Financial Position and Need for Additional Capital
We are a preclinical stage biopharmaceutical company with a limited operating history.
We were established and began operations in 2017. Our operations to date have been limited to financing and staffing our company, licensing product candidates, conducting preclinical of Epoladerm for acute musculoskeletal pain, Probudur for postoperative hip and knee replacement pain management, and NES100 for the management of acute and chronic pain, including pain associated with cancer. We have not yet demonstrated the ability to successfully complete a large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.
Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially preclinical stage pharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to, among other things:
• successfully implement or execute our current business plan, and we cannot assure you that our business plan is sound;
• successfully manufacture our clinical product candidates and establish commercial supply;
• successfully complete the clinical trials necessary to obtain regulatory approval for the marketing of our product candidates;
• secure market exclusivity and/or adequate intellectual property protection for our product candidates;
• attract and retain an experienced management and advisory team;
• secure acceptance of our product candidates in the medical community and with third-party payors and consumers;
• raise sufficient funds in the capital markets or otherwise to effectuate our business plan; and
• utilize the funds that we do have and/or raise in this offering or in the future to efficiently execute our business strategy.
If we cannot successfully execute any one of the foregoing, our business may fail and your investment will be adversely affected.
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability.
We are a preclinical stage biopharmaceutical company with a limited operating history and have incurred losses since our formation. We incurred net losses of approximately $3.3 million and approximately $2.6 million for the years ended December 31, 2019 and 2018, respectively, and incurred net losses of approximately $3.6 million and approximately $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. As of
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September 30, 2020, we had an accumulated loss of approximately $9.9 million. We have not commercialized any product candidates and have never generated revenue from the commercialization of any product. To date, we have devoted most of our financial resources to research and development, including our preclinical and clinical work, and to intellectual property.
We expect to incur significant additional operating losses for the next several years, at least, as we advance Epoladerm, Probudur, and NES100 through clinical development, complete clinical trials, seek regulatory approval and commercialize Epoladerm, Probudur and NES100, if approved. The costs of advancing product candidates into each clinical phase tend to increase substantially over the duration of the clinical development process. Therefore, the total costs to advance any of our product candidates to marketing approval in even a single jurisdiction will be substantial. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to begin generating revenue from the commercialization of any products or achieve or maintain profitability. Our expenses will also increase substantially if and as we:
• are required by the FDA, to complete Phase 2 trials to support an NDA for Epoladerm, Probudur and NES100;
• are required by the FDA to complete Phase 3 trials to support NDAs for Epoladerm, Probudur and NES100;
• establish a sales, marketing and distribution infrastructure to commercialize our drugs, if approved, and for any other product candidates for which we may obtain marketing approval;
• maintain, expand and protect our intellectual property portfolio;
• hire additional clinical, scientific and commercial personnel;
• add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company; and
• acquire or in-license or invent other product candidates or technologies.
Furthermore, our ability to successfully develop, commercialize and license any product candidates and generate product revenue is subject to substantial additional risks and uncertainties, as described under “Risks Related to Development, Clinical Testing, Manufacturing and Regulatory Approval” and “Risks Related to Commercialization.” As a result, we expect to continue to incur net losses and negative cash flows for the foreseeable future. These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. The amount of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues. If we are unable to develop and commercialize one or more product candidates, either alone or through collaborations, or if revenues from any product that receives marketing approval are insufficient, we will not achieve profitability. Even if we do achieve profitability, we may not be able to sustain profitability or meet outside expectations for our profitability. If we are unable to achieve or sustain profitability or to meet outside expectations for our profitability, the value of our common stock will be materially and adversely affected.
Even if this offering is successful, we will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our drugs.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to advance the clinical development of and launch and commercialize our product candidates if we receive regulatory approval. Following this offering, we will require additional capital for the further development and potential commercialization of Epoladerm, Probudur and NES100 and may also need to raise additional funds sooner to pursue a more accelerated development of Epoladerm, Probudur and NES100. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
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We believe that the net proceeds from this offering will enable us to fund our operating expense requirements for at least 12 months following the closing of this offering. We have based this estimate on assumptions that may prove to be wrong, and we could deploy our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to the:
• initiation, progress, timing, costs and results of preclinical studies and clinical trials, including patient enrollment in such trials, for Epoladerm, Probudur and NES100 or any other future product candidates;
• clinical development plans we establish for Epoladerm, Probudur and NES100 and any other future product candidates;
• obligation to make royalty and non-royalty sublicense receipt payments to third-party licensors, if any, under our licensing agreements;
• number and characteristics of product candidates that we discover or in-license and develop;
• outcome, timing and cost of regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;
• costs of filing, prosecuting, defending and enforcing any patent claims and maintaining and enforcing other intellectual property rights;
• effects of competing technological and market developments;
• costs and timing of the implementation of commercial-scale manufacturing activities;
• costs and timing of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval; and
• cost associated with being a public company.
If we are unable to expand our operations or otherwise capitalize on our business opportunities due to a lack of capital, our ability to become profitable will be compromised.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2019 with respect to this uncertainty. Our ability to continue as a going concern will require us to obtain additional funding.
Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. We do not currently have any committed external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.
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 stockholder. 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 collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or product candidates or grant
15
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 product candidate development or future commercialization efforts.
Changes in U.S. tax law may materially adversely affect our financial condition, results of operations and cash flows.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law to address the COVID-19 crisis. The CARES Act is an approximately $2 trillion emergency economic stimulus package that includes numerous U.S. federal income tax provisions, including the modification of: (i) net operating loss rules (as discussed below), (ii) the alternative minimum tax refund and (iii) business interest deduction limitations under Section 163(j) of the Internal Revenue Code of 1986, as amended, or the Code.
On December 22, 2017, President Trump signed into law federal tax legislation commonly referred to as the TCJA (defined below), which also significantly changed the U.S. federal income taxation of U.S. corporations. TCJA remains unclear in many respects and has been, and may continue to be, subject to amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service, or the IRS, any of which could lessen or increase certain adverse impacts of TCJA. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.
While some of these U.S. federal income tax changes may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going-forward basis. We continue to work with our tax advisors and auditors to determine the full impact TCJA and the CARES Act will have on us. We urge our investors to consult with their legal and tax advisors with respect to both TCJA and the CARES Act and the potential tax consequences of investing in our common stock.
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Our net operating loss carryforwards (“NOLs”), and certain other tax attributes could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law. As of December 31, 2019, we had NOLs of approximately $4.4 million for federal and state income tax purposes. Our federal NOL of $326,000 expire in 2037 (with the remaining federal NOLs having an indefinite expiration date) and our state NOL’s of $4,387,000 begin to expire after 2037 through 2039.
Under TCJA (defined below), federal NOLs generated in tax years ending after December 31, 2017 may be carried forward indefinitely. Under the CARES Act, NOL carryforwards arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Due to our cumulative losses through September 30, 2020, we do not anticipate that such provision of the CARES Act will be relevant to us. The deductibility of federal NOLs, particularly for tax years beginning after December 31, 2020, may be limited. It is uncertain if and to what extent various states will conform to TCJA or the CARES Act.
In addition, our NOLs are subject to review and possible adjustment by the U.S. Internal Revenue Service, or IRS, and state tax authorities. In general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change NOLs to offset future taxable income. Due to previous ownership changes, or if we undergo an ownership change in connection with or after this offering, our ability to use our NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership, inclusive of a public offering and some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, we may not be able to use a material portion of the NOLs, even if we attain profitability.
16
Risks Related to Development, Clinical Testing, Manufacturing and Regulatory Approval
Clinical trials are expensive, time-consuming and difficult to design and implement, and involve an uncertain outcome.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Because the results of preclinical studies and early clinical trials are not necessarily predictive of future results, Epoladerm, Probudur, and NES100 may not have favorable results in later preclinical and clinical studies or receive regulatory approval. We may experience delays in initiating and completing any clinical trials that we intend to conduct, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, or at all. Clinical trials can be delayed for a variety of reasons, including delays related to:
• the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;
• obtaining regulatory approval to commence a trial;
• reaching an agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
• obtaining Institutional Review Board (“IRB”), approval at each site, or Independent Ethics Committee (“IEC”), approval at sites outside the United States;
• recruiting suitable patients to participate in a trial in a timely manner and in sufficient numbers;
• having patients complete a trial or return for post-treatment follow-up;
• imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues or side effects or failure of trial sites to adhere to regulatory requirements or follow trial protocols;
• clinical sites deviating from trial protocol or dropping out of a trial;
• addressing patient safety concerns that arise during the course of a trial;
• adding a sufficient number of clinical trial sites; or
• manufacturing sufficient quantities of product candidate for use in clinical trials.
We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs or IECs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board (“DSMB”) for such trial or the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities 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. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and, while we have agreements governing their committed activities, we have limited influence over their actual performance, as described in “Risks Related to Our Dependence on Third Parties”.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for Epoladerm, Probudur, and/or NES100 or any other product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA and comparable foreign authorities 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 regulatory approval 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
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and it is possible that we will never obtain regulatory approval for Epoladerm, Probudur, and/or NES100 or any other product candidate. We are not permitted to market any of our product candidates in the United States until we receive regulatory approval of an NDA from the FDA. Our product candidates could fail to receive regulatory approval for many reasons, including the following:
• we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;
• serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates, or other products containing the active ingredient in our product candidates;
• negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
• we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
• the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
• the data collected from clinical trials of our product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and we may be required to conduct additional clinical trials;
• the FDA or comparable foreign authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates;
• the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
• the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or foreign regulatory agencies, 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. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities.
The FDA or any foreign regulatory bodies 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:
• the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
• the FDA or comparable foreign regulatory authorities may disagree with our safety interpretation of our product candidate;
• the FDA or comparable foreign regulatory authorities may disagree with our efficacy interpretation of our product candidate;
• the FDA or comparable foreign regulatory authorities may regard our CMC package as inadequate.
Of the large number of drugs in development, only a small percentage successfully complete the regulatory approval processes and are commercialized. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market Epoladerm, Probudur, and/or NES100 or another product candidate, which would significantly harm our business, results of operations and prospects.
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In addition, the FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
If we are unable to file for approval of Epoladerm and Probudur under Section 505(b)(2) of the FDCA or if we are required to generate additional data related to safety and efficacy in order to obtain approval under Section 505(b)(2), we may be unable to meet our anticipated development and commercialization timelines.
Our current plans for filing NDAs for Epoladerm and Probudur include efforts to minimize the data we will be required to generate in order to obtain marketing approval and therefore reduce the development time. We intend to file Section 505(b)(2) NDAs for Epoladerm and Probudur that might, if accepted by the FDA, save time and expense in the development and testing of these indications.
The timeline for filing and review of our NDAs for Epoladerm and Probudur is based on our plan to submit the NDAs under Section 505(b)(2) of the FDCA, which would enable us to rely in part on data in the public domain or elsewhere. We have not yet filed an NDA under Section 505(b)(2) for any of our product candidates. Depending on the data that may be required by the FDA for approval, some of the data may be related to products already approved by the FDA. If the data relied upon is related to products already approved by the FDA and covered by third-party patents, we would be required to certify that we do not infringe the listed patents or that such patents are invalid or unenforceable. As a result of the certification, the third-party would have 45 days from notification of our certification to initiate an action against us. In the event that an action is brought in response to such a certification, the approval of our NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval of our product candidates under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully challenge the applicability of those patents to our product candidates. Alternatively, we may elect to generate sufficient additional clinical data so that we no longer rely on data which triggers a potential stay of the approval of our product candidates. Even if no exclusivity periods apply to our applications under Section 505(b)(2), the FDA has broad discretion to require us to generate additional data on the safety and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either event, we could be required, before obtaining marketing approval for any of our product candidates, to conduct substantial new research and development activities beyond those we currently plan to engage in order to obtain approval of our product candidates. Such additional new research and development activities would be costly and time consuming.
We may not be able to realize a shortened development timeline for Epoladerm and Probudur, and the FDA may not approve either of our NDAs based on their review of the submitted data. Moreover, if products containing the reference drug are withdrawn from the market by the FDA for any safety reason, we may not be able to reference such products to support a 505(b)(2) NDA for our product candidates, and we may need to fulfill the more extensive requirements of Section 505(b)(1). If we are required to generate additional data to support approval, we may be unable to meet our anticipated development and commercialization timelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain marketing approval of our lead product candidate.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including:
• the patient eligibility criteria defined in the protocol;
• the size of the patient population required for analysis of the trial’s primary endpoints;
• the nature of the trial protocol;
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• the existing body of safety and efficacy data with respect to the product candidate;
• the proximity of patients to clinical sites;
• our ability to recruit clinical trial investigators with the appropriate competencies and experience;
• clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;
• competing clinical trials being conducted by other companies or institutions;
• our ability to maintain patient consents; and
• the risk that patients enrolled in clinical trials will drop out of the trials before completion.
We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented.
We face risks related to health epidemics or outbreaks of communicable diseases. For example, the recent outbreak around the world, including in the United States, the European Union (the “EU”) members, China and many other countries, of the highly transmissible and pathogenic COVID-19. The outbreak of such communicable diseases could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries, which in the case of COVID-19 has occurred. In addition, the COVID-19 pandemic is having a severe effect on the clinical trials of many drug candidates. Some trials have been merely delayed, while others have been cancelled. The extent to which the COVID-19 pandemic may impact our preclinical and clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration and geographic reach of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat COVID-19. The continued spread of COVID-19 globally could adversely impact our clinical trial operations, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. Disruptions or restrictions on our ability to travel to monitor data from our clinical trials, or to conduct clinical trials, or the ability of patients enrolled in our studies to travel, or the ability of staff at study sites to travel, as well as temporary closures of our facilities or the facilities of our clinical trial partners and their contract manufacturers, would negatively impact our clinical trial activities. In addition, we rely on independent clinical investigators, CROs and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, including the collection of data from our clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our preclinical trials could be delayed and/or disrupted by the COVID-19 pandemic. As a result, the expected timeline for data readouts of our preclinical studies and clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our financial results.
Results of preclinical studies, early clinical trials or analyses may not be indicative of results obtained in later trials.
The results of preclinical studies, early clinical trials or analyses of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. In addition, conclusions based on promising data from analyses of clinical results may be shown to be incorrect when implemented in prospective clinical trials. Even if our clinical trials for Epoladerm, Probudur, and/or NES100 are completed as planned, we cannot be certain that their results will support the safety and efficacy sufficient to obtain regulatory approval.
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Interim “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim “top-line” or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.
Our product candidates may cause serious adverse events or undesirable side effects, which may delay or prevent marketing approval, or, if approved, require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.
Serious adverse events or undesirable side effects caused by Epoladerm, Probudur, and/or NES100 or any other product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of any clinical trial we conduct could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Any clinical trials for our drug product candidates which include Epoladerm, Probudur, and/or NES 100 to date may fail to demonstrate acceptable levels of safety and efficacy which could prevent or significantly delay their regulatory approval or result in a more restrictive label by the FDA or other comparable foreign authorities.
If unacceptable side effects arise in the development of our product candidates, we, the FDA or the IRBs at the institutions in which our studies are conducted, or the DSMB, if constituted for our clinical trials, could recommend a suspension or termination of our clinical trials, or the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:
• regulatory authorities may withdraw approvals of such product;
• regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;
• additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;
• we may be required to implement a Risk Evaluation and Mitigation Strategy (“REMS”) or create a medication guide outlining the risks of such side effects for distribution to patients;
• we could be sued and held liable for harm caused to patients;
• the product may become less competitive; and
• our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm our business, results of operations and prospects.
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The market opportunities for Epoladerm, Probudur, and NES100, if approved, may be smaller than we anticipate.
We expect to initially seek approval for Epoladerm for acute musculoskeletal pain, Probudur for postoperative pain management, and NES100 for the management for acute and chronic pain, including pain associated with cancer, in the United States. Our estimates of market potential have been derived from a variety of sources, including scientific literature, patient foundations, and market research, and may prove to be incorrect. Even if we obtain significant market share for any product candidate, if approved, if the potential target populations are smaller than we anticipate, we may never achieve profitability without obtaining marketing approval for additional indications.
We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our product candidates.
We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not accept or approve our NDAs for our product candidates, it may require that we conduct additional clinical, preclinical, or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required studies, approval of any NDA that we submit may be delayed or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.
Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our product candidates, generating revenues, and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.
Even if we obtain FDA approval for Epoladerm, Probudur, and/or NES100 or any other product candidate in the United States, we may never obtain approval for or commercialize Epoladerm, Probudur, and/or NES100 or any other product candidate in any other jurisdiction, which would limit our ability to realize their full market potential.
In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions. However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval elsewhere. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country.
Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and increased costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.
Even if we obtain regulatory approval for Epoladerm, Probudur, and/or NES100 or any product candidate, we will still face extensive and ongoing regulatory requirements and obligations and any product candidates, if approved, may face future development and regulatory difficulties.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements,
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continued compliance with current Good Manufacturing Practice (“cGMP”) requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and Good Clinical Practice (“GCP”) requirements for any clinical trials that we conduct post-approval.
Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of our product candidates receive marketing approval, the accompanying label may limit the approved indicated use of the product candidate, which could limit sales of the product candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use, and if we market our products for uses beyond their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the FDCA relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, may yield various results, including:
• restrictions on manufacturing such products;
• restrictions on the labeling or marketing of products;
• restrictions on product distribution or use;
• requirements to conduct post-marketing studies or clinical trials;
• warning letters or untitled letters;
• withdrawal of the products from the market;
• refusal to approve pending applications or supplements to approved applications that we submit;
• recall of products;
• fines, restitution or disgorgement of profits or revenues;
• suspension or withdrawal of marketing approvals;
• refusal to permit the import or export of our products;
• product seizure; or
• injunctions or the imposition of civil or criminal penalties.
Further, the FDA’s policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. 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, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the current presidential administration may impact our business and industry. Namely, the current presidential administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these executive actions will be implemented, and the extent to which they
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will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.
The use of Epoladerm, Probudur, and/or NES100 or any other product candidates we may develop in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:
• impairment of our business reputation and significant negative media attention;
• withdrawal of participants from our clinical trials;
• significant costs to defend the litigation;
• distraction of management’s attention from our primary business;
• substantial monetary awards to patients or other claimants;
• inability to commercialize Epoladerm, Probudur, and/or NES100 or any other product candidate;
• product recalls, withdrawals, or labeling, marketing, or promotional restrictions;
• decreased market demand for any product; and
• loss of revenue.
Risks Related to Commercialization
We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.
The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to acquire, develop, and obtain marketing approval for new products on a cost-effective basis and to market them successfully. If Epoladerm, Probudur, and/or NES100 is approved, we will face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies in the United States and other jurisdictions. These organizations may have significantly greater resources than we do and may conduct similar research; seek patent protection; and establish collaborative arrangements for research, development, manufacturing and marketing of products that may compete with us.
Our competitors may, among other things:
• have significantly greater name recognition, financial, manufacturing, marketing, drug development, technical, and human resources than we do, and future mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors;
• develop and commercialize products that are safer, more effective, less expensive, more convenient, or easier to administer, or have fewer or less severe effects;
• obtain quicker regulatory approval;
• implement more effective approaches to sales and marketing; or
• form more advantageous strategic alliances.
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Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel; establishing clinical trial sites and patient registration; and in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer or less severe side effects, or are more convenient or are less expensive than Epoladerm, Probudur, and/or NES100. Our competitors may also obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for Epoladerm, Probudur, and/or NES100, which could result in our competitors establishing or strengthening their market position before we are able to enter the market.
The successful commercialization of Epoladerm, Probudur, and/or NES100 and any other product candidate we develop 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 coverage and adequate 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 prescription medications such as Epoladerm, Probudur, and/or NES100, 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 our drug and any other product candidates we develop. Assuming we obtain coverage for our product candidates 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 or elsewhere will be available for our product candidates or 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 or biologics when an equivalent generic drug, biosimilar, or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and offer to reimburse patients only 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 our product candidates. 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 our product candidates.
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 in the United States 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 healthcare 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.
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 product candidates 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.
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We may also be subject to extensive governmental price controls and other market regulations outside of the United States, and we believe the increasing emphasis on cost-containment initiatives in other countries have and will continue to put pressure on the pricing and usage of medical products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits.
Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
Moreover, increasing efforts by governmental and third-party payors in the United States 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 of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.
Even if Epoladerm, Probudur, and/or NES100 or any product candidate we develop receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.
If Epoladerm, Probudur, and/or NES100 or any product candidate we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant product revenues or become profitable. The degree of market acceptance of our product candidates, if approved, will depend on a number of factors, including but not limited to:
• the efficacy and potential advantages compared to alternative treatments;
• effectiveness of sales and marketing efforts;
• the cost of treatment in relation to alternative treatments, including any similar generic treatments;
• our ability to offer our products for sale at competitive prices;
• the convenience and ease of administration compared to alternative treatments;
• the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
• the strength of marketing and distribution support;
• the availability of third-party coverage and adequate reimbursement;
• the prevalence and severity of any side effects; and
• any restrictions on the use of our product together with other medications.
Because we expect sales of our product candidates, if approved, to generate substantially all of our revenues 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.
If we are unable to establish sales, marketing, and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing Epoladerm, Probudur, and/or NES100, if approved.
We do not have any infrastructure for the sales, marketing, or distribution of Epoladerm, Probudur, and/or NES100, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market and successfully commercialize our drug or any product candidate we develop, if approved, we must
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build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We expect to build a focused sales, distribution and marketing infrastructure to market Epoladerm, Probudur, and/or NES100, if approved, in the United States and Europe. There are significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of that product. For example, if the commercial launch of Epoladerm, Probudur, and/or NES100 for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
• our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
• the inability of sales personnel to obtain access to physicians or attain adequate numbers of physicians to prescribe our products; and
• unforeseen costs and expenses associated with creating an independent sales and marketing organization.
We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of our product candidates, if approved, in certain markets overseas. Therefore, our future success will depend, in part, on our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest in a product and such collaborator’s ability to successfully market and sell the product. We intend to pursue collaborative arrangements regarding the sale and marketing of Epoladerm, Probudur, and/or NES100, if approved, for certain markets overseas; however, we cannot assure you that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales forces. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.
If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of Epoladerm, Probudur, and/or NES100, we may be forced to delay the potential commercialization of the drug or reduce the scope of our sales or marketing activities. If we need to increase our expenditures to fund commercialization activities for Epoladerm, Probudur, and/or NES100 we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. We may also have to enter into collaborative arrangements for Epoladerm, Probudur, and/or NES100 at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to it or otherwise agree to terms unfavorable to us. Any of these occurrences may have an adverse effect on our business, operating results, and prospects.
If we are unable to establish adequate sales, marketing, and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates and may never become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
A variety of risks associated with operating internationally could materially adversely affect our business.
We currently have no international operations, but our business strategy includes potentially expanding internationally if any of our product candidates receive regulatory approval. Doing business internationally involves a number of risks, including but not limited to:
• multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;
• failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;
• additional potentially relevant third-party patent rights;
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• complexities and difficulties in obtaining protection and enforcing our intellectual property;
• difficulties in staffing and managing foreign operations;
• complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;
• limits in our ability to penetrate international markets;
• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;
• natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
• certain expenses including, among others, expenses for travel, translation and insurance; and
• regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions, or its anti-bribery provisions.
Any of these factors could significantly harm any future international expansion and operations and, consequently, our results of operations.
Risks Related to Our Dependence on Third Parties
Our employees and independent contractors, including principal investigators, CROs, consultants, vendors, and any third parties we may engage in connection with development and commercialization, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
Our employees and independent contractors, including principal investigators, consultants, vendors and any third parties we may engage in connection with development and commercialization of our product candidates, could engage in misconduct, including intentional, reckless or negligent conduct or unauthorized activities that violate: the laws and regulations of the FDA or other similar regulatory requirements of other authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; manufacturing standards; data privacy, security, fraud and abuse and other healthcare laws and regulations; or laws that require the reporting of true, complete and accurate financial information and data. Specifically, 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. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. 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 comply 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 and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.
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We currently rely on third-party contract manufacturing organizations (“CMOs”) for the production of clinical supply of Epoladerm, Probudur, and/or NES100 and intend to rely on CMOs for the production of commercial supply of Epoladerm, Probudur, and/or NES100, if approved. Our dependence on CMOs may impair the development and commercialization of the drug, which would adversely impact our business and financial position.
We have limited personnel with experience in manufacturing, and we do not own facilities for manufacturing. Instead, we rely on and expect to continue to rely on CMOs for the supply of cGMP grade clinical trial materials and commercial quantities of Epoladerm, Probudur, and/or NES100 and any product candidates we develop, if approved. Reliance on CMOs may expose us to more risk than if we were to manufacture our product candidates ourselves. We intend to have manufactured a sufficient clinical supply of Epoladerm, Probudur, and/or NES100 drug substance to enable us to complete our clinical trials, and we have also engaged a CMO to provide clinical and commercial supply of the drug product.
The facilities used to manufacture our product candidates must be inspected by the FDA and comparable foreign authorities. While we provide oversight of manufacturing activities, we do not and will not control the execution of manufacturing activities by, and are or will be essentially dependent on, our CMOs for compliance with cGMP requirements for the manufacture of our product candidates. As a result, we are subject to the risk that our product candidates may have manufacturing defects that we have limited ability to prevent. If a CMO cannot successfully manufacture material that conforms to our specifications and the regulatory requirements, we will not be able to secure or maintain regulatory approval for the use of our product candidates in clinical trials, or for commercial distribution of our product candidates, if approved. In addition, we have limited control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval or finds deficiencies in the future, we may need to find alternative manufacturing facilities, which would delay our development program and significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacture of our product candidates or that obtained approvals could be revoked. Furthermore, CMOs may breach existing agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreement at a time that is costly or otherwise inconvenient for us. If we were unable to find an adequate CMO or another acceptable solution in time, our clinical trials could be delayed, or our commercial activities could be harmed.
We rely on and will continue to rely on CMOs to purchase from third-party suppliers the raw materials necessary to produce our product candidates. We do not and will not have control over the process or timing of the acquisition of these raw materials by our CMOs. Moreover, we currently do not have any agreements for the production of these raw materials. Supplies of raw material could be interrupted from time to time and we cannot be certain that alternative supplies could be obtained within a reasonable timeframe, at an acceptable cost, or at all. In addition, a disruption in the supply of raw materials could delay the commercial launch of our product candidates, if approved, or result in a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates. Growth in the costs and expenses of raw materials may also impair our ability to cost effectively manufacture our product candidates. There are a limited number of suppliers for the raw materials that we may use to manufacture our product candidates and we may need to assess alternative suppliers to prevent a possible disruption of the manufacture of our product candidates.
Finding new CMOs or third-party suppliers involves additional cost and requires our management’s time and focus. In addition, there is typically a transition period when a new CMO commences work. Although we generally have not, and do not intend to, begin a clinical trial unless we believe we have on hand, or will be able to obtain, a sufficient supply of our product candidates to complete the clinical trial, any significant delay in the supply of our product candidates or the raw materials needed to produce our product candidates, could considerably delay conducting our clinical trials and potential regulatory approval of our product candidates.
As part of their manufacture of our product candidates, our CMOs and third-party suppliers are expected to comply with and respect the proprietary rights of others. If a CMO or third-party supplier fails to acquire the proper licenses or otherwise infringes the proprietary rights of others in the course of providing services to us, we may have to find alternative CMOs or third-party suppliers or defend against claims of infringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved.
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We intend to rely on third parties to conduct, supervise and monitor our clinical trials. If those third parties do not successfully carry out their contractual duties, or if they perform in an unsatisfactory manner, it may harm our business.
We rely, and will continue to rely, on CROs, CRO-contracted vendors and clinical trial sites to ensure the proper and timely conduct of our clinical trials. Our reliance on CROs for clinical development activities limits our control over these activities, but we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards.
We and our CROs will be required to comply with the Good Laboratory Practice requirements for our preclinical studies and GCP requirements for our clinical trials, which are regulations and guidelines enforced by the FDA and are also required by comparable foreign regulatory authorities. Regulatory authorities enforce GCP requirements through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Accordingly, if our CROs fail to comply with these requirements, we may be required to repeat clinical trials, which would delay the regulatory approval process.
Our CROs are not our employees, and we do not control whether or not they devote sufficient time and resources to our clinical trials. Our 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 competitive position. 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, 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 any CROs terminate, 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’s time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our 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 an adverse impact on our business, financial condition and prospects.
• the number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers; and
• the loss of, or a disruption in our relationship with, any one or more collaborators could harm our business.
If any collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research and development funding or milestone or royalty payments under such collaborations. If we do not receive the funding we expect under these agreements, our continued development of our product candidates could be delayed, and we may need additional resources to develop additional product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of any collaborators and there can be no assurance that our collaborations will produce positive results or successful products on a timely basis or at all.
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In addition, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination or otherwise changes its business priorities, the collaborator might deemphasize or terminate the development or commercialization of our product candidates. If a collaborator terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of our business and our stock price could be adversely affected.
We may in the future collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability to 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. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a 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 fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our programs, and our business may be materially and adversely affected.
Risks Related to Healthcare Laws and Other Legal Compliance Matters
Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates, if approved, and may affect the prices we may set.
In the United States and other 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 U.S. 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 (collectively the “ACA”) was enacted, which substantially changed 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 the following:
• an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;
• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
• new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value” made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;
• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
• a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and biologics that are inhaled, infused, instilled, implanted, or injected;
• extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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• expansion of eligibility criteria for Medicaid programs thereby potentially increasing a manufacturer’s Medicaid rebate liability;
• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
• establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;
• expansion of the entities eligible for discounts under the Public Health Service program; and
• a licensure framework for follow on biologic products.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. The current presidential administration and Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. This includes enactment of the TCJA (as defined below), which, among other things, removes penalties for not complying with the ACA’s individual mandate to carry health insurance. It is uncertain the extent to which any such changes may impact our business or financial condition.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, the Budget Control Act of 2011, resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional action is taken by Congress. In January 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. Additionally, the orphan drug tax credit was reduced as part of a broader tax reform. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our customers and accordingly, our financial operations.
In addition, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been Congressional inquiries and proposed federal and state legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which 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 product candidates or put pressure on our product pricing.
In markets outside of the United States, 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 in the United States or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties 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.
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Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:
• the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item, or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The U.S. federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand;
• the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act (the “FCA”) which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. A claim includes “any request or demand” for money or property presented to the federal government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;
• the U.S. federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which impose, among other things, specified requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;
• the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;
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• the U.S. federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and
• analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities, including our consulting agreements and other relationships with physicians and other healthcare providers, some of whom receive stock or stock options as compensation for their services, could be subject to challenge under one or more of such laws. Ensuring that our current and future internal operations and 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 the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. If any of the physicians or other providers or entities with whom we expect to do business are 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, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant 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.
Any clinical trial programs we conduct or research collaborations we enter into in the European Economic Area may subject us to the General Data Protection Regulation.
If we conduct clinical trial programs or enter into research collaborations in the European Economic Area, we may be subject to the General Data Protection regulation (“GDPR”). The GDPR applies extraterritorially and implements stringent operational requirements for processors and controllers of personal data, including, for example, high standards for obtaining consent from individuals to process their personal data, robust disclosures to individuals, a comprehensive individual data rights regime, data export restrictions governing transfers of data from the European Union (the “EU”) to other jurisdictions, short timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to health data, other special categories of personal data and coded data and additional obligations if we contract third-party processors in connection with the processing of personal data. The GDPR provides that EU member states may establish their own laws and regulations limiting the processing of personal data, including genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase. If our or our partners’ or service providers’ privacy
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or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
We are subject to environmental, health and safety laws and regulations, and we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities.
Our operations, including our development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.
As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case, the production efforts of our third-party manufacturers or our development efforts may be interrupted or delayed.
Risks Related to Our Intellectual Property
If we fail to comply with our obligations under our existing intellectual property license, we risk losing the rights to our intellectual property.
Each of the material license agreements in which we have engaged, including the license agreements with MedPharm Limited, LipoCureRx Ltd. and Nanomerics Ltd. has provisions by which each of those companies could terminate the license agreements thereby terminating our access to the intellectual property licensed under those agreements. Termination of these license agreements would prevent the commercialization of the products we are developing.
If we are unable to obtain and maintain patent protection for our technology, products, 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 drug development programs, product candidates, and products. 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 Epoladerm, OSF200, Probudur, NES100, PES200 and MMS019 and any future products and product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our development programs, product candidates and products. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
If the patent applications we own or license 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 Epoladerm, OSF200, Probudur, NES100, PES200 and MMS019 or any future product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future product candidates. Any such outcome could have a materially adverse effect on our business.
The patent position of biotechnology and pharmaceutical 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 patent rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. However, in certain instances, the laws of the United States are more restrictive than those of foreign countries. For example, a recent series of Supreme Court Cases has narrowed the types of subject matter considered eligible for patenting.
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Accordingly, certain diagnostic methods are considered ineligible for patenting in the U.S. because they are directed to a “law of nature”. Further, publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. 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. Our pending and future patent applications may not result in patents being issued which protect our technology, products, or product candidates, in whole or in part, or patents being issued which effectively prevent others from commercializing competitive technologies and products. 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.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated, held unenforceable, in whole or in part, or reduced patent term. Such a result could limit our ability to stop others from using or commercializing similar or identical technologies and products to ours. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. While various extensions may be available, the life of a patent is limited. Without patent protection for our current or future products, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from using or commercializing technologies or products similar or identical to ours.
We may become subject to third parties’ claims alleging infringement of their patents and proprietary rights, or we may need to become involved in lawsuits to protect or enforce our patents, which could be costly, time consuming, delay or prevent the development and commercialization of our products and product candidates or put our patents and other proprietary rights at risk.
Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our products and product candidates without alleged or actual infringement, misappropriation or other violation of the patents and proprietary rights of third parties. Litigation relating to infringement or misappropriation of patent and other intellectual property rights in the pharmaceutical and biotechnology industries is common, including patent infringement lawsuits, interferences, oppositions, reexamination, derivation and post-grant proceedings before the U.S. Patent and Trademark Office (“USPTO”), and corresponding foreign patent offices. The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including the biotechnology and pharmaceutical industries, have employed intellectual property litigation as a means to gain an advantage over their competitors. Numerous U.S., European and other foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products and 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 products and product candidates may be subject to claims of infringement of the intellectual property rights of third parties.
We may be subject to third-party claims including infringement, interference or derivation proceedings, post-grant review and inter partes review before the USPTO or similar adversarial proceedings or litigation in other jurisdictions. 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 the applicable 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. These proceedings may also result in our patent claims being invalidated, held unenforceable or narrowed in scope. Similarly, if our patents or patent applications are challenged during interference or derivation proceedings, a court may hold that a third-party is entitled to certain patent ownership rights instead of us. Further, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our compositions, formulations, methods of manufacture, 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 products
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and product candidates unless we obtained a license or until such patents expire or are finally determined to be invalid or unenforceable. In addition, defending such claims would cause us to incur substantial expenses and, if successful, could cause us to pay substantial damages, if we are found to be infringing a third party’s patent rights. If we are found to have infringed such rights willfully, the damages may be enhanced and may include attorneys’ fees. Further, if a patent infringement suit is brought against us or our third-party service providers, our development, manufacturing or sales activities relating to the product or product candidate that is the subject of the suit may be delayed or terminated. As a result of patent infringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the third party, which may require us to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if a license can be obtained on acceptable terms, the rights may be nonexclusive, which could give our competitors access to the same intellectual property rights. If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more of our products and product candidates, forced to modify such products and product candidates, or to cease some aspect of our business operations, which could harm our business significantly. Modifying our products and product candidates to design around third-party intellectual property rights may result in significant cost or delay to us and could prove to be technically infeasible. 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. In addition, if the breadth or strength of protection provided the patents and patent applications we own or in-license is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products and product candidates.
If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products and product candidates, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States and in Europe, 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, for example, lack of eligibility, lack of written description, lack of novelty, obviousness or non-enablement. Third parties might allege unenforceability of our patents because someone connected with prosecution of the patent withheld relevant information, or made a misleading statement, during patent prosecution. The outcome of proceedings involving assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity of patents, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our products and product candidates. Furthermore, our patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectual property rights.
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 view these announcements in a negative light, the price of common stock could be adversely affected.
Finally, even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. 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 view these announcements in a negative light, the price of our common stock could be adversely affected. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development 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 substantially greater financial resources. 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.
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, manufacture and market our products and product candidates.
We cannot guarantee that any of our or our licensors’ patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or
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thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our products and product candidates in any jurisdiction. For example, in the United States, applications filed before November 29, 2000 and certain 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, Europe 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 future products and product candidates, or their manufacture or use may currently be unpublished. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our products and product candidates or the use thereof. 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 products and product candidates. We may incorrectly determine that our products and 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, Europe or elsewhere that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our products and product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products and product candidates.
From time to time we may identify patents or applications in the same general area as our products and product candidates. We may determine these third-party patents are irrelevant to our business based on various factors including our interpretation of the scope of the patent claims and our interpretation of when those patents expire. If the patents are asserted against us, however, a court may disagree with our determinations. Further, while we may determine that the scope of claims that will issue from a patent application does not present a risk, it is difficult to accurately predict the scope of claims that will issue from a patent application, our determination may be incorrect, and the issuing patent may be asserted against us. 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 monetary damages, we may be temporarily or permanently prohibited from commercializing our products and product candidates. We might, if possible, also be forced to redesign our products and 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.
Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products and product candidates.
As is the case with other biopharmaceutical and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical and pharmaceutical industries involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmaceutical and pharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act, or the AIA, which was passed in September 2011, resulted in significant changes to the U.S. patent system.
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 USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we 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 opportunities for third parties to challenge any issued patent before the USPTO. This applies to all of our U.S. patents, even those effectively filed 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.
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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. 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 owned and in-licensed patent applications and the enforcement or defense of our owned and in-licensed patents.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years 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 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. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.
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, European Patent Office (“EPO”) and other foreign patent offices over the lifetime of a patent. In addition, the USPTO, EPO and other foreign patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent failure to make payment of such fees or to comply with such provisions 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 such noncompliance will result in the abandonment or lapse of the patent or patent application, and the 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 within prescribed time limits. If we or our licensors fail to maintain the patents and patent applications covering our products and product candidates or if we or our licensors otherwise allow our owned or licensed patents or patent applications to be abandoned or lapse, our competitors might be able to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products and product candidates in any indication for which they are approved.
We enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents covering our products and product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our owned and in-licensed technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our licensors have patent protection, but enforcement is not as strong as that in the United States or the Europe. These products may compete with our products and product candidates, and our owned or in-licensed patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
In addition, we may decide to abandon national and regional patent applications before grant. The grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. 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. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our owned and in-licensed 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. It is also quite common that depending on the country, the scope of patent protection may vary for the same product candidate or technology.
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The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other 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. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.
Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired.
If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of marketing exclusivity for our products, our business may be materially harmed.
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 covering our products are obtained, once the patent life has expired for a product, 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 products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from using or commercializing technologies or products similar or identical to ours.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, we may be able to extend the term of a patent covering each product candidate under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments and similar legislation in the EU. 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. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent that is applicable to and covers an approved drug may be extended. Similar provisions are available in Europe, such as supplementary protection certificates, and in certain other non-United States jurisdictions to extend the term of a patent that covers an approved drug. 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 a patent term extension could be less than we request. 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, possibly materially.
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Further, under certain circumstances, the term of a patent covering our products may be extended for time spent during the pendency of the corresponding patent application in the USPTO (referred to as Patent Term Adjustment, or PTA). The laws and regulations underlying how the USPTO calculates the PTA is subject to change and any such PTA granted by the USPTO could be challenged by a third-party. If we do not prevail under such a challenge, the PTA may be reduced or eliminated, resulting in a shorter patent term, which may negatively impact our ability to exclude competitors.
Because PTA added to the term of patents covering pharmaceutical products has particular value, our business may be adversely affected if the PTA is successfully challenged by a third party and our ability to exclude competitors is reduced or eliminated.
Intellectual property rights do not address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
• others may be able to make products that are similar to Epoladerm, OSF200, Probudur, NES100, PES200, and MMS019 or our future products or product candidates but that are not covered by the claims of the patents that we own or license from others;
• others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights;
• we or any of our collaborators might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license;
• we or any of our collaborators might not have been the first to file patent applications covering certain technologies we or they own or have obtained a license, or will own or obtain a license;
• it is possible that our owned and in-licensed pending patent applications will not lead to issued patents;
• issued patents that we own and in-licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
• our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
• ownership and inventorship of our owned and in-licensed patents or patent applications may be challenged by third parties; and
• patents of third parties, or pending or future applications of third parties, if issued, may have an adverse effect on our business.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that our trade secrets will be misappropriated or disclosed, and confidentiality agreements with employees and third parties may not adequately prevent disclosure of trade secrets and protect other proprietary information.
We consider proprietary trade secrets or confidential know-how and unpatented know-how to be important to our business. We may rely on trade secrets or confidential know-how to protect our technology, especially where patent protection is believed by us to be of limited value. Because we expect to rely on third parties to manufacture Epoladerm, OSF200, Probudur, NES100, PES200, and MMS019 and any future products and product candidates, and we expect to collaborate with third parties on the development of Epoladerm, OSF200, Probudur, NES100, PES200, and MMS019 and any future products and product candidates, we must, at times, share trade secrets with them. We also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. However, trade secrets or confidential know-how can be difficult to maintain as confidential.
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To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, collaborators, contractors and advisors to enter into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with us 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, including our trade secrets. However, current or former employees, consultants, collaborators, contractors and advisors may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. The need to share 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 have an adverse effect on our business and results of operations. Enforcing a claim that a third party obtained illegally and is using trade secrets or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.
In addition, these agreements typically restrict the ability of our employees, consultants, collaborators, contractors and advisors 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.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential collaborators or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Over the long term, if we are unable to successfully register our trademarks and trade names and establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.
We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property, including patent rights that are important or necessary for the development or commercialization of Epoladerm, OSF200, Probudur, NES100, PES200 and/or MMS019 or our future products or product candidates. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize Epoladerm, OSF200, Probudur, NES100, PES200, and/or MMS019 or our products or product candidates, in which case we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable terms, or at all, which could materially harm our business. At this time, we are unaware of any intellectual property that interferes with ours or is complementary and needed to commercialize Epoladerm, OSF200, Probudur, NES100, PES200, and/or MMS019.
We may be subject to claims that our employees, consultants, collaborators contractors or advisors have wrongfully used or disclosed confidential information of their former employers or other third parties.
We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, consultants, collaborators, contractors, advisors and other third parties with whom we do business include provisions
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requiring such parties to assign rights in inventions to us, we may be subject to claims that we or our employees, consultants, collaborators, contractors and advisors have inadvertently or otherwise used or disclosed confidential information of their former employers or other third parties. We may also be subject to claims that the former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and 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, litigation could result in substantial cost and be a distraction to our management and other employees.
Our proprietary information may be lost, or we may suffer security breaches.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, proprietary business information, personal data and personally identifiable information of our clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, significant regulatory penalties, disrupt our operations, damage our reputation and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.
Risks Related to Our Employees, Managing Our Growth and Our Operations
Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.
We are highly dependent on the development, regulatory, commercialization and business development expertise of Anthony Mack, our Chief Executive Officer, as well as the other principal members of our management, scientific and clinical teams. Although we have employment agreements, offer letters or consulting agreements with our executive officers, these agreements do not prevent them from terminating their services at any time.
If we lose one or more of our executive officers or key employees, our ability to implement our business strategy successfully could be seriously harmed. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop product candidates, gain regulatory approval, and commercialize new products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be engaged by entities 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 highly qualified personnel, our ability to develop and commercialize product candidates will be limited.
We expect to expand our development, regulatory, and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities or acquire new facilities and 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
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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.
We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.
In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and nondisruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.
Our business and operations would suffer in the event of system failures.
Our computer systems, as well as those of our CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters (including hurricanes), terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of Epoladerm, Probudur and/or NES100 or any other product candidate could be delayed.
We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of our information technology systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of this confidential, proprietary, or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, could enable others to produce competing products, use our proprietary technology or information, or adversely affect our business or financial condition. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations or cash flow.
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Risks Related to this Offering and Our Common Stock
No active trading market for our common stock currently exists, and an active trading market may not develop.
Prior to this offering, there has not been an active trading market for our common stock. If an active trading market for our common stock does not develop following this offering, you may not be able to sell your shares quickly or at the market price. Our ability to raise capital to continue to fund operations by selling shares of our common stock and our ability to acquire other companies or technologies by using shares of our common stock as consideration may also be impaired. The initial public offering price of our common stock will be determined by negotiations between us and the underwriters and may not be indicative of the market prices of our common stock that will prevail in the trading market.
The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.
The market price of our common stock is likely to be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:
• any delay in the commencement, enrollment and ultimate completion of our clinical trials;
• any delay in submitting an NDA and any adverse development or perceived adverse development with respect to the FDA’s review of that NDA;
• failure to successfully develop and commercialize Epoladerm, Probudur NES100, PES200, and/or MMS019 or any future product candidate;
• inability to obtain additional funding;
• regulatory or legal developments in the United States and other countries applicable to Epoladerm, Probudur NES100, PES200, and/or MMS019 or any other product candidate;
• adverse regulatory decisions;
• changes in the structure of healthcare payment systems;
• inability to obtain adequate product supply for Epoladerm, Probudur NES100, PES200, and/or MMS019 or any other product candidate, or the inability to do so at acceptable prices;
• introduction of new products, services or technologies by our competitors;
• failure to meet or exceed financial projections we provide to the public;
• failure to meet or exceed the estimates and projections of the investment community;
• changes in the market valuations of companies similar to ours;
• market conditions in the pharmaceutical and biotechnology sectors, and the issuance of new or changed securities analysts’ reports or recommendations;
• announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by us or our competitors;
• significant lawsuits, including patent or stockholder litigation, and disputes or other developments relating to our proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
• additions or departures of key scientific or management personnel;
• sales of our common stock by us or our stockholders in the future;
• trading volume of our common stock;
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• general economic, industry and market conditions;
• health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented; and
• the other factors described in this “Risk Factors” section.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our common stock, regardless of our actual operating performance. The market price of our common stock may decline below the initial public offering price, and you may lose some or all of your investment. In particular, stock markets have experienced extreme volatility in the first nine months of 2020 due to the ongoing COVID-19 pandemic and investor concerns and uncertainty related to the impact of the pandemic on the economies of countries worldwide.
Our management has broad discretion in using the net proceeds from this offering.
We have stated, in only a general manner, how we intend to use the net proceeds from this offering. See “Use of Proceeds.” We cannot, with any assurance, be more specific at this time. We will have broad discretion in the timing of the expenditures and application of proceeds received in this offering. If we fail to apply the net proceeds effectively, we may not be successful in bringing our proposed products to market. You will not have the opportunity to evaluate all of the economic, financial or other information upon which we may base our decisions to use the net proceeds from this offering.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against companies following a decline in the market price of their securities. This risk is especially relevant for us because biotechnology companies have experienced significant share price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
After this offering, our directors, executive officers and certain stockholders (one of which is an affiliate of our Chief Executive Officer) will continue to own a significant percentage of our common stock and, if they choose to act together, will be able to exert significant control over matters subject to stockholder approval.
Upon the closing of this offering, our directors, executive officers, and stockholders affiliated with our directors and executive officers will beneficially own approximately 67.1% of the voting power of our outstanding common stock, or approximately 64.2% if the underwriters exercise their over-allotment option from us in full. In particular, Virpax Pharmaceuticals, LLC, which is controlled by Anthony Mack, our Chief Executive Officer, and of which Jeffrey Gudin, our Chief Medical Officer, is a member, will beneficially own shares representing approximately 60.6% of our outstanding capital stock immediately after this offering. As a result, such entities and individuals will have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our certificate of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those entities and individuals. These individuals also have significant control over our business, policies and affairs as officers and directors of our company. Therefore, you should not invest in reliance on your ability to have any control over our company.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts may publish about us or our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our share price would likely decline. If one or more of these analysts
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cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid any cash dividends on our common stock. 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. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future. See “Dividend Policy” for additional information.
If you purchase shares of our common stock in this offering, you will incur immediate dilution in the book value of your shares.
The initial public offering price of our common stock will be substantially higher than the as adjusted net tangible book value per share of our common stock. Therefore, if you purchase our common stock in this offering, you will pay a price per share of our common stock that substantially exceeds the book value of our tangible assets after subtracting our liabilities. Based on an assumed initial public offering price of $11.00 per share, you will experience immediate dilution of $8.92 per share, representing the difference between our net tangible book value per share, after giving effect to this offering, and the assumed initial public offering price. Further, the future exercise of any outstanding options and/or warrants to purchase shares of our common stock will cause you to experience additional dilution. See “Dilution.”
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur previously. The Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management 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 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 senior management personnel or members for our board of directors. In addition, these rules and regulations are often subject to varying interpretations, 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. Pursuant to Section 404 of SOX (“Section 404”), we will be required to furnish a report by our senior management on our internal control over financial reporting.
While we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To prepare for eventual compliance with Section 404, once we no longer qualify as an emerging growth company, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
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We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“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 exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock held by non-affiliates exceeds $700 million as of the end of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until such time as those standards apply to private companies. We may elect not to avail ourselves of this exemption from new or revised accounting standards and, therefore, may be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.
Anti-takeover provisions contained in our certificate of incorporation and bylaws to be adopted upon the closing of this offering, as well as provisions of Delaware law, could impair a takeover attempt.
Our certificate of incorporation, bylaws and Delaware law contain or will contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents include or will include provisions:
• classifying our board of directors into three classes;
• authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;
• limiting the liability of, and providing indemnification to, our directors and officers;
• limiting the ability of our stockholders to call and bring business before special meetings;
• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
• controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; and
• providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
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Our certificate of incorporation, as amended, designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our certificate of incorporation requires that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for each of the following:
• any derivative action or proceeding brought on our behalf;
• any action asserting a claim for breach of any fiduciary duty owed by any director, officer or other employee of ours to the Company or our stockholders, creditors or other constituents;
• any action asserting a claim against us or any director or officer of ours arising pursuant to, or a claim against us or any of our directors or officers, with respect to the interpretation or application of any provision of, the DGCL, our certificate of incorporation or bylaws; or
• any action asserting a claim governed by the internal affairs doctrine;
provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any of the foregoing actions for lack of subject matter jurisdiction, any such action or actions may be brought in another state court sitting in the State of Delaware.
The exclusive forum provision is limited to the extent permitted by law, and it will not apply to claims arising under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or for any other federal securities laws which provide for exclusive federal jurisdiction.
Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation.
Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, this provision may limit or discourage a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
We note that there is uncertainty as to whether a court would enforce the provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:
• our lack of operating history;
• the expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital following this offering;
• our current and future capital requirements to support our development and commercialization efforts for our product candidates and our ability to satisfy our capital needs;
• our dependence on our product candidates, which are still in preclinical or early stages of clinical development;
• our, or that of our third-party manufacturers, ability to manufacture cGMP quantities of our product candidates as required for pre-clinical and clinical trials and, subsequently, our ability to manufacture commercial quantities of our product candidates;
• our ability to complete required clinical trials for our product candidates and obtain approval from the FDA or other regulatory agencies in different jurisdictions;
• our lack of a sales and marketing organization and our ability to commercialize our product candidates if we obtain regulatory approval;
• our dependence on third-parties to manufacture our product candidates;
• our reliance on third-party CROs to conduct our clinical trials;
• our ability to maintain or protect the validity of our intellectual property;
• our ability to internally develop new inventions and intellectual property;
• interpretations of current laws and the passages of future laws;
• acceptance of our business model by investors;
• the accuracy of our estimates regarding expenses and capital requirements;
• our ability to adequately support organizational and business growth; and
• the continued spread of COVID-19 and the resulting global pandemic and its impact on our preclinical studies and clinical studies.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us 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 our forward-looking statements.
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You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Moreover, 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, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission 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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The following is a glossary of certain industry terms used throughout this prospectus:
• “ANDA” refers to an Abbreviated New Drug Application, which is used to seek approval from the FDA of a generic drug. Generic drug applications are called “abbreviated” because they are generally not required to include preclinical and clinical data to establish safety and effectiveness. Instead, an applicant must scientifically demonstrate that its product is bioequivalent (i.e., performs in the same way as the innovator drug). Once approved, an applicant may manufacture and market the generic drug.
• “AB-rated drugs” refer to drugs that meet bioequivalence requirements and which the FDA considers to be therapeutically equivalent and, therefore, substitutable with a reference listed drug.
• “branded products” refer to products that are marketed under a proprietary, often trademark-protected name.
• “BX-rated drugs” refer to drugs for which the data that have been reviewed by the FDA are insufficient to determine therapeutic equivalence. In these situations, the FDA presumes these drugs are not therapeutically equivalent until the FDA has determined that there is adequate information to make a full evaluation of therapeutic equivalence.
• “generic products” refer to products that are comparable to a branded product in dosage form, strength, route of administration, quality and performance characteristics and intended use. Before approving a generic product, the FDA requires many rigorous tests and procedures to ensure that the generic product can be substituted for the branded product. The FDA bases evaluations of substitutability or therapeutic equivalence of generic products on scientific evaluations. By law, a generic product must contain the identical amounts of the same active ingredients as the branded product. Generic products evaluated as therapeutically equivalent can be expected to have the same clinical effect and safety profile as the branded, or reference, product when administered under the conditions specified in the labeling.
• “NDA” refers to a New Drug Application. When the sponsor of a new drug believes sufficient evidence of the drug’s safety and effectiveness has been obtained to meet the FDA’s requirements for marketing approval, the sponsor submits an NDA to the FDA. The application must contain certain data about the drug, including information about chemistry, pharmacology, medical, biopharmaceutics and statistics. If the NDA is approved, the product may be marketed in the United States.
• “non-promoted products” refer to our products that we do not actively market or do not intend to actively market upon receipt of regulatory approval.
• “promoted products” refer to our products that we actively market or intend to actively market upon receipt of regulatory approval.
We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by third parties. We believe that each of these studies and publications is reliable. We also believe our internal company research as to such matters is reliable and the market definitions are appropriate. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors including those described in the section titled “Risk Factors”. These and other factors could cause results to differ materially from those expressed in the estimate made by the independent parties and by us.
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TRADEMARKS, SERVICE MARKS AND TRADE NAMES
We own or have rights to use a number of registered and common law trademarks, service marks and/or trade names in connection with our business in the United States and/or in certain foreign jurisdictions.
Solely for convenience, the trademarks, service marks, logos and trade names referred to in this prospectus are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
Virpax® is a registered tradename for Virpax® Pharmaceuticals, Inc. It was registered under the United States Patent and Trademark Office under serial number 87897821 on December 11th, 2019. Our logo is a registered tradename for Virpax® Pharmaceuticals, Inc. It was registered under the United States Patent and Trademark Office under serial number 87897809 on January 1st, 2019. For the purpose of this prospectus, Virpax® will be referred to as Virpax. Additionally, “we”, “our”, “the company” will be synonymous with Virpax. We have obtained a notice of allowance for our trademarks PROBUDURTM and EPOLADERMTM.
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We estimate that the net proceeds we will receive from the sale of our common shares in this offering, after deducting underwriting discounts and commissions and estimated expenses payable by us, will be approximately $13.2 million (or $15.3 million if the underwriters exercise their option to purchase additional shares in full). This estimate assumes an initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus.
The principal purposes of this offering are to increase our financial flexibility, create a public market for our common stock and to facilitate our access to the public equity markets. We currently expect to use the net proceeds from this offering for product development activities, including clinical and regulatory research and development for our product candidates, and the remainder for working capital and other general corporate purposes, including the associated costs of operating as a public company. We currently expect to use the net proceeds from this offering as follows:
• approximately $8.0 million for research and development activities related to Epoladerm;
• approximately $1.8 million for research and development activities related to Probudur;
• approximately $0.6 million for research and development activities related to NES100;
• approximately $0.5 for the repayment of the RRD Notes (as defined below); and
• approximately $2.3 million for working capital and general corporate purposes.
Based on our current projections, we believe the net proceeds of this offering will fund our operations for at least 12 months after the closing of this offering. We expect the net proceeds from this offering to fund Epoladerm through the submission of an NDA, and Probudur and NES100 through the submission of an IND.
We may also use a portion of the net proceeds of this offering for the acquisition or licensing, as the case may be, of additional technologies, other assets or businesses, or for other strategic investments or opportunities, although we currently have no understandings, agreements or commitments to do so.
Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including our sales and marketing and commercialization efforts, demand for our products, our operating costs and the other factors described under “Risk Factors” in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.
A $1.00 increase (decrease) in the assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $1.3 million (or approximately $1.5 million if the underwriters exercise their option to purchase additional shares in full), assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and, after deducting underwriting discounts and commissions and estimated expenses payable by us. An increase (decrease) of 100,000 in the number of shares offered by us in this offering, would increase (decrease) the net proceeds to us from this offering by approximately $1.0 million (or approximately $1.2 million if the underwriters exercise their option to purchase additional shares in full), assuming the initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us. The information above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.
The net proceeds from this offering, together with our cash and marketable securities, may not be sufficient for us to fund any of our product candidates through regulatory approval, and we may need to raise additional capital to complete the development and commercialization of our product candidates.
Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
54
We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Investors should not purchase our common stock with the expectation of receiving cash dividends. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors our board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
55
The following table sets forth our cash and our capitalization as of September 30, 2020:
• on an actual basis; and
• on an as adjusted basis, giving effect to our issuance and sale of 1,363,637 shares of our common stock in this offering at an assumed initial public offering price of $11.00 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.
The as adjusted information below is illustrative only, and our capitalization following the completion 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 together with our financial statements and the related notes appearing at the end of this prospectus and the “Summary Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Securities” sections of this prospectus.
As of September 30, 2020
|
||||||||
Actual |
As Adjusted |
|||||||
Cash |
$ |
257 |
|
$ |
13,477 |
|
||
|
|
|
|
|||||
Liabilities: |
|
|
|
|
||||
Accounts payable and accrued expenses |
$ |
2,732 |
|
$ |
2,732 |
|
||
Notes payable |
|
536 |
|
|
1,536 |
|
||
Total current liabilities |
|
3,268 |
|
|
3,268 |
|
||
Notes payable, net of current portion |
|
30 |
|
|
30 |
|
||
Related party notes payable |
|
1,000 |
|
|
1,000 |
|
||
Total non-current liabilities |
|
1,030 |
|
|
1,030 |
|
||
$ |
4,298 |
|
$ |
4,298 |
|
|||
Stockholders’ deficit: |
|
|
|
|
||||
Common stock, $0.00001 par value; 20,000,000 shares authorized, and 3,145,153 shares issued and outstanding, actual; 20,000,000 shares authorized, as adjusted and 4,508,790 shares issued and outstanding, as adjusted |
$ |
— |
|
$ |
— |
|
||
Additional paid-in capital |
|
6,096 |
|
|
19,140 |
|
||
Accumulated deficit |
|
(9,943 |
) |
|
(9,943 |
) |
||
Total stockholders’ deficit |
$ |
(3,847 |
) |
$ |
9,197 |
|
||
Total capitalization |
$ |
451 |
|
$ |
13,495 |
|
A $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $1.3 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 the estimated underwriting discounts and commissions and estimated offering expenses payable by us. At an assumed initial public offering price of $11.00 per share, the as adjusted amount of each of cash, additional paid-in capital, total stockholders’ equity and total capitalization would increase by approximately $13.2 million, assuming the number of shares offered by us, as set forth on the cover page of the prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 100,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $1.0 million, assuming no change in the assumed initial public offering price per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
56
The table above does not include:
• 486,101 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share;
• 334,695 shares of our common stock that are available for future issuance under our 2017 Plan or shares that will become available under our 2017 Plan;
• 5,056 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share; and
• 68,181 shares of our common stock issuable upon exercise of the warrant to be issued to the underwriters in this offering at an exercise price equal to 125% of the offering price set forth on the cover of this prospectus.
57
If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering.
Dilution results from the fact that the initial public offering price per share is substantially in excess of the book value per share attributable to the existing stockholders for the presently outstanding common shares. We calculate net tangible book value per share by dividing the net tangible book value (total tangible assets less total liabilities) by the number of outstanding common shares.
Our historical net tangible book value deficit as of September 30, 2020 was $(3.8) million, or $(1.22) per share of our common stock. Our historical net tangible book value deficit is the amount of our total tangible assets less our total liabilities and our common stock. Historical net tangible book value deficit per share represents our historical net tangible book value deficit divided by the 3,145,153 shares of our common stock outstanding as of September 30, 2020.
After giving effect to the receipt of the estimated net proceeds from our sale of shares of common stock in this offering, assuming an initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus, and the application of the estimated net proceeds therefrom as described under “Use of Proceeds,” our as adjusted net tangible book value at September 30, 2020 would have been approximately $9.4 million, or $2.08 per share. This represents an immediate increase in net tangible book value per share of $3.30 to existing stockholders and an immediate decrease in net tangible book value per share of $1.08 to you. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share |
$ |
11.00 |
|
|
Historical net tangible book value deficit per share as of September 30, 2020 |
$ |
(1.22 |
) |
|
Increase in pro forma net tangible book value per share attributable to this offering |
$ |
3.30 |
|
|
As adjusted net tangible book value per share after this offering |
$ |
2.08 |
|
|
Dilution per share to new investors purchasing common stock in this offering |
$ |
8.92 |
|
The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 decrease in the assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would decrease our as adjusted net tangible book value per share after this offering by $0.28 and dilution per share to new investors purchasing common stock in this offering by $0.72, 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 the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase in the assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus would increase our as adjusted net tangible book value per share after this offering by $0.28 and dilution per share to new investors purchasing common stock in this offering by $0.72, 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 the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 100,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by $0.23 and dilution per share to new investors purchasing common stock in this offering by $0.18, assuming no change in the assumed initial public offering price per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters’ over-allotment option is exercised in full, our as adjusted net tangible book value per share after this offering would be $2.44 and dilution per share to new investors purchasing common stock in this offering would be $8.56, assuming an initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table summarizes, as of September 30, 2020, on an as adjusted basis, the total number of shares of common stock purchased from us on an as converted to common stock basis and the total consideration paid or to be paid and the average price per share paid or to be paid by existing stockholder and by new investors in this offering
58
at an assumed initial public offering price of $11.00 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. As the table shows, new investors purchasing our common stock in this offering will pay an average price per share higher than our existing stockholder paid.
|
|
Average
|
||||||||||||
Number |
Percent |
Amount |
Percent |
|||||||||||
Existing stockholder |
3,145,153 |
69.8 |
% |
$ |
3,495,006 |
18.9 |
% |
$ |
1.11 |
|||||
New investors |
1,363,637 |
30.2 |
% |
|
15,000,000 |
81.21 |
% |
$ |
11.00 |
|||||
Total |
4,508,790 |
100.0 |
% |
$ |
18,495,006 |
100.0 |
% |
$ |
4.10 |
A $1.00 increase (decrease) in the assumed initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $1.4 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 1.3 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 1.5 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 100,000 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 $1.1 million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by 1.1 percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 1.2 percentage points, assuming no change in the assumed initial public offering price per share.
The table above assumes no exercise of the underwriters’ over-allotment option. If the underwriters’ over-allotment option is exercised in full, the number of shares of our common stock held by existing stockholder would be reduced to 66.7% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering would be increased to 33.3% of the total number of shares outstanding after this offering.
The tables above do not include:
• 486,101 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share;
• 334,695 shares of our common stock that are available for future issuance under our 2017 Plan or shares that will become available under our 2017 Plan;
• 5,056 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2020, at a weighted-average exercise price of $9.89 per share; and
• 68,181 shares of our common stock issuable upon exercise of the warrant to be issued to the underwriters in this offering at an exercise price equal to 125% of the offering price set forth on the cover of this prospectus.
To the extent any outstanding options or other equity awards are exercised or become vested or any additional options or other equity awards are granted and exercised or become vested or other issuances of our common shares are made, there may be further economic dilution to new investors.
59
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with “Prospectus Summary—Summary Financial Information,” “Selected Financial Information” and the financial statements and the related notes thereto included elsewhere in this prospectus. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the section entitled “Risk Factors.” This discussion and analysis are based upon the historical financial statements of Virpax Pharmaceuticals, Inc. included in this prospectus. All references to years, unless otherwise noted, refer to our fiscal years, which end on December 31.
Overview
Company Overview
We are a preclinical-stage pharmaceutical company focused on becoming a global leader in pain management by developing and delivering innovative non-opioid and non-addictive pharmaceutical products using new drug delivery systems and technology. We develop branded pharmaceutical product candidates for pain management by using cutting-edge technology to enhance patients’ quality of life.
We have exclusive global rights to develop, sell and export (among other rights) a proprietary patented Topical Spray Film Delivery Technology for acute musculoskeletal pain (“DSF100” or “EpoladermTM”) and for chronic osteoarthritis of the knee (“OSF200”). We also have exclusive global rights to a proprietary patented injectable “local anesthetic” Liposomal Gel Technology for postoperative pain management (“LBL100” or “ProbudurTM”). Additionally, we have exclusive global rights to a proprietary patented Nanomerics’ Molecular Envelope Technology (“MET”) that uses an intranasal device to deliver enkephalin for the management of acute and chronic pain, including pain associated with cancer (EnveltaTM or “NES100”). We believe NES100 would support the current effort among prescribers, regulators, and patients to seek non-addictive treatment options to combat the opioid epidemic. Further, we have the exclusive North American rights to develop and commercialize a High-Density Molecular Masking Spray (MS019) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. We plan to utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and NCE candidates for commercialization.
We believe the Topical Spray Film Delivery Technology could provide a pathway for additional proprietary spray formulations with strong adhesion and accessibility properties, especially around joints and curved body surfaces. Pursuant to the MedPharm Research and Option Agreement, MedPharm will conduct certain research and development activities of proprietary formulations incorporating certain MedPharm technologies and certain of our proprietary molecules. These proprietary molecules relate to indications which include, but are not limited to, treatment of estrogen levels, Alzheimer’s disease, dementia, Parkinson’s disease, neuropathic issues, and acute and chronic pain. Under the agreement, we were granted an option to obtain an exclusive, world-wide, sub-licensable, royalty bearing, irrevocable license to research, develop, market, use, commercialize, and sell any product utilizing MedPharm’s spray formulation technology. See “Material Agreements” below for more information concerning this research and option agreement.
We have never been profitable and have incurred net losses since inception Our net losses were $3,306,512 and $2,640,938 for the years ended December 31, 2019 and 2018, respectively. Our net losses for the nine months ended September 30, 2020 and 2019 were $3,634,442 and $2,606,499, respectively, and our accumulated deficit at September 30, 2020 was $9,942,633. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. 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.
On November 19, 2020, we effected a 1-for-4.944260256 reverse stock split of our common stock.
60
Trends and Uncertainties — COVID-19
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our service providers, suppliers, contract research organizations and our preclinical trials, all of which are uncertain and cannot be predicted.
As of the date of this filing, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.
Financial Operations Overview
The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.
Research and Development Expenses
Costs for research and development are charged as incurred and include employee-related expenses (including salaries and benefits, travel and expenses incurred under agreements with CROs, CMOs and service providers that assist in conducting clinical and preclinical studies), costs associated with preclinical activities and development activities and costs associated with regulatory operations.
Costs for certain development activities, such as preclinical and clinical studies, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in our financial statements as prepaid expenses or accrued expenses as applicable.
We expect that our research and development expenses for the next several years will be higher than in 2019 as a result of increased expenditures for the work needed for our expected initiation of clinical trials for Epoladerm, Probudur and NES100. These expenditures are subject to numerous uncertainties regarding timing and cost to completion. Completion of our clinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of our product candidate. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:
• the number of sites included in the clinical trials;
• the length of time required to enroll suitable patients;
• the size of patient populations participating in the clinical trials;
• the duration of patient follow-ups;
• the development stage of the product candidates; and
• the efficacy and safety profile of the product candidates.
Due to the early stage of our research and development, we are unable to determine the duration or completion costs of our development of Epoladerm, Probudur and NES100. As a result of the difficulties of forecasting research and development costs of Epoladerm, Probudur and NES100 as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of an approved product candidate.
61
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, accounting, legal and human resource functions. Our general and administrative expenses also include professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance and general corporate expenses. We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates.
We expect that our general and administrative expenses for the next several years will be higher than in 2019 and 2020 as we increase our headcount. We also anticipate increased expenses relating to our operations as a public company, including increased costs for the hiring of additional personnel, and for payment to outside consultants, including lawyers and accountants, to comply with additional regulations, corporate governance, internal control and similar requirements applicable to public companies, as well as increased costs for insurance.
Interest Expense
Interest expense consists primarily of interest expense on our promissory and convertible debt.
Income Taxes
We account for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and our respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.
We follow the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. We recognize the impact of an uncertain income tax position in the financial statements if we believe that the position is more likely than not to be sustained by the relevant taxing authority. We will recognize interest and penalties related to tax positions in income tax expense. As of September 30, 2020 and December 31, 2019, we had no uncertain income tax positions.
Critical Accounting Policies and Use of Estimates
We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully discussed in Note 2 to our audited financial statements appearing at the end of this prospectus, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.
62
Research and Development Expenses
We rely on third parties to conduct our preclinical studies and to provide services, including data management, statistical analysis and electronic compilation. Once our clinical trials begin, at the end of each reporting period, we will compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.
Fair Value of Common Stock and Stock-Based Compensation
We account for grants of stock options to employees and non-employees, and warrants to consultants, based on their grant date fair value and recognize compensation expense over the vesting periods. We estimate the fair value of stock options as of the date of grant using the Black-Scholes option pricing model. Estimates in our stock-based compensation valuations are highly complex and subjective.
In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock underlying the option and warrant grants. We estimated the fair value of our common stock by referencing arms-length transactions inclusive of the common stock underlying which occurred on or near the valuation date(s). Once our common stock is publicly traded, we will no longer have to estimate the fair value of the common stock, rather we will determine the value based on quoted market prices. We determined the fair value of our common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm.
During the year ended December 31, 2018, we issued 136,515 options with exercise prices of $9.89 per share. For purposes of recognizing compensation expense in our financial statements, we estimated the value of the common stock underlying these grants to be $9.89 per share. During the year ended December 31, 2019, we issued 135,336 options with exercise prices of $9.89 per share. During the nine months ended September 30, 2019, we issued 104,999 options with exercise prices of $9.89 per share. During the nine months ended September 30, 2020, we issued 269,868 options and 5,056 warrants with exercise prices of $9.89 per share. For purposes of recognizing compensation expense in our financial statements, we estimated the value of the common stock underlying these grants to be $9.89 per share. We used the Black-Scholes option pricing model to value the option and warrant awards. The assumptions used in calculating the fair value of share-based awards represents management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
Results of Operations
Nine Months Ended September 30, 2020 and 2019
Operating expenses:
Nine Months Ended
|
Change |
|||||||||||
2020 |
2019 |
Dollars |
Percentage |
|||||||||
Operating expenses: |
|
|
|
|
||||||||
General and administrative |
$ |
2,321,509 |
$ |
2,050,193 |
$ |
271,316 |
13 |
% |
||||
Research and development |
|
1,187,333 |
|
468,369 |
|
718,964 |
154 |
% |
||||
Total operating expenses |
$ |
3,508,842 |
$ |
2,518,562 |
$ |
990,280 |
39 |
% |
General and administrative expenses increased by $271,316, or 13%, to $2,321,509 for the nine months ended September 30, 2020 from $2,050,193 for the nine months ended September 30, 2019. The increase was primarily the result of an increase of $581,335 in share based compensation expense offset by a reduction in accounting and professional fees of $267,701 and travel expenses of $16,727 from the prior period.
63
Research and development expenses increased by $718,964, or 154%, to $1,187,333 for the nine months ended September 30, 2020 from $468,369 for the nine months ended September 30, 2019. The increase was primarily the result of incurring costs related to reaching certain program milestones related to NES100 of $600,000, pre-clinical work associated with Epoladerm of $65,247, and professional services related to pre-clinical activities related to Epoladerm of $35,635.
As a result of the foregoing, our loss from operations for the nine months ended September 30, 2020 was $3,508,842, compared to a loss from operations of $2,518,562 for the nine months ended September 30, 2019.
Other income (expense):
Nine Months Ended
|
Change |
||||||||||||||
2020 |
2019 |
Dollars |
Percentage |
||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
||||||||
Interest expense |
$ |
(129,600 |
) |
$ |
(87,937 |
) |
$ |
(41,663 |
) |
47 |
% |
||||
Other income |
|
4,000 |
|
|
— |
|
|
4,000 |
|
100 |
% |
||||
Total other expense |
$ |
(125,600 |
) |
$ |
(87,937 |
) |
$ |
(37,663 |
) |
43 |
% |
Other expense increased by $37,663, or 43%, to $125,600 for the nine months ended September 30, 2020 from $87,937 for the nine months ended September 30, 2019. The increase was primarily the result of an increase of $41,663 in interest expense related to our related party promissory notes and convertible notes with RRD slightly offset by $4,000 of funds received pursuant to a grant under Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
Liquidity and Capital Resources
Nine Months Ended September 30, 2020 and 2019
Capital Resources
September 30,
|
December 31,
|
Change |
|||||||||||||
Dollars |
Percentage |
||||||||||||||
Current assets |
$ |
274,561 |
|
$ |
46,719 |
|
$ |
227,842 |
|
488 |
% |
||||
Current liabilities |
$ |
4,267,342 |
|
$ |
2,778,994 |
|
$ |
1,488,348 |
|
54 |
% |
||||
Working capital |
$ |
(3,992,781 |
) |
$ |
(2,732,275 |
) |
$ |
(1,260,506 |
) |
46 |
% |
Since our inception in 2017, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock, related party note payables and convertible promissory notes. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of September 30, 2020, our principal source of liquidity was our cash, which totalled $256,505.
Equity Financings
During the nine months ended September 30, 2020, we issued 139,220 shares of common stock for gross proceeds totaling $1,376,900.
Debt
On October 28, 2020, we further amended the 2018 Promissory Note dated October 1, 2018, as amended, and 2019 Promissory Note dated January 15, 2019, as amended, with Anthony Mack, our Chief Executive Officer and a significant investor, to extend the maturity date to December 31, 2023 for both promissory notes. All other terms and conditions of these agreements remained unchanged.
Refer also to the “Description of Certain Indebtedness” section for further details regarding our indebtedness.
64
Cash Flows
The following table summarizes our cash flows from operating and financing activities:
Nine Months Ended
|
||||||||
2020 |
2019 |
|||||||
Statement of cash flow data: |
|
|
|
|
||||
Total net cash provided by (used in): |
|
|
|
|
||||
Operating activities |
$ |
(1,234,031 |
) |
$ |
(865,580 |
) |
||
Financing activities |
|
1,449,000 |
|
|
925,000 |
|
||
Increase in cash |
$ |
214,969 |
|
$ |
59,420 |
|
Operating Activities
For the nine months ended September 30, 2020, cash used in operations was $1,234,031 compared to $865,580 for the nine months ended September 30, 2019. The increase in cash used in operations was primarily the result of an increase in research and development costs associated with our pre-IND activities related to NES100 and preclinical work performed on Epoladerm.
Financing Activities
Cash provided by financing activities was $1,449,000 and $925,000 during the nine months ended September 30, 2020 and 2019. The primary reason for the increase of $524,000 was attributable to the issuance of 139,242 shares of common stock for proceeds totaling $1,376,900 as well as proceeds of $72,100 received under the Paycheck Protection Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) pursuant to the CARES Act in the current period.
Cash provided by financing activities in the prior period was primarily attributable to the issuance of 42,977 shares of common stock for proceeds of $425,000 as well as proceeds from the issuance of debt in the principal amount of $500,000 from a related party.
To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. Any equity financing would be dilutive to our stockholders. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in-licensing or similar strategic business transaction.
Results of Operations
Years Ended December 31, 2019 and 2018
Operating expenses:
Year Ended
|
Change |
||||||||||||
2019 |
2018 |
Dollars |
Percentage |
||||||||||
Operating expenses: |
|
|
|
|
|
||||||||
General and administrative |
$ |
2,559,127 |
$ |
1,483,786 |
$ |
1,075,341 |
|
72 |
% |
||||
Research and development |
|
622,741 |
|
1,142,176 |
|
(519,435 |
) |
(45 |
)% |
||||
Total operating expenses |
$ |
3,181,868 |
$ |
2,625,962 |
$ |
555,906 |
|
21 |
% |
65
General and administrative expenses increased by $1,075,341, or 72%, to $2,559,127 for the year ended December 31, 2019 from $1,483,786 for the year ended December 31, 2018. The increase was primarily the result of a $553,250 increase in professional fees, a $293,191 increase in share-based compensation expense and a $187,689 increase in employee compensation and benefits.
Research and development expenses decreased by $519,435, or 45%, to $622,741 for the year ended December 31, 2019 from $1,142,176 for the year ended December 31, 2018. The decrease was primarily the result of a decrease of approximately $589,739 related to IND enabling studies for Epoladerm in 2018.
As a result of the foregoing, our loss from operations for the year ended December 31, 2019 was $3,181,868, compared to a loss from operations of $2,625,962 for the year ended December 31, 2018.
Other expenses:
Year Ended
|
Change |
||||||||||||||
2019 |
2018 |
Dollars |
Percentage |
||||||||||||
Other expenses: |
|
|
|
|
|
|
|
||||||||
Interest expense |
$ |
(124,644 |
) |
$ |
(14,976 |
) |
$ |
(109,668 |
) |
732 |
% |
||||
Total other expenses: |
$ |
(124,644 |
) |
$ |
(14,976 |
) |
$ |
(109,668 |
) |
732 |
% |
Interest expense increased by $109,668, or 732%, to $124,644 for the year ended December 31, 2019 from $14,976 for the year ended December 31, 2018. The increase was primarily the result of an increase in the principal amount of outstanding notes payable of $500,000 and $264,520 with Anthony Mack and RRD, respectively.
Liquidity and Capital Resources
Years Ended December 31, 2019 and 2018
Capital Resources
Year Ended
|
Change |
||||||||||||||
2019 |
2018 |
Dollars |
Percentage |
||||||||||||
Current assets |
$ |
46,719 |
|
$ |
61,500 |
|
$ |
(14,781 |
) |
(24 |
)% |
||||
Current liabilities |
|
2,778,994 |
|
|
1,254,224 |
|
|
1,524,770 |
|
122 |
% |
||||
Working capital |
|
(2,732,275 |
) |
|
(1,192,724 |
) |
|
(1,539,551 |
) |
129 |
% |
As of December 31, 2019, our principal source of liquidity was our cash, which totalled $41,536. To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. Any equity financing would be dilutive to our stockholders. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in-licensing or similar strategic business transaction.
Equity Financings
During the year ended December 31, 2019, we issued 63,203 shares of common stock for gross proceeds totaling $625,000. During the year ended December 31, 2018, the Company issued 113,263 shares of common stock for gross proceeds totaling $1,120,000.
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Debt
On October 1, 2018, we issued an aggregate of $500,000 of principal amount of promissory notes bearing an interest rate of 11.19%.
On January 15, 2019, we issued an additional $500,000 of principal amount of promissory notes bearing an interest rate of 11.19%.
On August 29, 2019, we issued the RRD Note with a maximum principal balance of $400,000, which will automatically convert into equity or cash (at the holders’ option) upon a transaction where we sell our equity securities for at least $1.5 million (a “RRD Qualified Financing”). We anticipate that this offering will constitute an RRD Qualified Financing. The RRD Note was amended on March 20, 2020 to increase the maximum principal balance to $600,000. In October 2020, we amended the RRD Note to extend the maturity date from September 30, 2020 to November 30, 2020, increase the principal amount from $434,260 to $493,480, extend the RRD Qualified Financing deadline from September 30, 2020 to November 30, 2020, and provide for the payment of all interest accrued from April 1, 2020 through November 30, 2020, which was $30,431. As of September 30, 2020, the principal balance on the RRD Note was $493,480, with accrued interest of $22,208.
Refer to the “Description of Certain Indebtedness” section for further details regarding our indebtedness.
Cash Flows
Years Ended December 31, 2019 and 2018
The following table summarizes our cash flows from operating and financing activities:
Year Ended
|
||||||||
2019 |
2018 |
|||||||
Statement of cash flow data: |
|
|
|
|
||||
Total net cash provided by (used in): |
|
|
|
|
||||
Operating activities |
$ |
(1,131,834 |
) |
$ |
(1,799,636 |
) |
||
Financing activities |
|
1,125,000 |
|
|
1,674,766 |
|
||
Decrease in cash |
$ |
(6,834 |
) |
$ |
(124,870 |
) |
Operating Activities
For the year ended December 31, 2019, cash used in operations was $1,131,834 compared to $1,799,636 for the year ended December 31, 2018. The decrease in cash used in operations was primarily the result of the increase in net loss, offset by an increase in interest and stock-based compensation expense from 2018, and an increase in accounts payable and accrued expense balances.
Financing Activities
Cash provided by financing activities was $1,125,000 during the year ended December 31, 2019, attributable to $625,000 from the sale of 63,203 shares of our common stock and $500,000 from the issuance of debt. Cash provided by financing activities was $1,674,766 during the year ended December 31, 2018, attributable to $1,120,000 from the sale of 113,263 shares of our common stock and $554,766 from the issuance of debt.
Future Capital Requirements
We expect that the net proceeds from this offering and our existing cash will be sufficient to fund our operations, future research and development, and general working capital for at least 12 months following the closing of this offering. However, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.
67
Our expectations regarding future cash requirements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we make in the future. We have no current understandings, agreements or commitments for any material acquisitions or licenses of any products, businesses or technologies. We may need to raise substantial additional capital in order to engage in any of these types of transactions.
We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company following the closing of this offering.
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
• the initiation, progress, timing, costs and results of clinical trials for our product candidates;
• the clinical development plans we establish for each product candidate;
• the number and characteristics of product candidates that we develop or may in-license;
• the terms of any collaboration agreements we may choose to execute;
• the outcome, timing and cost of meeting regulatory requirements established by the DEA, the FDA, the EMA or other comparable foreign regulatory authorities;
• the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
• the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;
• costs and timing of the implementation of commercial scale manufacturing activities; and
• the cost of establishing, or outsourcing, sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.
To the extent that our capital resources are insufficient to meet our future operating and capital requirements, we must finance our cash needs through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. We have no committed external sources of funds. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.
If we raise additional funds by issuing equity securities, our stockholder will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and 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. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholder. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.
Going Concern
Since inception we have been engaged in organizational activities, including raising capital and research and development activities. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. We are subject to those risks associated with any pre-clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that our research
68
and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change and is largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of the Company’s efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for 12 months after the issuance date of our financial statements. The accompanying financial statements have been prepared on a going concern basis which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We incurred a net loss of $3,306,512 and $2,640,938 for the years ended December 31, 2019 and 2018, respectively, and had an accumulated deficit of $6,308,191 as of December 31, 2019. We incurred a net loss of $3,634,442 for the nine months ended September 30, 2020 and had an accumulated deficit of $9,942,633 as of September 30, 2020. We anticipate incurring additional losses until such time, if ever, that it can generate significant revenue from our product candidates currently in development. Our primary source of capital has been the issuance of debt and equity securities. We believe that current cash is sufficient to fund operations and capital requirements through December 2020. Additional financings will be needed by us to fund our operations, to complete development of and to commercially develop our product candidates. There is no assurance that such financing will be available when needed or on acceptable terms.
Global Pandemic Outbreak
In March 2020, the World Health Organization declared COVID-19 a global pandemic. The outbreak has become increasingly widespread in the United States, impacting the markets in which we operate. While the full impact of the pandemic continues to evolve, the financial markets have been subject to significant volatility that adversely impacts our ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing initiatives. The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values also affect our ability to enter into collaborations, joint ventures, and license and royalty agreements. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the pandemic and its effects on our business and operations are uncertain. We may face difficulties recruiting or retaining patients in our ongoing and planned preclinical and clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, CROs, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in our clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak. While expected to be temporary, these disruptions may negatively impact our results of operations, financial condition, and liquidity in 2020, and potentially beyond.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recently Issued Accounting Standards
For a discussion of recent accounting pronouncements, please see Note 2, Summary of Significant Accounting Policies to our financial statements included elsewhere in this prospectus.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company”. As an “emerging growth company,” we are electing to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision not to take advantage of the extended transition period is irrevocable.
69
Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply until the fifth anniversary of the completion of our initial public offering or until we no longer meet the requirements for being an “emerging growth company,” whichever occurs first.
70
Our Company
We are a preclinical-stage pharmaceutical company focused on becoming a global leader in pain management by developing and delivering innovative non-opioid and non-addictive pharmaceutical products using new drug delivery systems and technology. We are developing branded pharmaceutical product candidates with a focus on pain management by using cutting-edge technology to enhance patients’ quality of life.
We have exclusive global rights to develop, sell and export (among other rights) a proprietary patented nonsteroidal anti-inflammatory Topical Spray Film Delivery Technology for acute musculoskeletal pain (“DSF100” or “EpoladermTM”) and for chronic osteoarthritis of the knee (“OSF200”). We also have exclusive global rights to a proprietary patented injectable, long-acting, local anesthetic Liposomal Gel Technology for postoperative pain management (“LBL100” or “ProbudurTM”). Additionally, we have exclusive global rights to a proprietary patented MET that uses an intranasal device to deliver exogenous enkephalin for the management of acute and chronic pain, including pain associated with cancer (“NES100”) and for the management of Post-Traumatic Stress Disorder (“PES200”). Enkephalins are pain-relieving pentapeptides produced in the body, and function to inhibit neurotransmitters in the pathway for pain perception, thereby reducing the physical impact of pain.
We believe the Topical Spray Film Delivery Technology could provide a pathway for additional proprietary spray formulations with strong adhesion and accessibility properties upon application, especially around joints and curved body surfaces. Our belief is based on, in part, a recent ACP/AAFP (American College of Physicians and American Academy of Family Practice) national guideline for the treatment of non-Low Back Musculoskeletal Pain which recommends topical NSAIDs as the first-line therapy in patients with acute pain from non-low back, musculoskeletal injuries. According to the new guideline, evidence shows that topical NSAIDs were among the most effective for pain reduction, physical function, treatment satisfaction, and symptom relief and were not associated with any significant side effects. The guideline was based on a systematic evidence review of the comparative efficacy and safety of non-pharmacological and pharmacological management of acute pain from non-low back, musculoskeletal injuries in adults in the outpatient setting and a systematic review of the predictors of prolonged opioid use.
Pursuant to the MedPharm Research and Option Agreement, MedPharm will conduct certain research and development activities of proprietary formulations incorporating certain MedPharm technologies and certain of our proprietary molecules. These proprietary molecules relate to indications which include, but are not limited to, treatment of estrogen levels, Alzheimer’s disease, dementia, Parkinson’s disease, neuropathic issues, and acute and chronic pain. Under the agreement, we were granted an option to obtain an exclusive, world-wide, sub-licensable, royalty bearing, irrevocable license to research, develop, make, market, commercialize, and sell any product utilizing MedPharm’s spray formulation technology. See “Material Agreements” below for more information concerning this research and option agreement.
We believe NES100 and PES200 could support the current effort among prescribers, regulators, and patients to seek non-addictive treatment options. We plan to utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and NCE candidates for commercialization.
While we are currently focused on the development of our non-opioid and non-addictive pain management pipeline of product candidates, we also plan on using our proprietary delivery technologies to develop anti-viral therapies as an anti-viral barrier to potentially prevent or reduce the risk or the intensity of viral infections in humans, including, but not limited to, influenza and SARS-CoV-2 (COVID 19). As of the date of this prospectus, activities related to our anti-viral therapies have not commenced. We plan to finance our anti-viral-related activities through the use of grants and do not plan on using any proceeds from this offering.
71
Our Portfolio
Our portfolio currently consists of multiple preclinical-stage product candidates: Epoladerm, OSF200, Probudur, NES100, PES200 and MMS019. In the accompanying section we will describe each product candidate, its benefits, and our market strategy for each product candidate. The dates reflected in the below table are estimates only, and there can be no assurances that the events included in the below table will be completed on the anticipated timeline presented, or at all.
____________
* We are also developing Epoladerm for a second indication, OSF200, which utilizes the same transdermal delivery system as Epoladerm, as a twice daily topical treatment for chronic osteoarthritis of the knee. OSF200 development plan is pending the approval of Epoladerm. In addition, we are also developing NES100 for a second indication, PES200, which utilizes the same delivery mechanism as NES100. PES200 enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain for post-traumatic stress disorder. PES200 development plan is pending a grant approval. Further, we recently entered into a Collaboration and License Agreement with Nanomerics Ltd. for the exclusive North American license to develop and commercialize a High-Density Molecular Masking Spray (MMS019) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. We plan to develop MMS019 primarily through grants and do not plan on using any proceeds from this offering.
Diclofenac Epolamine Metered-Dose Spray Film (Epoladerm)
We plan to develop and market Epoladerm as a topical NSAID treatment for acute pain. We believe Epoladerm’s proprietary spray film technology may lead to adhesion capabilities superior to those of transdermal patches (e.g. Epoladerm does not require any tape reinforcement), while maintaining comparable skin absorption capabilities to transdermal patches currently on the market. Specifically, because the Epoladerm technology does not require a patch to deliver the drug through the skin, we believe Epoladerm may have better adhesion to the skin and may have better accessibility, particularly around joints and other curved body surfaces. Additionally, because Epoladerm is a spray, we believe it will be more aesthetically appealing than transdermal patches. As a spray, Epoladerm and OSF200 were studied in ex-vivo skin studies (skin from abdominoplasty) and demonstrated drying times of between 60 and 90 seconds. Unlike other topical NSAIDs, Epoladerm does not require physical handling of the actual drug and enables metered dosing that provides an accurate amount of active ingredient per spray application. We plan to target our marketing and selling efforts on pain management clinics and high-prescribing healthcare practitioners including orthopedic surgeons, rheumatologists, physical medicine and rehabilitation specialists and primary care within the $3.3 billion (as of 2019) transdermal and topical non-opioid pain market.
72
Image 1, below, displays the expected delivery system of Epoladerm for the treatment of acute pain:
Image 2, below, illustrates the results of MedPharm’s skin flux study which performed a standard In Vitro Permeation Test (“IVPT”) experiment comparing the amount of diclofenac epolamine permeating through skin from both Epoladerm and Flector patch and noted that Epoladerm demonstrated similar absorption over the 24 hour period observed, despite a lower amount of drug product being applied to the skin than contained in the Flector patch:
When discussing nonopioid treatments for chronic pain, the CDC notes clinicians should consider topical agents as alternative first-line analgesics, thought to be safer than systemic medications. In an August 18, 2020 article appearing in the Annals of Internal Medicine, the American College of Physicians and the American Academy of Family Physicians announced a joint clinical guideline, “Nonpharmacologic and Pharmacologic Management of Acute Pain from Non-Low Back, Musculoskeletal Injuries in Adults,” whereby they recommend topical NSAIDs as first-line therapy for patients experiencing pain from non-low back, musculoskeletal injuries. The clinical guideline also recommends that clinicians not prescribe opioids for these injuries except in cases of severe injury or if patients cannot tolerate first-line therapeutic options. We believe this creates a unique market opportunity for Epoladerm
73
within the $3.3 billion (as of 2019) transdermal and topical non-opioid pain market. We plan to target our marketing and selling efforts to pain management clinics and high-prescribing healthcare practitioners, including orthopedic surgeons, rheumatologists, physical medicine and rehabilitation specialists and PCPs.
We believe Epoladerm represents a novel technology that administers a metered dose spray based on our proprietary spray. We are not aware of any other metered dose spray film product, on the market or in clinical development, that utilizes the same delivery mechanisms as Epoladerm. As a result of the Pre-IND review, the FDA has indicated that it is reasonable for us to pursue a 505(b)(2) accelerated NDA for Epoladerm. There can be no assurance that we will be successful in securing regulatory approval under the 505(b)(2) pathway or that we will be successful in mitigating risks associated with the clinical development of this product candidate.
The following is the planned development activity and status to bring Epoladerm to market:
Activity |
Status |
|
GLP Pig Tox 28 Day |
Planned |
|
IND Filing with FDA |
Planned |
|
Pilot/Pivotal BE HV Study vs competitor transdermal patch |
Planned |
|
Phototoxicity, Irritation & Sensitivity |
Planned |
|
Phase III Clinical Trials |
Planned |
|
NDA, 505(b)(2) filing with FDA |
Planned |
|
NDA Approval |
Planned |
We are also developing a second indication utilizing the same transdermal delivery system as Epoladerm as a twice daily topical treatment for chronic osteoarthritis of the knee (OSF200). OSF200 will use the same formulation as Epoladerm; however, OSF200 would be applied twice daily. OSF200 is also covered under the same intellectual property listed above for Epoladerm. As a result of the IND review, the FDA has indicated that it is reasonable for us to pursue a 505(b)(2) NDA for OSF200. There can be no assurance that we will be successful in securing regulatory approval under the 505(b)(2) pathway or that we will be successful in mitigating risks associated with the clinical development of this product candidate. OSF200 would be marketed as a topical NSAID treatment of chronic osteoarthritis for the knee. We believe OSF200’s adhesion capabilities and attributes are the same as listed for Epoladerm. Our plan would be to file a supplement to our potential NDA approval of Epoladerm. If we are able to obtain approval of the NDA for Epoladerm, we plan to conduct Phase III clinical trials for OSF200 with an anticipated NDA approval in approximately 18 months following a potential approval for Epoladerm. However, there can be no assurance that Epoladerm is approved by the FDA.
Long-acting Bupivacaine Liposomal-gel 3.0% (LBL100 or ProbudurTM)
Probudur is a drug product candidate based on a unique liposomal delivery system LMVVs encapsulating a high dose of the local anesthetic bupivacaine. These drug-loaded liposomes are composed of lecithin and cholesterol which are GRAS by the FDA. These LMVVs are embedded in hydrogel beads to form a Lipogel. The system delivers a local analgesic medicine from the Lipogel. Early non-clinical animal studies produced data which suggests that Probudur may be able to provide improved onset, duration and peak performance properties as compared to a similar product on the market. The animal studies were conducted by administering Probudur by local infiltration of the surgical site which resulted in keeping the active ingredient localized at the surgical site for a longer period of time. Four trials were conducted using three animal models. Data from these animal studies showed that after treatment with Probudur (50 mg/kg), statistically significant analgesic activity (measured as threshold pressure at animal’s withdrawal of the treated extremity) was observed in comparison to control (vehicle), for as long as 96 hours post-treatment, which is 24 hours longer than the leading product on the market.
If we are able to demonstrate a successful Phase III clinical trial, we believe Probudur may represent the first long acting local anesthetic with an opioid sparing label. The slow release of the drug from the liposomal depot reduces the peak plasma levels, reducing toxicity while also potentially providing longer-lasting post-operative pain control. We believe this property may permit administration of higher bupivacaine doses (3% versus 1.3% in leading market product); however, there can be no assurances, based on these animal studies, that Probudur will be safe and effective as these determinations are solely within the authority of the FDA. Further, there can be no assurance that Probudur will receive FDA approval.
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Image 4 below illustrates the results of the early animal studies of Probudur:
We plan to market Probudur to general surgeons, anesthesiologists, and orthopedic surgeons within the $577 million (as of 2019) local anesthetic post-surgical market. If the product candidate is used appropriately, we believe this product candidate could potentially eliminate the need for opioids for post-operative pain relief. As a result of our IND review, the FDA has indicated that it is reasonable for us to pursue a 505(b)(2) accelerated NDA for Probudur. There can be no assurance that we will be successful in securing regulatory approval under the 505(b)(2) pathway or that we will be successful in mitigating risks associated with the clinical development of this product candidate.
Image 5, below, displays the planned delivery of Probudur at the wound site:
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Probudur has completed IND Enabling studies “in vitro,” “in vivo efficacy” and “in vivo toxicology.” Based upon discussions with the FDA, we intend to move Probudur directly into dose escalation studies in targeted patient populations. We believe the completed IND Enabling studies allow us to transition directly to a Phase II study. The following is the planned development activity and status to bring Probudur to market:
Activity |
Status |
|
Preclinical Studies: Bunionectomy GLP Tox 28 day (2 species) Non-GLP Rat Study |
Planned |
|
Preclinical Studies: GLP Tox 28 Day |
Planned |
|
Phase II Patient Studies |
Planned |
|
Phase III Clinical Trials vs leading market indicator (Pacira BioSciences, Inc.) |
Planned |
|
NDA, 505(b)(2) Filing with FDA |
Planned |
|
Launch |
Planned |
Molecular Envelope Technology Enkephalin Intranasal Spray (EnveltaTM or NES100)
EnveltaTM or NES100 is a nanotechnology-based intranasal spray drug product candidate which enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain. NES100 is manufactured using high pressure homogenization and spray drying. Preclinical studies were conducted in animals for between 6 and 28 days through intravenous, oral and intranasal dosing. Twelve studies were conducted using three animal models whereby the animal studies were aimed at determining safety pharmacology and genetic toxicology. The preliminary data from these early animal studies of NES100 have shown that NES100 exhibited pain control in morphine tolerant animals, without the development of tolerance itself. These animal models tested the anti-hyperalgesic effects in rats against evoked stimuli in a model of chronic inflammatory pain and against ongoing neuropathic pain in a conditioned placement preference model with spinal nerve ligation. NES100 and morphine were compared at the same dose level of 7.5 mg kg-1 in this model and NES100 was determined to have a similar analgesic effect. With respect to respiratory depression, delta opioid receptor agonists actually reverse the respiratory depression caused by morphine agonists, meaning that we believe NES100 will be unlikely to cause respiratory depression. However, there can be no assurances, based on these preclinical studies, that NES100 will be safe and effective. Further, there can be no assurance that NES100 will receive FDA approval.
We believe we have identified a large unmet need and market opportunity for current prescribers of opioids, including pain and hospice treatment centers. Currently, these prescribers may be using morphine-like opioids, which target three opioid receptors: mu, delta and kappa. Most analgesics used clinically target mu receptor, however, this receptor is also responsible for the majority of undesirable side effects associated with opioids. Currently, enkephalins are limited in their therapeutic potential by their pharmacokinetic profiles due to their inability to cross the blood-brain barrier to reach opioid receptors located in the central nervous system. However, we believe NES100’s novel nasally delivered formulation, based on early animal studies, may enhance enkephalin transport to the brain by protecting the drug in a molecular envelope (MET), facilitating its crossing of the blood-brain barrier. Enkephalins bind predominantly to the delta-receptor which is typically not associated with the dangers associated with opioids. We believe NES100 may have analgesic potential without opioid tolerance and has not exhibited any indications of withdrawal, respiratory depression euphoria, or addiction in the early animal studies. We plan to use the endogenous NCE regulatory pathway to bring this product candidate to market. We plan to target our marketing and selling efforts to pain specialists, anesthesiologists, orthopedic surgeons, PCPs, NPs, oncologists, and neurologists within the $7 billion (as of 2019) analgesic narcotics pain market. There can be no assurances, based on these preclinical animal studies, that NES100 will be safe and effective in human trials.
NES100 is a neuroactive peptide drug product (enkephalin) with a proprietary composition formulated for administration by all routes except the topical route. A preassembled device and cartridge would be used to propel the enkephalin formulation through the nose to the brain via the olfactory nerve/bulb route of transmission. A MET will encapsulate the drug product, protecting it from degradation and help to carry the drug across the blood-brain barrier to promptly suppress pain.
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Image 6 and Image 7, below, display the planned delivery of enkephalin peptide nanoparticles to the brain via the olfactory route:
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Image 8 below illustrates the concept NES100 delivery device:
NES100 has completed IND enabling studies “in vitro,” “in vivo efficacy” and “in vivo toxicology.” The following is the planned activity and development status to bring the product candidate to market:
Activity |
Status |
|
28-day Toxicology Study |
Planned |
|
Submit IND for Phase 2 dose escalation and Phase 3 clinical safety and efficacy study |
Planned |
|
Phase III Clinical trials: v/s Morphine |
Planned |
|
NDA, Endogenous NCE filing with FDA |
Planned |
|
FDA Action |
Planned |
We are also developing NES100 for a second indication utilizing the same delivery mechanism as NES100 (“PES200”) which enables the delivery of a metabolically labile peptide drug (Enkephalin) into the brain. PES200 is also covered under the same intellectual property listed elsewhere in this prospectus for NES100. We believe PES200’s capabilities and attributes are the same as NES100. Our plan is to validate proof-of-concept followed by IND-enabling studies for the development of a novel enkephalin-based formulation to treat Post-Traumatic Stress Disorder.
On August 25, 2020, we entered into a CRADA with NCATS. This collaboration is for the continued development of Virpax’s product candidate, NES100, an intranasal peptide, for the management of acute and chronic non-cancer pain. The term of the CRADA is for a period of four years from the effective date of the agreement and can be terminated by both parties at any time by mutual written consent. In addition, either party may unilaterally terminate the CRADA at any time by providing written notice of at least sixty (60) days before the desired termination date. The agreement provides for studies that are focused on the pre-clinical characterization of NES100 as a novel analgesic for acute and chronic non-cancer pain, and for studies to further develop NES100 through IND enabling studies. There are certain development “Go/No Go” provisions within the agreement whereby, if certain events occur, or do not occur, NCATS may terminate the CRADA. These “No GO” provisions include: i) lack of efficacy in all animal pain models, ii) no reliable and sensitive bioanalytical method can be developed, iii) manufacturing failure due to inherent process scalability issues, iv) unacceptable toxicity or safety profile to enable clinical dosing, and v) inability to manufacture the NES100 dosage form.
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High-Density Molecular Masking Spray Formulation for the Prevention of Respiratory Viruses (MMS019)
MMS019 is high-density molecular masking spray we plan to develop as an anti-viral barrier to potentially prevent or reduce the risk or the intensity of viral infections in humans. We intend for this formulation to be delivered using a preassembled device and cartridge to propel the High-Density Molecular Spray formulation into the nose. MMS019 will be used as a nasal powder spray to potentially prevent viral binding to epithelial cells in the nasal cavity and the upper respiratory tract, potentially reducing respiratory related infections.
We believe MMS019 may offer another layer of protection, in the form of a Molecular Mask, to be added to standard personal protective equipment to protect healthcare workers, and those at-risk of serious disease, from viral infections. MMS019 has completed IND-enabling toxicology studies and intends to demonstrate that pre-treatment of nasal mucosal cells in vitro prevents, or reduces, the number of cells that get infected. We intend to finance activities related to MMS019 with grants and not with any proceeds from this offering.
We continue to seek to exploit our product portfolio through licensing and other strategic transactions to further develop our drug product candidates. This includes seeking potential partners in further developing our drug product candidates and responding to inquiries of interest we have received concerning our product portfolio.
Our Strengths
We are working within this larger context to create and advance novel non-addictive treatments for the management of acute musculoskeletal pain, chronic pain, mononeuropathy and post-operative pain. Our strategy is to develop product candidates that may provide a clinical advantage over current treatments. However, there can be no assurance that we will be able to execute on this strategy. With the support of the President, the U.S. Department of Health and Human Health Services (“HHS”), the National Institutes of Health (“NIH”) launched the initiative Helping to End Addiction Long-term (“HEAL”), to provide solutions to the national opioid crisis. Pursuant to this initiative, we have been awarded grants related to NES100 and have filed for additional grants that are currently pending. We believe HEAL and recent FDA guidance has made it more efficient to bring novel non-opioid medication to market.
We believe the below product candidates have novel technologies that could improve pain management. We believe these product candidates have the following individual strengths and differentiators as compared to similar product candidates that we believe could make these product candidates more desirable, if we obtain FDA approval:
• Diclofenac Epolamine Metered-Dose Spray (“Epoladerm”) quick-drying spray film technology we believe will permit consistent 12-hour dosing without the messy handling of the much slower drying liquids, gels and spray foam formulations that must be rubbed into the skin on application. We believe that this may allow for improved patient compliance, which may enhance therapeutic outcomes compared to the inconsistent adhesion of patch technology.
• Long-acting Bupivacaine Liposomal-gel 3% (“Probudur”) we believe may eliminate the need for opioids and catheters after surgery. It may reduce the associated costs and length of stay.
• MET Endogenous Enkephalin Intranasal Spray (“NES100”) is an intranasal enkephalin nonaddictive MET formulation and has exhibited pain control in morphine tolerant animals, without the development of tolerance itself.
Also, three of our product candidates (Epoladerm, Probudur, and OSF200) could potentially be developed using the FDA’s 505(b)(2) regulatory pathway. This type of submission differs from the FDA’s standard 505(b)(1) NDA clinical development pathway typically used for most pharmaceutical NCEs in that the development candidate (e.g., Diclofenac Epolamine Metered-Dose spray) in question contains similar active ingredients to a previously approved drug. Consequently, the data included in the submission can rely, at least partially, on the FDA’s findings of safety and effectiveness related to the other product, and as a result can mitigate many of the drug development risks faced by the drug developer. Companies utilizing the 505(b)(2) regulatory pathway typically experience a shorter drug development program that requires less resources than the standard regulatory pathway. Under the 505(b)2 pathway, the FDA allows the use of data from a prior application that can be referenced by a new sponsor that can include part of the required preclinical or clinical studies for approval. Consequently, this alternative pathway can significantly lower the development cost and shorten the timeline to NDA approval.
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We are focused on applying our spray film and liposomal gel technologies to already-approved pharmacological actives. We intend to seek to leverage the 505(b)(2) accelerated regulatory pathway to accelerate our development timeline and lower our clinical and regulatory risk for not only our Epoladerm drug candidate, but for the OSF200 and Probudur product candidates as well.
There can be no assurance that the 505(b)(2) accelerated NDA pathway will lead to a faster development process or regulatory review. Further, while the 502(b)(2) pathway may expedite development or the approval process, it does not change the FDA’s standards of approval or increase the likelihood that a product candidate will receive approval.
Our Team
We have assembled a highly experienced management team, board of directors and scientific advisory board to execute on our mission to develop product candidates that effectively manage pain in all its complexities, while minimizing risks to patients and society. Our team has a proven track record in developing, launching and marketing multiple pain products.
Our Founder and Chief Executive Officer, Anthony Mack, is a business leader with over 25 years of experience in the pharmaceutical and finance industries. Our Chief Medical Officer, Jeffrey Gudin, M.D., is a Clinical Associate Professor in Anesthesiology at the Rutgers New Jersey Medical School and is Board Certified in Pain Medicine, Anesthesiology, Addiction Medicine and Hospice and Palliative Medicine. Our Commercial Operations Officer, Gerald W. Bruce, has spent over 30 years, including 20 years in senior leadership roles, in the Pharmaceutical and Medical Nutrition industry. Our Chief Financial Officer, Christopher M. Chipman, CPA, has more than 25 years of industry experience assisting public companies with financial reporting, forecasting, preparation of periodic reports required to be filed with the Securities and Exchange Commission and compliance with Section 404 of the Sarbanes Oxley Act of 2002 including pharmaceutical clients. Gerald W. Bruce EVP, Commercial Operations, has spent over 30 years, including 20 years in senior leadership roles, in the Pharmaceutical industry.
Our Strategy
We are focused on becoming a global leader in pain management by developing and delivering innovative pharmaceutical products to patients. We are developing branded pharmaceutical product candidates for pain management by using cutting-edge technology to enhance patients’ quality of life. While we are currently focused on developing our non-opioid and non-addictive pain management pipeline of product candidates, we are also using our proprietary delivery technologies to develop anti-viral therapies as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans, including, but not limited to, influenza and SARS-CoV-2 (COVID 19).
According to data from the CDC, in 2016, approximately 20% of adults in the United States had chronic pain (approximately 50 million people). Further, CDC data also indicates that the prescribing of opioids by clinicians has increased threefold in the last 20 years, contributing to the problem of prescription opioid abuse. Accordingly, there is a push among prescribers, regulators, and patients to seek non-opioid and non-addictive treatment options to combat the opioid epidemic. We plan to utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and NCE candidates for commercialization.
We plan to enter the prescription analgesic/pain market with our multiple proprietary non-opioid and non-addictive products. If approved, we believe Epoladerm will be the only transdermal Diclofenac Epolamine Spray film with an indication in sprains, strains, and bruises. In addition, based on early data from our animal studies, we believe Probudur, our proprietary single injectable liposomal gel local anesthetic for postoperative pain management, could be the only liposomal gel bupivacaine with 96 hours of postoperative pain control (96 hours is 24 hours longer than any other liposomal bupivacaine). Further, we believe NES100 may significantly reduce moderate to severe pain with a fast onset of activity, improved mood, and the elimination of opioid-induced constipation. We also believe MMS019 may offer another layer of protection, in the form of a Molecular Mask, to be added to standard personal protective equipment to protect healthcare workers, and those at-risk of serious disease, from viral infections.
Additionally, we have developed a marketing and sales strategy tailored to each individual product candidate within our portfolio which will be deployed if each product candidate is approved and brought to market. With a dedicated sales team, and niche non-opioid and non-addictive pain management product candidates, we believe if the product candidates receive approval and these strategies are put into place, they can produce products with greater pain management than opioid competitor products, but potentially without any of the side effects caused by morphine/opioid related products.
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Epoladerm
We believe we may have a significant advantage over our competitors due to the potential superior adhesion and faster onset of action for which Epoladerm is currently being studied.
Probudur
We believe we have a significant advantage over our competitors due to early data which seems to support a longer efficacy period of 96 hours as compared to 72 hours for the leading market indicator.
NES100
If NES100 obtains FDA approval, we intend for it to be sold as an innovative, non-addictive analgesic. We believe it has significant potential to participate in the moderate – severe pain markets. We plan to target specialists of rheumatology, orthopedic, neurology, anesthesiology, pain management, LTC, hospice care, surgery, oncology, PCPs, and geriatrics. Our sales team plans to target 32,000 physicians and market to 200,000 health care providers.
Intellectual Property
We strive to protect and enhance the proprietary technologies, inventions and improvements that we believe are important to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, platforms and our product candidates that are important to the development and implementation of our business.
As of October 7, 2020, our portfolio of owned and licensed patents and pending patent applications consisting of 8 issued U.S. patents, 1 pending U.S. patent application, 25 issued patents and 2 pending foreign applications. These include US Patent Nos. 7,741,474, 8,470,371, 10,213,474, 8,278,277, 8,920,819, 9,713,591, 8,349,297 and 8,695,592 as well as patents in Europe, Canada, Japan, China, Australia, New Zealand, Russia and South Korea. Below is a breakdown of patents by indication:
Epoladerm
The product candidate is covered by US Patent No. 8,349,297 (expires December 4, 2028) as well as issued patents in South Africa, Russian Federation, New Zealand, Norway, Mexico, Republic of Korea, Japan, China, Canada, Australia, Turkey, Slovakia, Slovenia, Sweden, Portugal, Poland, Netherlands, Latvia, Luxembourg, Lithuania, Italy, Ireland, Hungary, Greece, United Kingdom, France, Finland, Spain, Denmark, Germany, Czech Republic, Switzerland, Belgium and Austria (all of which expire September 14, 2026). The patents contain broad composition claims to a platform of pharmaceutical formulations which form a film on spray administration where the active agent is present at least 80% saturation and there is no undissolved active agent in the formulation. The claims also include a method of treatment and an aerosol dispenser containing the formulation.
Probudur
The product candidate is covered by US Patent No. 9,713,591 (expires July 24, 2030) as well as a European patent (expires October 11, 2029) and a Chinese patent (expires October 11, 2029). There is also a pending US application which is a continuation of US Patent No. 9,713,591 and for which a notice of allowance has been received and the issue fee paid. The patent contains composition claims to pharmaceutical compositions having an external storage solution containing an active pharmaceutical ingredient and particles of liposomes embedded in a polymeric matrix contained within the storage solution.
NES100
The product candidate is covered by the following patent families which protect the chemistry of the MET polymer and its use in pharmaceutical products: Patent Family 1 includes US Patent No. 7,741,474 (expires March 18, 2026), and a Japanese Patent, Canadian Patent and European Patent (all which expire September 22,2023). This patent family covers carbohydrate polymers with hydrophobic and hydrophilic side-groups suitable for solubilizing, for example, hydrophobic drugs.
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Patent Family 2 includes US Patent No. 8,470,371 (expires July 29, 2029) and a Japanese Patent (expires August 8, 2027) and a European Patent (which expire August 8, 2027). This family covers both composition and method claims for amphiphilic carbohydrate polymers which are capable of self-assembling to form micellar clusters in which the carbohydrate amphiphiles aggregate into hierarchically organized micellar clusters of individual aggregates. These micellar clusters formed by the aggregation of individual micelles may be transformed into stable nanoparticles with drugs, especially hydrophobic drugs that have poor aqueous solubility. This provides molar polymer/drug ratios that are greater than the ratios observed with block copolymers and improve the transfer of hydrophobic drugs across biological barriers.
Patent Family 3 includes US Patent Nos. 8,278,277 (expires August 16, 2030) and 8,920,819 (expires April 29, 2029), a Canadian patent (expires March 1, 2030) and a pending European application (which would expire March 1, 2030). This family covers lipophilic derivatives of hydrophilic drugs comprising a hydrophilic drug and a cleavable linker as well as methods of treatment using these compositions. In particular the patents relate to compositions of a lipophilic derivative of the hydrophilic neuropeptide Leucine [5]-Enkephalin and an amphiphile compound, where the derivative includes a lipophilic linker attached to the side chain oxygen of the tyrosine in the Leucine [5]-Enkephalin, and where the amphiphile compound is quaternary palmitoyl glycol chitosan (GCPQ).
Patent Family 4 includes US Patent No. 10,213,474 (expires November 3, 2034), a Japanese patent (expires November 3, 2034), a European patent (expires November 3, 2034) and a pending Canadian patent application (which would expire November 3, 2034). The patents cover methods for treating pain, comprising intranasally administering to a human or animal a composition comprising a therapeutically effective amount of a hydrophilic neuroactive peptide and an amphiphilic quaternary ammonium palmitoyl glycol chitosan (GCPQ); wherein the amphiphilic GCPQ is capable of self-assembly in aqueous media into particles having a mean particle size between 20-500 nm; where intranasally administering the composition delivers the hydrophilic neuroactive peptide to the brain of the human or animal.
In addition to the patent families which protect the chemistry of the MET polymer and its use in pharmaceutical products there is a patent family which covers the delivery device that can be used to administer the pharmaceutical compositions including US Patent No. 8,695,592 (expires October 11, 2029), and a European patent (expires October 11, 2029). This family covers a capsule for use in dispensing a drug which has a pressurized container for a fluid, a chamber for containing a particulate, at least one channel running between the container and the chamber to provide fluidic communication and at least two distinct concave surfaces which impart rotational motion to a fluid flow so that within the chamber a rotationally turbulent flow of fluid is produced in order to engage with the particulate and to produce a mobile fluid comprising the particulate.
Individual patents extend for varying periods depending on the date of filing of the patent application and the legal term of patents in the countries in which they are obtained. Generally, patents issued for regularly filed applications in the United States are granted a term of 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office, or USPTO, delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. However, the actual protection afforded by a patent varies on a product by product basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
Furthermore, we rely upon trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our collaborators, employees, contractors, consultants and advisors and invention assignment agreements with our employees. We also have confidentiality agreements or invention assignment agreements with our collaborators, contractors and selected consultants. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our collaborators, employees, contractors and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
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Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies, or our drugs or processes, or to obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our future drugs may have an adverse impact on us. If third parties have prepared and filed patent applications prior to the date of our earliest filed patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the USPTO, to determine priority of invention. For more information, please see “Risk Factors — Risks Related to Our Intellectual Property.”
Material Agreements
MedPharm Limited
Research and Option Agreement
On April 11, 2017, we entered into a research and option agreement, as amended on May 30, 2018 (the “MedPharm Research and Option Agreement”), with MedPharm Limited, a company organized and existing under the laws of the United Kingdom (“MedPharm”), pursuant to which MedPharm granted us an option to obtain an exclusive, world-wide, royalty bearing license to use certain technology developed by MedPharm. Pursuant to the agreement, MedPharm will conduct certain research and development of proprietary formulations incorporating certain MedPharm technologies and certain of our proprietary molecules.
Under the MedPharm Research and Option Agreement, MedPharm granted us an option (the “MedPharm Option”) to obtain an exclusive (even to MedPharm), worldwide, sub-licensable (through multiple tiers), royalty bearing, irrevocable license to research, develop, market, commercialize, and sell any product utilizing MedPharm’s spray formulation technology which is the result of the activities performed under the MedPharm Research and Option Agreement, subject to our entry into a definitive license agreement with MedPharm. In order to exercise the MedPharm Option, we must provide MedPharm with written notice of such exercise before the end of the Option Period (as defined in the MedPharm Research and Option Agreement). The Option Period is subject to extension upon our mutual agreement with MedPharm.
Pursuant to the MedPharm Research and Option Agreement, we have a right of first refusal with respect to any license or commercial arrangement involving any Licensed Intellectual Property (as defined in the MedPharm Research and Option Agreement) in combination with any Virpax Molecule (as defined in the MedPharm Research and Option Agreement). In the event that MedPharm reaches an agreement with respect to a license or other commercial arrangement that involves technology or molecules covered by the right of first refusal, we have ten business days from the date of notice to notify MedPharm of our intention to exercise the right of first refusal and our intention to match the financial terms of the other license or commercial arrangement.
License Agreement
On June 6, 2017, as a result of our exercise of the MedPharm Option under the MedPharm Research and Option Agreement, we entered into a license agreement, as amended on September 2, 2017 and October 31, 2017 (the “MedPharm License Agreement”), with MedPharm for the exclusive global rights to discover, develop, make, sell, market, and otherwise commercialize any pharmaceutical composition or preparation (in any and all dosage forms) in final form containing one or more compounds, including Epoladerm and OSF200, that was developed, manufactured or commercialized utilizing MedPharm’s spray formulation technology (“MedPharm Product”), to be used for any and all uses in humans (including all diagnostic, therapeutic and preventative uses). Under the MedPharm License Agreement, we are required to make future milestone and royalty payments to MedPharm. We are obligated to make aggregate milestone payments to MedPharm of up to $1.125 million upon the achievement of specified development milestones (payable in Great British Pounds). Royalty payments must be paid to MedPharm in an amount equal to a single-digit percentage of net sales of all MedPharm Product sold by us during the royalty term in the territory. Royalties shall be payable, on a country-by-country basis, during the period of time commencing on the first commercial sale and ending upon the expiration of the last-to-expire patent claim on the licensed product, which is set to expire on December 4, 2028. Each party has the right to terminate the agreement in its entirety upon written notice to the other party if such other party is in material breach of the agreement and has not cured such breach within ninety (90) days after notice from the terminating party indicating the nature of such breach.
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LipoCureRx, Ltd.
On March 19, 2018, we entered into a license and sublicense agreement (the “LipoCure Agreement”) with LipoCureRx, Ltd., a company organized and existing under the laws of Israel (“LipoCure”), for the sole and exclusive global license and sub-license rights to discover, develop, make, sell, market, and otherwise commercialize bupivacaine liposome, in injectable gel or suspension (“Licensed Compound”) or any pharmaceutical composition or preparation (in any and all dosage forms) in final form, including any combination product, containing a Licensed Compound (“Licensed Product”), including Probudur. Under the LipoCure Agreement, we were required to pay an upfront fee upon signing of $150,000 and are required to make future milestone and royalty payments to LipoCure. We are obligated to make aggregate milestone payments of up to $19.8 million upon the achievement of specified development and commercial milestones. Royalty payments must be paid in an amount equal to a single digit to low double-digit percentage of annual net sales of royalty qualifying products, subject to certain adjustments. Royalties shall be payable during the period of time, on a country-by-country basis, commencing on the first commercial sale and ending upon the expiration of the last-to-expire patent claim on the licensed product, which is set to expire on July 24, 2030. Each party has the right to terminate the agreement in its entirety upon written notice to the other party if such other party is in material breach of the agreement and has not cured such breach within ninety (90) days after notice from the terminating party indicating the nature of such breach.
Nanomerics Ltd.
Nanomerics Collaboration Agreement
On April 11, 2019, we entered into an exclusive collaboration and license agreement, as amended (the “Nanomerics Collaboration Agreement”), with Nanomerics Ltd. (“Nanomerics”), a company organized and existing under the laws of United Kingdom, for the exclusive world-wide license to develop and commercialize products, including NES100, which contain hydrophilic neuropeptide Leucin5-Enkephalin and an amphiphile compound which is quaternary ammonium palmitoyl glycol chitosan, and to engage in a collaborative program utilizing Nanomerics’ knowledge, skills and expertise in the clinical development of products and in attracting external funding for such development. The Nanomerics Collaboration Agreement was also amended to include a program for the pre-clinical development of a product for post-traumatic stress disorder.
Under the Nanomerics Collaboration Agreement, we are required to make royalty payments equal to a single digit percentage of annual net sales of royalty qualifying products. We are also required to make aggregate milestone payments of up to $103 million upon the achievement of specified development and commercial milestones, and sublicense fees for any sublicense relationships we enter into subsequent to the Nanomerics Collaboration Agreement. Our obligation to pay royalties, on a country-by-country basis, shall commence on the date of first commercial sale of our licensed products and shall expire with respect to each separate licensed product, on the latest to occur of (a) the tenth (10th) anniversary of the first commercial sale of the first licensed product; (b) the expiration date of the last to expire of any valid claim (patent is set to expire on November 3, 2034); and, (c) the date upon which a generic product has been on the market for a period of no fewer than ninety (90) days. We have the right to terminate the agreement upon 180 days’ prior written notice to Nanomerics. Upon termination, we shall assign to Nanomerics all its right title and interest in all results other than results specific to (a) the Device (as defined in the Nanomerics Collaboration Agreement), its manufacture or use; and (b) the Technology, but excluding any clinical Results relating to the Compound or Licensed Products (all terms as defined in the Nanomerics Collaboration Agreement).
Nanomerics License Agreement
On August 7, 2020, we entered into a collaboration and license agreement with Nanomerics (the “Nanomerics License Agreement”) for the exclusive North American license to develop and commercialize a High-Density Molecular Masking Spray (MMS019) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. Under the Nanomerics License Agreement, we are required to make royalty payments within a range of 5% to 15% of annual net sales of royalty qualifying products. Our obligation to pay royalties, on a country-by-country basis, shall commence on the date of first commercial sale of our licensed products and shall expire with respect to each separate licensed product, on the latest to occur of (a) the tenth (10th) anniversary of the first commercial sale of the first licensed product; (b) the expiration date of the last to expire of any valid claim; and, (c) the date upon which a generic product has been on the market for a period of no fewer than ninety (90) days. We are also required to make aggregate milestone payments of up to $50 million upon the achievement of specified development and commercial milestones,
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and sublicense fees for any sublicense relationships we enter into subsequent to the Nanomerics License Agreement (any patent that issues from the currently filed provisional patent application would expire on August 24, 2041). We have the right to terminate the Nanomerics License Agreement upon 60 days’ prior written notice to Nanomerics. Upon termination, we shall assign to Nanomerics all its rights, title and interest in all of our results. Nanomerics has the right to terminate the agreement upon 60 days’ prior written notice if we have not secured funding by the Funding Expiry Date (as defined in the Nanomerics License Agreement).
Yissum
License Agreement
On August 11, 2019, we entered into an exclusive research and license agreement, as amended (the “Yissum License Agreement”), with Yissum Research Development Company of the Hebrew University of Jerusalem, Ltd., a company organized and existing under the laws of Israel (“Yissum”). Under the Yissum Agreement, we shall provide funding for research and development studies to be performed by researchers at Hebrew University related to technology enabling the creation of quick-onset and long-acting formulations of opioid antagonists. Under the Yissum License Agreement, we have the exclusive right to license the commercial technology resulting from the activities of the researches at the Hebrew University. We have agreed to use commercially reasonable efforts to carry out the development, regulatory, manufacturing and marketing work necessary to develop and commercialize any of the products which result from such research.
The Yissum License Agreement requires us to pay an annual license maintenance fee of $50,000, a royalty fee equal to a single digit percentage of annual net sales of any product, aggregate milestone payments of up to $1.19 million upon the achievement of various development and commercial milestones, and a percentage of sublicense fees based on the timing of execution of a sublicense agreement. The license agreement expires on a country-by-country, product-by-product basis, upon the later of: (i) the date of expiration in such country of the last to expire licensed patent included in the licensed technology; (ii) the date of expiration of any exclusivity on the product granted by a regulatory or government body in such country; or (iii) the end of a period of twenty (20) years from the date of the first commercial sale in such country. We have the right to terminate the Yissum License Agreement by written notice immediately if the licensor passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within 60 days. Additionally, we may terminate the Yissum License Agreement if either a receiver or liquidator is appointed for us, or we enter into a winding up or insolvency or bankruptcy proceeding.
Research Agreement
On May 12, 2019, we entered into an Agreement for Rendering of Research Services (the “May 2019 Yissum Research Agreement”), with Yissum. Under the May 2019 Yissum Research Agreement, we shall provide funding for research and development studies to be performed by researchers at Hebrew University related to the formulation, preparation and characterization of Liposomal Bupivacaine for size zeta potential, drug loading and rate of drug release. In consideration for the research services, we agreed to pay research service fees of $81,000 in equal monthly installments. We retain ownership in all our intellectual property rights and any intellectual property belonging to either us or Yissum prior to the execution of the May 2019 Yissum Research Agreement will remain the sole property of either us or Yissum, respectively. All data generated from the provision of the May 2019 Yissum Research Agreement, including any reports, which are specifically required and contemplated under the May 2019 Yissum Research Agreement, shall be owned by us upon full payment of the research services fees. Each party will be entitled to terminate the agreement in the event of a breach by the other party of its obligations under the agreement, including, but not limited to, any payment failure, which is not remedied by the breaching party within 30 days of receipt of written notice from the non-breaching party. All services to be provided under the May 2019 Yissum Research Agreement will be completed by September 14, 2021.
On October 11, 2020, we entered into an Agreement for Rendering of Research Services with Yissum (the “October 2020 Yissum Research Agreement”) on substantially similar terms and conditions as detailed above in the May 2019 Yissum Research Agreement. Under the October 2020 Yissum Research Agreement, we shall provide funding for research and development studies to be performed by researchers at Hebrew University related to the formulation of Liposomal Bupivacaine as well as efficacy and PK studies in animals. In consideration for the research services, we agreed to pay research service fees of $81,000 in six equal monthly installments. In the event we complete a funding event (which this offering would be) before December 31, 2020, we agreed to pay Yissum $40,500 towards the total consideration of $81,000. All services to be provided under the October 2020 Yissum Research Agreement will be completed by June 30, 2021.
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NCATS-NIH Cooperative Research and Development Agreement
On August 25, 2020, we entered into a CRADA with NCATS. This collaboration is for the continued development of our product candidate, NES100, an intranasal peptide, for the management of acute and chronic non-cancer pain. The term of the CRADA is for a period of four years from the effective date of the agreement and can be terminated by both parties at any time by mutual written consent. In addition, either party may unilaterally terminate the CRADA at any time by providing written notice of at least sixty (60) days before the desired termination date. The agreement provides for studies that are focused on the pre-clinical characterization of NES100 as a novel analgesic for acute and chronic non-cancer pain, and for studies to further develop NES100 through IND enabling studies. There are certain development “Go/No Go” provisions within the agreement whereby, if certain events occur, or do not occur, NCATS may terminate the CRADA. These “No GO” provisions include: i) lack of efficacy in all animal pain models, ii) no reliable and sensitive bioanalytical method can be developed, iii) manufacturing failure due to inherent process scalability issues, iv) unacceptable toxicity or safety profile to enable clinical dosing, and v) inability to manufacture the NES100 dosage form.
With respect to NCATS rights to any invention made solely by an NCATS employee(s) or made jointly by an NCATS employee(s) and our employee(s), the CRADA grants to us an exclusive option to elect an exclusive or nonexclusive commercialization license. For inventions owned solely by NCATS or jointly by NCATS and us, and licensed pursuant to our option, we must grant to NCATS a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention or have the invention practiced throughout the world by or on behalf of the United States government. For inventions made solely by an employee of ours, we grant to the United States government a nonexclusive, nontransferable, irrevocable, paid-up license to practice the invention or have the invention practiced throughout the world by or on behalf of the United States government for research or other government purposes.
Sales and Marketing
If Epoladerm, OSF200, Probudur, NES100, PES200 and/or MMS019 are approved, we plan to enter into sales and marketing agreements with one or several pharmaceutical companies to sell to pain management clinics and specialists, general and orthopedic surgeons, anesthesiologists, PCPs, NPs, oncologists, and neurologists.
On August 30, 2018, we entered into a Master Service Agreement (the “MSA”) with INC Research, LLC, a Syneos Health™ group company (“Syneos Health”) to operate as our Contract Sales Organization (“CSO”). Services provided by Syneos Health include clinical research services, bioanalytical analysis, statistics, validations, pharmacokinetics, and/or consulting, advertising, and public relations (communications), field team sales and education recruiting and deployment, and patient adherence services.
Manufacturing
NES100 is an intranasal spray and we rely on third-party contractors for manufacturing clinical supplies and plan to do so for commercial amounts also.
We continue to explore manufacturing sources, in order to ensure that we have access to sufficient manufacturing capacity in order to meet potential demand for any of our product candidates in a cost-efficient manner. We plan to secure supply sources and contract with these or other parties to manufacture commercial quantities of any products we successfully develop. Among the conditions for FDA approval of a pharmaceutical product is the requirement that the manufacturer’s quality control and manufacturing procedures conform to cGMP, which must be followed at all times. The FDA typically inspects manufacturing facilities on an ongoing basis. In complying with Current Good Manufacturing Practice (“cGMP”) regulations, pharmaceutical manufacturers must expend resources and time to ensure compliance with product specifications as well as production, record keeping, quality control, reporting, and other requirements.
Competition
The pharmaceutical industry is intensely competitive and subject to rapid and significant technological change. We will continue to face competition from various global pharmaceutical, biotechnology, specialty pharmaceutical and generic drug companies that engage in drug development activities. Our key competitors include Pacira Biosciences, Inc. (which is developing EXPAREL®) and Pfizer Inc. (which is developing the Flector Patch). Many of our competitors have similar products that focus on the same diseases and conditions that our current and future pipeline product
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candidates address. Many of our competitors have greater financial flexibility to deploy capital in certain areas as well as more commercial and other resources, marketing and manufacturing organizations, and larger research and development staff. As a result, these companies may be able to pursue strategies or approvals that we are not able to finance or otherwise pursue and may receive FDA, or other applicable regulatory approvals more efficiently or rapidly than us. Also, our competitors may have more experience in marketing and selling their products post-approval and gaining market acceptance more quickly. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our product candidates could become less competitive if our competitors are able to license or acquire technology that is more effective or less costly and thereby offer an improved or a cheaper alternative to our product candidates.
We expect any product candidates that we develop and commercialize will compete on the basis of, among other things, efficacy, safety, convenience of administration and delivery, price and the availability of reimbursement from government and other third-party payors. We also expect to face competition in our efforts to identify appropriate collaborators or partners to help commercialize our product candidate portfolio in our target commercial markets.
Government Regulation and Approval Process
Government authorities in the United States at the federal, state and local level, including the FDA, the FTC and the DEA, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, distribution, marketing and export and import of products such as those we market. For both currently marketed and future products, failure to comply with applicable regulatory requirements can, among other things, result in suspension of regulatory approval and possible civil and criminal sanctions. Regulations, enforcement positions, statutes and legal interpretations applicable to the pharmaceutical industry are constantly evolving and are not always clear. Significant changes in regulations, enforcement positions, statutes and legal interpretations could have a material adverse effect on our financial condition and results of operations.
Additionally, future healthcare legislation or other legislative proposals at the federal and state levels could bring about major changes in the affected health care systems, including statutory restrictions on the means that can be employed by brand and generic pharmaceutical companies to settle Paragraph IV patent litigations. We cannot predict the outcome of such initiatives, but such initiatives, if passed, could result in significant costs to us in terms of costs of compliance and penalties associated with failure to comply.
With the support of the President and the HHS, the NIH launched the initiative Helping to End Addiction Long-term (“HEAL”), to provide solutions to the national opioid crisis. With the focus on ending the opioid crisis in America, HEAL, and new FDA guidance has made it more efficient to bring novel non-opioid medication to market.
The Office of National Drug Control Policy (“ONDCP”) is a component of the Executive Office of the President which works to reduce drug use and its consequences by leading and coordinating the development, implementation, and assessment of U.S. drug policy. In addition to its vital ongoing work, ONDCP also provided administrative and financial support to the President’s Commission on Combating Drug Addiction and the Opioid Crisis, established by Executive Order on March 29, 2017 by President Donald J. Trump. This commission was created to make recommendations to the President on how to best combat opioid addiction and abuse. In August 2017, the commission issued a preliminary report calling on President Trump to officially declare the crisis of opioid abuse a national emergency. On October 26, 2017, President Trump declared the opioid crisis a “national public health emergency.” The commission’s final report was released in early November 2017. In July 2017, the Pharmaceutical Care Management Association, a trade association representing pharmacy benefit managers, wrote a letter to the commissioner of FDA in which it expressed support for, among other things, the CDC guidelines and a seven-day limit on the supply of opioids for acute pain. In September 2018, CVS Pharmacy announced that it would only fill first time opioid prescriptions for acute pain for a seven-day supply.
Law enforcement and regulatory agencies may apply policies that seek to limit the availability of opioids. This creates the potential for aggressive enforcement, unfavorable publicity regarding the use or misuse of opioid drugs or the limitations of abuse-deterrent formulations, litigation, public inquiries or investigations related to the abuse, sales, marketing, distribution or storage of opioid products.
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In addition, efforts by the FDA and other regulatory bodies to combat the abuse of opioids will positively impact the market for our novel non-opioid and non-addictive product candidates. We expect that the FDA will continue to evaluate the impact of abuse-deterrent opioids in the future, and this could impose further restrictions to opioid products currently on the market, which may include changing labeling, imposing additional prescribing restrictions, or seeking a product’s removal from the market.
Coinciding with HEAL, there is new FDA guidance that streamlines and broadens the range of novel non-opioid medications. The first guidance will address medications that can reduce the use of opioids in the treatment of acute pain, including how sponsors can demonstrate a clinically meaningful reduction in the use of opioid pain medications in the acute setting. The second guidance will focus on assessing the benefits and risks of developing new opioid pain drugs, including drafting an updated framework for evaluating the risks associated with intentional or illicit misuse or abuse of these substances. The third guidance will “outline a path for developing extended-release local anesthetics,” including clinical pharmacology, proper evaluation of safety and efficacy, and the types of studies that may support approval of these product candidates. Finally, FDA will issue guidance on the development of “new non-opioid pain medications for acute and chronic pain that can provide therapeutic alternatives to the use of opioids.”
Pharmaceutical Regulation in the United States
In the United States, the FDA regulates drugs under the 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 require 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 to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, Warning Letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug or a generic version of a previously approved drug, can be marketed in the United States.
The process required by the FDA before a new drug may be marketed in the United States generally involves:
• Completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s current GLP regulations;
• Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin in the United States;
• Approval by an IRB at each clinical site before each trial may be initiated;
• Performance of adequate and well-controlled human clinical trials in accordance with the FDA to establish the safety and efficacy of the proposed drug product for each intended use;
• Satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with the FDA’s cGMP regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;
• Submission to the FDA of an NDA;
• Satisfactory completion of a potential review by an FDA advisory committee, if applicable; and
• FDA review and approval of the NDA.
Preclinical Studies
When developing a branded product and bringing it to market, the first step in proceeding to clinical studies is preclinical testing. Preclinical tests are intended to provide a laboratory or animal study evaluation of the product to determine its chemistry, formulation and stability. Toxicology studies are also performed to assess the potential safety of the product. The conduct of the preclinical tests must comply with federal regulations and requirements,
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including GLPs. The results of these studies are submitted to the FDA as part of an IND application along with other information, including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted.
Clinical Trials
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it initiates at that institution. Information about certain clinical trials must be submitted within specific timeframes to the NIH for public dissemination on their website, www.ClinicalTrials.gov.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
• Phase I: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
• Phase II: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
• Phase III: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2, and Phase 3 trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
Disclosure of Clinical Trial Information
Sponsors of certain clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information on www.ClinicalTrials.gov. Information related to the product, subject population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss certain results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Marketing Approval
After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include, among other things, the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. Under federal law, the submission of most NDAs is subject to a substantial application user fee, and the manufacturer or sponsor under an approved NDA is also subject to annual program fees. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted
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for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and is subject to payment of additional user fees. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under the Prescription Drug User Fee Act, as amended, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, Standard Review and Priority Review. Priority Review designation is given to drugs that are intended to treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness over existing therapies. The FDA endeavors to review most applications subject to Standard Review within ten to twelve months whereas the FDA’s goal is to review most Priority Review applications within six to eight months, depending on whether the drug is a new molecular entity.
The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. Before approving an NDA, the FDA may inspect one or more clinical sites to assure compliance with GCP requirements. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the NDA unless it determines that the manufacturing process and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications and the NDA contains data that provide substantial evidence that the drug is safe and effective for the labeled indication.
After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter to indicate that the application is not ready for approval. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
As a condition of NDA approval, the FDA may require a REMS to help ensure that the benefits of the drug outweigh the potential risks. If the FDA determines a REMS is necessary during review of the application, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug’s risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use, such as special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. In addition, the REMS must include a timetable to periodically assess the strategy. The requirement for a REMS can materially affect the potential market and profitability of a drug.
Moreover, as a condition of product approval, the FDA may require substantial post-approval testing, known as Phase IV testing, and/or surveillance to monitor the drug’s safety or efficacy, and the FDA has the authority to prevent or limit further marketing of a product based on the results of these post-marketing programs. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or certain problems are identified following initial marketing. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling, and, even if the FDA approves a product, it may limit the approved indications for use for the product or impose other conditions, including labeling or distribution restrictions or other risk-management mechanisms.
Further changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented, which may require us to develop additional data or conduct additional preclinical studies and clinical trials. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the similar procedures in reviewing NDA supplements as it does in reviewing NDAs.
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Post-Approval Requirements
Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to drug listing and registration, recordkeeping, periodic safety reporting, product sampling and distribution, adverse event reporting and advertising, marketing and promotion, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in a manner consistent with the provisions of the approved labeling. While physicians may prescribe for off-label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved labeling. 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. There also are extensive DEA regulations applicable to controlled substances.
Adverse event reporting and submission of periodic reports is also required following FDA approval of an NDA. Additionally, the FDA may place conditions on an approval, in addition to REMS programs of Phase IV testing, that could restrict the distribution or use of the product. Drug manufacturers and certain of their subcontractors are required to register their establishments and list their marketed products with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs, including quality control and manufacturing processes. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing or if previously unrecognized problems are subsequently discovered. The FDA may also impose a REMS requirement on a drug already on the market if the FDA determines, based on new safety information, that a REMS is necessary to ensure that the drug’s benefits outweigh its risks. In addition, regulatory authorities may take other enforcement action, including, among other things, Warning Letters, the seizure of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, refusal to approve pending applications or supplements to approved applications, civil penalties and criminal prosecution.
The Hatch-Waxman Amendments
505(b)(2) NDAs
The FDA is authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) permits the filing of an NDA 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 from the data owner. The applicant may rely upon the FDA’s findings of safety and efficacy for an approved product that acts as the “listed drug.” The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the listed drug. The FDA may then approve the new product candidate for all, or some, of the conditions of use for which the branded reference drug has been approved, or for a new condition of use sought by the 505(b)(2) applicant.
Abbreviated New Drug Applications (“ANDAs”)
The Hatch-Waxman amendments to the FDCA established a statutory procedure for submission and FDA review and approval of ANDAs for generic versions of listed drugs. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient (“API\I”), drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include clinical data to demonstrate safety and effectiveness. However, a generic manufacturer is typically required to conduct bioequivalence studies of its test product against the listed drug. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorption of the generic product and the reference listed drug. For some drugs, other means of demonstrating bioequivalence may be required by the FDA, especially where rate or extent of absorption are difficult or impossible to measure. The FDA will approve an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the reference listed drug. A product is not eligible for ANDA approval if the FDA determines that it is not bioequivalent to the reference listed drug if it is intended for a different use or if it is not subject to, and requires, an approved Suitability Petition.
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Patent Exclusivity and 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. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any applicant who files an 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 to the FDA (i) that there is no patent listed with the FDA as covering the relevant branded product, (ii) that any patent listed as covering the branded product has expired, (iii) that the patent listed as covering the branded product will expire prior to the marketing of the generic product, in which case the ANDA will not be finally approved by the FDA until the expiration of such patent or (iv) that any patent listed as covering the branded drug is invalid or will not be infringed by the manufacture, sale or use of the generic product for which the ANDA is submitted. 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.
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. 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.
For example, a drug that is considered new chemical entity (NCE) at the time of approval may be awarded a five-year period of marketing exclusivity, starting at the time of product approval. An ANDA or 505(b)(2) application referencing that drug may not be approved until the five-year period expires. Also, an ANDA or 505(b)(2) application referencing that drug may not filed with the FDA until the expiration of five years, unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval.
A drug, including one approved under Section 505(b)(2), may obtain a three-year period of 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.
DEA Regulation
Our product candidates may be regulated as “controlled substances” as defined in the Controlled Substances Act of 1970, as amended, which establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the U.S. Drug Enforcement Agency (the “DEA”). The DEA is concerned with, among other things, the control of handlers of controlled substances and with the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.
The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. The manufacture, shipment, storage, sale and use of Schedule II drugs are subject to a high degree of regulation. For example, Schedule X drug prescriptions generally must be signed by a physician and may not be refilled without a new prescription. Substances in Schedule IV are considered to have a lower potential for abuse relative to substances in Schedule II. A prescription for controlled substances in Schedule IV may be issued by a practitioner through oral communication, in writing or by facsimile to the pharmacist and may be refilled if so, authorized on the prescription or by call-in. In the future, our other potential products may also be listed by the DEA as controlled substances.
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Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized.
The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling of all controlled substances and periodic reports must be made to the DEA, including, for example, distribution reports for Schedule II controlled substances, Schedule III substances that are narcotics and other designated substances. Reports must also be made for thefts or losses of any controlled substance and authorization must be obtained to destroy any controlled substance. In addition, special authorization and notification requirements apply to imports and exports.
In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule II. Distributions of any Schedule II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. The DEA establishes annually an aggregate quota for how much of a Schedule II substance may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. This limited aggregate amount of any particular Schedule II substance that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications annually to the DEA for individual production and procurement quotas. We and our contract manufacturers must receive an annual quota from the DEA in order to produce or procure any Schedule II substance for use in manufacturing. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our and our contract manufacturers’ quota of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay or refusal by the DEA in establishing our and our contract manufacturers’ quota for controlled substances could delay or stop our clinical trials or product launches, which could have a material adverse effect on our business, financial position and results of operations.
To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations. In certain circumstances, violations could result in criminal proceedings.
Individual states also regulate controlled substances, and we and our contract manufacturers will be subject to state regulation on distribution of these products.
Pricing and Reimbursement
Successful commercialization of our products depends, in part, on the availability of governmental and third-party payor reimbursement for the cost of our products. Government authorities and third-party payors increasingly are challenging the price of medical products and services. On the government side, there is a heightened focus, at both the federal and state levels, on decreasing costs and reimbursement rates for Medicaid, Medicare and other government insurance programs. This has led to an increase in federal and state legislative initiatives related to drug prices, which could significantly influence the purchase of pharmaceutical products, resulting in lower prices and changes in product demand. If enacted, these changes could lead to reduced payments to pharmaceutical manufacturers. Many states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. If our current products or future drug candidates are not included on these preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients, thereby diminishing the potential market for our products.
In addition, third-party payors have been imposing additional requirements and restrictions on coverage and limiting reimbursement levels for pharmaceutical products. Third-party payors may require manufacturers to provide them with predetermined discounts from list prices and limit coverage to specific pharmaceutical products on an approved list, or formulary, which might not include all of the FDA-approved pharmaceutical products for particular indications. Third-party payors may challenge the price and examine the medical necessity and cost-effectiveness
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of pharmaceutical products in addition to their safety and efficacy. Manufacturers may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of pharmaceutical products in addition to the costs required to obtain the FDA approvals. Adequate third-party reimbursement may not be available to enable manufacturers to maintain price levels sufficient to realize an appropriate return on their investment in drug development.
Healthcare Reform
In the United States, there have been a number of federal and state proposals during the last several years regarding the pricing of pharmaceutical products, government control and other changes to the healthcare system of the United States. It is uncertain what other legislative proposals may be adopted or what actions federal, state, or private payors may take in response to any healthcare reform proposals or legislation. We cannot predict the effect such reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.
By way of example, in March 2010, the ACA was signed into law, which, among other things, includes changes to the coverage and payment for drug products under government health care programs. The law includes measures that (i) significantly increase Medicaid rebates through both the expansion of the program and significant increases in rebates, (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts, (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees, (iv) assess a rebate on Medicaid Part D spending in the coverage gap for branded and authorized generic prescription drugs, and (v) levy a significant excise tax on the industry to fund the healthcare reform.
In addition to the changes brought about by the ACA, other legislative changes have been proposed and adopted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation 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 drug products. At the federal level, the Trump Administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump Administration have each indicated an intent to continue to seek new legislative or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical 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.
Healthcare Regulations
Pharmaceutical companies are subject to various federal and state laws that are intended to combat health care fraud and abuse and that govern certain of our business practices, especially our interactions with third-party payors, healthcare providers, patients, customers and potential customers through sales and marketing or research and development activities. These include anti-kickback laws, false claims laws, sunshine laws, privacy laws and FDA regulation of advertising and promotion of pharmaceutical products.
Anti-kickback laws, including the federal Anti-Kickback Statute, make it a criminal offense knowingly and willfully to offer, pay, solicit, or receive any remuneration to induce or reward referral of an individual for, or the purchase, order or recommendation of, any good or service reimbursable by, a federal health care program (including our products). The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or
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recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. Moreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. The penalties for violating the federal Anti-Kickback Statute include administrative civil money penalties, imprisonment for up to five years, fines of up to $25,000 per violation and possible exclusion from federal healthcare programs such as Medicare and Medicaid.
The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit knowingly presenting, or causing to be presented, claims for payment to the federal government (including Medicare and Medicaid) that are false or fraudulent (and, under the Federal False Claims Act, a claim is deemed false or fraudulent if it is made pursuant to an illegal kickback). Manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the False Claims Act can result in significant monetary penalties, including fines ranging from $11,181 to $22,363 for each false claim, and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other improper sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action plans and have often become subject to consent decrees or corporate integrity agreements, severely restricting the manner in which they conduct their business. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.
The Federal Civil Monetary Penalties Law prohibits, among other things, the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of Medicare or Medicaid payable items or services. Noncompliance can result in civil money penalties of up to $15,270 for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.
Federal criminal statutes prohibit, among other actions, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Analogous state and foreign laws and regulations, including state anti-kickback and false claims laws, may apply to products and services reimbursed by non-governmental third-party payors, including commercial payors. Additionally, there are state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or that otherwise restrict payments that may be made to healthcare providers as well as state and foreign laws that require drug manufacturers to report marketing expenditures or pricing information.
Sunshine laws, including the Federal Open Payments law enacted as part of the ACA, require pharmaceutical manufacturers to disclose payments and other transfers of value to physicians and certain other health care providers or professionals, and in the case of some state sunshine laws, restrict or prohibit certain such payments. Pharmaceutical manufacturers are required to submit reports to the government by the 90th day of each calendar year. Failure to submit the required information may result in civil monetary penalties of up to an aggregate of $165,786 per year (or up to an aggregate of $1.105 million per year for “knowing failures”) for all payments, transfers of value or ownership or investment interests not reported in an annual submission, and may result in liability under other federal laws or regulations. Certain states and foreign governments require the tracking and reporting of gifts, compensation and other remuneration to physicians.
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Privacy laws, such as the privacy regulations implemented under HIPAA, restrict covered entities from using or disclosing protected health information. Covered entities commonly include physicians, hospitals and health insurers from which we may seek to acquire data to aid in our research, development, sales and marketing activities. Although pharmaceutical manufacturers are not covered entities under HIPAA, our ability to acquire or use protected health information from covered entities may be affected by privacy laws. Specifically, HIPAA, as amended by HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.
The FDA regulates the sale and marketing of prescription drug products and, among other things, prohibits pharmaceutical manufacturers from making false or misleading statements and from promoting products for unapproved uses. There has been an increase in government enforcement efforts at both the federal and state level. Numerous cases have been brought against pharmaceutical manufacturers under the Federal False Claims Act, alleging, among other things, that certain sales or marketing-related practices violate the Anti-Kickback Statute or the FDA’s regulations, and many of these cases have resulted in settlement agreements under which the companies were required to change certain practices, pay substantial fines and operate under the supervision of a federally appointed monitor for a period of years. Due to the breadth of these laws and their implementing regulations and the absence of guidance in some cases, it is possible that our practices might be challenged by government authorities. Violations of fraud and abuse laws may be punishable by civil and criminal sanctions including fines, civil monetary penalties, as well as the possibility of exclusion of our products from payment by federal health care programs.
Government Price Reporting
Government regulations regarding reporting and payment obligations are complex, and we are continually evaluating the methods we use to calculate and report the amounts owed with respect to Medicaid and other government pricing programs. Our calculations are subject to review and challenge by various government agencies and authorities, and it is possible that any such review could result either in material changes to the method used for calculating the amounts owed to such agency or the amounts themselves. Because the process for making these calculations, and our judgments supporting these calculations, involve subjective decisions, these calculations are subject to audit. In the event that a government authority challenges or finds ambiguity with regard to our report of payments, such authority may impose civil and criminal sanctions, which could have a material adverse effect on our business. From time to time we conduct routine reviews of our government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.
Many governments and third-party payors reimburse the purchase of certain prescription drugs based on a drug’s AWP. In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, which they have suggested have led to excessive payments by state and federal government agencies for prescription drugs. We and numerous other pharmaceutical companies have been named as defendants in various state and federal court actions alleging improper or fraudulent practices related to the reporting of AWP.
Drug Pedigree Laws
State and federal governments have proposed or passed various drug pedigree laws which can require the tracking of all transactions involving prescription drugs from the manufacturer to the pharmacy (or other dispensing) level. Companies are required to maintain records documenting the chain of custody of prescription drug products beginning with the purchase of such products from the manufacturer. Compliance with these pedigree laws requires implementation of extensive tracking systems as well as heightened documentation and coordination with customers
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and manufacturers. While we fully intend to comply with these laws, there is uncertainty about future changes in legislation and government enforcement of these laws. Failure to comply could result in fines or penalties, as well as loss of business that could have a material adverse effect on our financial results.
Federal Regulation of Patent Litigation Settlements and Authorized Generic Arrangements
As part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, companies are required to file with the U.S. Federal Trade Commission (“FTC”) and the U.S. Department of Justice (the “DOJ”) certain types of agreements entered into between brand and generic pharmaceutical companies related to the settlement of patent litigation or manufacture, marketing and sale of generic versions of branded drugs. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical companies and could result generally in an increase in private-party litigation against pharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities.
Other
The U.S. federal government, various states and localities have laws regulating the manufacture and distribution of pharmaceuticals, as well as regulations dealing with the substitution of generic drugs for branded drugs. Our operations are also subject to regulation, licensing requirements and inspection by the states and localities in which our operations are located or in which we conduct business.
Certain of our activities are also subject to FTC enforcement actions. The FTC also enforces a variety of antitrust and consumer protection laws designed to ensure that the nation’s markets function competitively, are vigorous, efficient and free of undue restrictions. Federal, state, local and foreign laws of general applicability, such as laws regulating working conditions, also govern us.
In addition, we are subject to numerous and increasingly stringent federal, state and local environmental laws and regulations concerning, among other things, the generation, handling, storage, transportation, treatment and disposal of toxic and hazardous substances, the discharge of pollutants into the air and water and the cleanup of contamination. We are required to maintain and comply with environmental permits and controls for some of our operations, and these permits are subject to modification, renewal and revocation by the issuing authorities. Our environmental capital expenditures and costs for environmental compliance may increase in the future as a result of changes in environmental laws and regulations or increased manufacturing activities at any of our facilities. We could incur significant costs or liabilities as a result of any failure to comply with environmental laws, including fines, penalties, third-party claims and the costs of undertaking a clean-up at a current or former site or at a site to which our wastes were transported. In addition, we have grown in part by acquisition, and our diligence may not have identified environmental impacts from historical operations at sites we have acquired in the past or may acquire in the future.
Employees and Labor Relations
As of the date of this prospectus, we have a total of 2 full time employees and 2 employees working as contractors. We have no collective bargaining agreements with our employees, and none are represented by labor unions. We consider our current relations with our employees to be good.
Facilities
Our principal address is 1554 Paoli Pike, #279, West Chester, PA 19380. We believe our facilities are adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional or alternate space for our operations. We believe appropriate alternative space would be readily available on commercially reasonable terms.
Legal Proceedings
From time to time we may be involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending litigation to which we are a party or to which our property is subject that we believe to be material. Regardless of the outcome, litigation can be costly and time consuming, and it can divert management’s attention from important business matters and initiatives, negatively impacting our overall operations.
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Executive Officers and Directors
Below is a list of the names, ages as of September 30, 2020, and positions of the individuals who serve as our executive officers and directors. Our Certificate of Incorporation will provide that each of our directors will, subject to any earlier resignation or removal in accordance with the terms of our Certificate of Incorporation, serve until the first annual meeting of stockholder following the completion of this offering.
Name |
Age |
Position |
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Executive Officers |
||||
Anthony Mack, MBA |
59 |
Chief Executive Officer (Principal Executive Officer) and
|
||
Jeffrey Gudin, MD |
54 |
Executive Vice President, Chief Medical Officer, and Class III Director |
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Gerald Bruce |
68 |
Executive Vice President, Commercial Operations |
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Christopher M. Chipman, CPA |
47 |
Chief Financial Officer and Corporate Secretary |
||
Directors |
||||
Eric Floyd, PhD |
57 |
Independent Class III Director and Compensation Committee Chair |
||
Jerrold Sendrow, CFP |
75 |
Independent Class II Director and Audit Committee Chair |
||
Thani Jambulingam, PhD |
56 |
Independent Class II Director and Corporate Governance Committee Chair |
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Gary Jacob, PhD |
73 |
Independent Class I Director |
||
Vanila M. Singh, MD |
49 |
Independent Class I Director |
Executive Officers
Anthony Mack, MBA became a director and our Chairman of the Board of Directors and Chief Executive Officer in May 2017. Mr. Mack has more than 25 years of experience in the pharmaceutical and finance industries. Prior to founding Virpax in 2016, Mr. Mack founded SCILEX Pharmaceuticals in September 2012 and served as its President and CEO until ZTlido was approved in February 2018. Mr. Mack founded his first pharmaceutical company, ProSolus Pharmaceuticals, in 2009, where he served as President before selling the company to Mission Pharmacal in June 2015. Mr. Mack has held high-level management positions with Purdue Pharma, Endo Pharmaceuticals Inc., Novartis AG, and EKR Therapeutics Inc. (acquired by Cornerstone Therapeutics Inc.). He has led training, marketing, and commercial distribution for billion-dollar pain management products and has forged key strategic alliances. Mr. Mack also founded and serves as Director of IACTA Pharmaceuticals Inc. By serving on executive boards, Mr. Mack has utilized his skills and experience to implement policies relating to corporate governance and overall business strategy. Mr. Mack holds an Executive MBA in Pharmaceutical and Healthcare Marketing from Saint Joseph’s University. Mr. Mack was selected as a director due to his leadership experience at other companies and his history of founding and operating specialty pharmaceutical companies.
Jeffrey Gudin, MD became an Executive Vice President, and our Chief Medical Officer in January 2017. Prior to joining us, Dr. Gudin, was Director of Pain Management and Palliative Care at Englewood Hospital and Medical Center in New Jersey for almost 20 years. He is a Clinical Associate Professor in Anesthesiology at the Rutgers New Jersey Medical School. Dr. Gudin is Board Certified in Pain Medicine, Anesthesiology, Addiction Medicine and Hospice and Palliative Medicine. He is an active speaker in the field of pain management. His clinical and research focus includes pain management, opioid abuse and potential solutions, and increasing clinician awareness of pain assessment and risk management. Dr. Gudin completed a residency in anesthesiology at Yale University School of Medicine, in New Haven, Connecticut. He continued his training with an extended postdoctoral fellowship in pain medicine at the Yale Center for Pain Management, where he was actively involved in research and teaching.
Gerald W. Bruce became an Executive Vice President, and our Commercial Operations Officer in August 2017. Mr. Bruce has spent over 30 years, including 20 years in senior leadership roles, in the Pharmaceutical and Medical Nutrition industry. He started his career in May 1983 at Johnson & Johnson Inc. (NYSE: JNJ) where he was an award-winning sales representative and held leadership positions of increasing responsibility in sales and marketing ending with his role as Group Product Director of Analgesics in September 1998.From September 1998 to November 2000, he served as Vice President of Sales at Bristol-Myers Squibb Co. (NYSE: BMY) where he led
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the Cardiovascular and Metabolic sales force. From November 2000 to January 2006 he served as Vice President of Managed Markets where he led the team responsible for the development and implementation of the reimbursement strategy for Bristol-Myers Squibb’s US portfolio. From January 2006 to June 2008, Mr. Bruce was the Senior Vice President of Commercial Operations at NitroMed, Inc. where he was responsible for building the commercial strategy and led the team responsible for the development and implementation of the commercial plan for the start-up company’s first product for the treatment of Heart Failure. From April 2009 to November 2018, Mr. Bruce served as Vice President of Sales for Nutricia North America, Danone Medical Nutrition Division. Mr. Bruce currently serves on the Board of Trustees for Lincoln University and is a Board member for the National Sales Network. He received his bachelor’s degree in Business Administration from Lincoln University and a master’s degree in Leadership from the McDonough School of Business at Georgetown University.
Christopher M. Chipman, CPA became our Chief Financial Officer in May 2020. Mr. Chipman has more than 20 years of public and private accounting experience. Since November 2000, Mr. Chipman has been a managing member of Chipman & Chipman, LLC, a consulting firm that assists public companies with the preparation of periodic reports required to be filed with the Securities and Exchange Commission and compliance with Section 404 of the Sarbanes Oxley Act of 2002. Mr. Chipman is a CPA and was Chief Financial Officer and Secretary of Capital Gold Corporation from March 2006 to June 2011. Capital Gold Corporation was a publicly-held gold production and exploration company, until its acquisition by AuRico Gold, Inc. (formerly, Gammon Gold). From July 1996 to August 1998, Mr. Chipman was a senior accountant with the accounting firm of Grant Thornton LLP and from August 1998 to March 2000 he was a Senior Financial Analyst for GlaxoSmithKline. Prior to that, from July 1994 to July 1996, he was an Audit Examiner for Wells Fargo Corporation. Mr. Chipman received a B.A. in Economics from Ursinus College in 1994.
Directors
Eric Floyd, PhD became a director in January 2017. Dr. Floyd currently serves as Chief Regulatory Officer at Neurogene Inc. He has nearly 21 years of regulatory experience within the pharmaceutical industry. Most recently, from November 2018 to December 2019 he was Senior Vice President, Regulatory Affairs, for Axovant Sciences. Prior to that, he served as President of Compliance Services and Chief Scientific Officer at Dohmen Life Science Services, Inc. from June 2015, Senior Vice President, U.S. Regulatory Affairs and Clinical Quality Compliance at Lundbeck Inc. December 2011, Global Vice President of Regulatory Affairs at Hospira Inc. (later acquired by Pfizer Inc.) from January 2010, Vice President of Worldwide Regulatory Affairs and Quality Assurance at Cephalon Inc. (later acquired by Teva Pharmaceuticals Industries Ltd.) from January 2007 and VP and Global Head of Respiratory, Dermatology, and Tropical Medicines Drug Regulatory Affairs at Novartis AG from February 2005. Dr. Floyd has also held senior leadership roles at Bristol Myers Squibb Co., Aventis Pharma and Merck Research Laboratories (a division of Merck & Co.). Dr. Floyd received a Ph.D. in Neurophysiology from Meharry Medical College, Nashville, an executive MBA from St. Joseph’s University, Philadelphia, an MS from Tennessee State University, a BS from the University of Illinois and has served as an Assistant Professor at Harvard University School of Medicine. Dr. Floyd served as an outside director on the Board of Directors of SCILEX Pharmaceuticals Inc. from April 2014 to November 2016. Dr. Floyd was selected as a director due to his extensive experience at pharmaceutical companies and knowledge of the pharmaceutical industry.
Jerrold Sendrow, CFP became a director in January 2017. Mr. Sendrow has been a Certified Financial Planner since 1986 and continues to maintain his practice. Mr. Sendrow also served as an outside Director on the Board of Directors of SCILEX Pharmaceuticals Inc. from April 2014 to November 2016. Prior to that, Mr. Sendrow was an accountant in the audit departments of Touche Ross & Co. and Peat Marwick Mitchell & Co after returning from military service of two tours in the Vietnam conflict. Mr. Sendrow holds business degrees from Bernard Baruch College of the City University of New York and Adelphi University. Mr. Sendrow was selected as a director due to his leadership experience at other growth-stage companies and his financial accounting experience.
Thani Jambulingam, PhD became a director in January 2017. Dr. Jambulingam is a Pfizer Fellow and Professor in the Department of Pharmaceutical and Healthcare Marketing at St Joseph’s University, Erivan K. Haub School of Business, in Philadelphia, Pennsylvania. He teaches in the executive MBA program for biopharmaceutical, medical device and physician executives. Dr. Jambulingam served as the chair of the department for eight years, from June 2003 to June 2010. Dr. Jambulingam’s research is focused on pharmaceutical and healthcare strategy and innovation. His research is regularly published in marketing and management journals. Dr. Jambulingam has also served as a consultant and facilitated training sessions in innovation and strategy for senior leadership and/or brand teams within
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several small, mid and large pharma and healthcare firms including Alkermes Plc, Abbott Industries, AstraZeneca plc, Cardinal Health, FMC, IQVIA, Lancaster General Hospital, Leo Pharma, Merck & Co., Novo Nordisk, Pfizer Inc., Sanofi, Solvay and Procter & Gamble Inc. During his sabbatical from Saint Joseph’s University, from July 2011 to August 2012, he joined Pfizer Inc. (NYSE: PFE) with the Prevenar Global Commercial Team contributing to development of Prevenar franchise positioning, healthy aging platform development, vaccine business strategy for emerging markets, pediatric expanded age strategy (life cycle management) and conducted strategy sessions for executive leadership within the specialty care division of Pfizer. Dr. Jambulingam is a pharmacist and obtained his Ph.D. from the University of Wisconsin-Madison. Dr. Jambulingam completed the case method of teaching at Harvard. He has been inducted to the Rho Chi, the honor society in pharmacy and Beta Gamma Sigma, the honor society for business. For the past seven years, Dr. Jambulingam has been a faculty member conducting Bio-Entrepreneurship Bootcamp at the annual meeting at the Biotechnology Industry Organization (BIO). Dr. Jambulingam is also a visiting professor in the Wharton MBA Global program and teaches healthcare courses in India. Dr. Jambulingam was selected as a director due to his leadership experience at other companies and his extensive knowledge of the pharmaceutical industry.
Gary S. Jacob, PhD became a director in April 2020. Dr. Jacob has over 35 years of extensive experience in the pharmaceutical and biotechnology industries across multiple disciplines, including research and development, operations, business development, capital financing activities, and senior management expertise. He is the Co-Founder and former CEO and Chairman of Synergy Pharmaceuticals and has developed broad and influential contacts throughout the biopharmaceutical, financial, banking, and investor communities. He served as Chairman of the Board, President and Chief Executive Officer of Synergy Pharmaceuticals, Inc. where he held various positions from July 2008 until October 2018 and is the co-inventor of the FDA-approved drug Trulance® which is currently marketed in the U.S. by Bausch Health Companies, Inc. (NYSE: BHC) to treat functional GI disorders. From November 2018 to March 2020 Dr. Jacob served as the CEO and Managing Director of Immuron, Ltd., an Australian biotechnology company dual-listed on the Australian ASX exchange and on NASDAQ. Since March 2014, Dr. Jacob has served as Chairman of the Board of Hepion Pharmaceuticals, Inc., a public company with a drug in clinical development to treat nonalcoholic steatohepatitis, and since February 2009 has served on the Board of Directors of Cardiff Oncology Inc., a public oncology company. He served as Chief Executive Officer and Director of Callisto Pharmaceuticals, Inc. from May 2003 until January 2013. Prior to his involvement with Callisto and Synergy, Dr. Jacob spent a number of years at Monsanto/G.D. Searle, where he was Director of Glycobiology and a Monsanto Science Fellow, specializing in the field of Glycobiology and drug discovery. Dr. Jacob holds over 30 patents and is the co-inventor of one FDA-approved pharmaceutical drug. Dr. Jacob earned a B.S. in Chemistry cum laude from the University of Missouri — St. Louis and holds a Ph.D. in Biochemistry from the University of Wisconsin-Madison. Dr. Jacob was selected as a director due to his leadership experience at other companies and his extensive knowledge of the pharmaceutical industry.
Vanila M. Singh, MD became a director in June 2020. From June 2017 to July 2019, Dr. Singh is the former Chief Medical Officer of the U.S. Department of Health and Human Services, where she served as the Chairperson of the highly regarded HHS Pain and Opioid Task Force in conjunction with the Department of Defense and the Veterans Administration. Since November 2019, Dr. Singh has been a director of Biodelivery Sciences International, Inc. (NASDAQ: BDSI), and since June 2004, Dr. Singh has been a clinical associate professor of Anesthesiology, Pain and Peri-operative Medicine at Stanford University and is a teaching mentor at Walter Reed National Military Medical Center. For over ten years, Dr. Singh served on medical ethics as well as on scientific editorial boards, committees for the American Society of Regional Anesthesia, American Society of Interventional Pain Physicians, California Medical Association, and the Santa Clara County Medical Association. Dr. Singh, who is double board-certified in pain and anesthesiology, focuses her practice on regional anesthesia and peri-operative, subacute, and the development of chronic pain, with an appreciation for complimentary and traditional medicine approaches that emphasize an individualized patient-centered approach. Dr. Singh received her medical degree from George Washington University Medical School and her B.A. from U.C. Berkeley in Molecular and Cell Biology and Economics. Dr. Singh was selected as a director due to her leadership experience and her extensive knowledge of the pharmaceutical industry and the regulatory environment.
Corporate Governance
The bylaws to be adopted upon the closing of this offering will delegate the authority over our management and officers to our board of directors (the “Board of Directors”). The Board of Directors may then delegate management of the Company to committees of the Board of Directors, or such other persons based on its reasonable discretion. Regardless of any delegation, the Board of Directors will remain responsible for the proper management of our affairs.
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The Board of Directors may create new committees or change the responsibilities of existing committees from time to time.
Board Structure and Committee Composition
Our business and affairs are managed under the direction of our Board of Directors. Our Board of Directors currently consists of seven directors. The Certificate of Incorporation that will be in effect upon closing of this offering provides that our Board of Directors shall consist of at least one director but not more than nine directors and that the number of directors may be fixed from time to time by resolution of our Board of Directors.
In accordance with the terms of the Certificate of Incorporation and bylaws that will become effective upon the completion of this offering, our board of directors will be divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms. Upon the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholder in the year in which their term expires. Our directors will be divided among the three classes as follows:
• The Class I directors will be Mr. Jacob and Dr. Singh; their terms will expire at the annual meeting of stockholder to be held in 2021.
• The Class II directors will be Dr. Jambulingam and Mr. Sendrow; their terms will expire at the annual meeting of stockholder to be held in 2022.
• The Class III directors will be Mr. Mack, Dr. Gudin, and Dr. Floyd; their terms will expire at the annual meeting of stockholder to be held in 2023.
We expect that any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.
Under the Certificate of Incorporation that will become effective upon the closing of this offering, directors have the authority to appoint one or more directors to our Board of Directors, subject to the maximum number of directors allowed for in our Certificate of Incorporation. A vacancy on our Board of Directors may be filled by the remaining directors and any director so appointed will hold office until our next annual general meeting. During any vacancy on our Board of Directors, the remaining directors will have full power to act as the board.
Upon consummation of this offering, we will have an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Science and Technology Committee with the composition and responsibilities described below. Each committee will operate under a charter that will be approved by our Board of Directors. The members of each committee are appointed by the Board of Directors and serve until their successor is elected and qualified unless they are earlier removed or resign. In addition, from time to time, special committees may be established under the direction of the board of directors when necessary to address specific issues.
Audit Committee
Effective upon completion of this offering, our Audit Committee will be comprised of Mr. Sendrow, Dr. Floyd, and Dr. Jambulingam, with Mr. Sendrow serving as Chairman of the audit committee. Our Board of Directors has determined that each member of the Audit Committee meets the independence requirements of Rule 10A-3 under the Exchange Act and the applicable rules of the Nasdaq Capital Market. Our Board of Directors has determined that Mr. Sendrow is an “audit committee financial expert” within the meaning of SEC regulations and the applicable rules of the Nasdaq Capital Market. The Audit Committee’s responsibilities upon completion of this offering will include:
• appointing, approving the compensation of, and assessing the qualifications, performance and independence of our independent registered public accounting firm, and in particular the provision of additional services to each entity covered by the committee;
• pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
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• reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;
• monitoring the audit of our financial statements;
• setting policies for our hiring of employees or former employees of our independent registered public accounting firm;
• reviewing our significant risks or exposures and assessing the steps that management has taken or should take to monitor and minimize such risks or exposures;
• reviewing the adequacy of our internal control over financial reporting, including information system controls and security;
• monitoring the effectiveness of our systems of internal control, internal audit and risk management for each entity covered by the committee;
• establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;
• recommending, based upon the audit committee’s review and discussions with management and the independent registered public accounting firm, whether our audited financial statements shall be included in our Annual Report on Form 10-K;
• monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;
• preparing the audit committee report required by the rules of the SEC to be included in our annual proxy statement;
• reviewing all related party transactions for potential conflict of interest situations and approving all such transactions; and
• reviewing and discussing with management and our independent registered public accounting firm our earnings releases and scripts.
Compensation Committee
Effective upon completion of this offering, our Compensation Committee will be composed of Dr. Floyd, Mr. Sendrow, and Dr. Jambulingam, with Dr. Floyd serving as Chairman of the committee. Our Board of Directors has determined that each director serving on the Compensation Committee is “independent” as defined under the applicable listing standards of the Nasdaq Capital Market. Further, the Board of Directors has determined that the directors serving on the Compensation Committee are “non-employee directors” as defined in rule 16b-3 promulgated under the Exchange Act and are “outside directors” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended. The compensation committee’s responsibilities upon completion of this offering will include:
• reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, the officers who report directly to the chief executive officer and all officers who are “insiders” subject to Section 16 of the Exchange Act;
• evaluating the performance of our chief executive officer and such other officers in light of such corporate goals and objectives and determining and approving, or recommending to our board of directors for approval, the compensation of our chief executive officer and such other officers;
• appointing, compensating and overseeing the work of any compensation consultant, legal counsel or other advisor retained by the compensation committee;
• conducting the independence assessment outlined in the listing standards of the Nasdaq Capital Market with respect to any compensation consultant, legal counsel or other advisor retained by the compensation committee;
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• annually reviewing and reassessing the adequacy of the committee charter;
• reviewing and establishing our overall management compensation and our compensation philosophy and policy;
• overseeing and administering our equity compensation and other compensatory plans;
• reviewing and approving our equity and incentive policies and procedures for the grant of equity-based awards and approving the grant of such equity-based awards;
• reviewing and making recommendations to our board of directors with respect to non-employee director compensation; and
• producing a report, if required, on executive compensation to be included in our annual proxy statement or Annual Report on Form 10-K.
Nominating and Corporate Governance Committee
Effective upon completion of this offering, our nominating and corporate governance committee will be composed of Dr. Jambulingam, Mr. Sendrow, and Dr. Floyd, with Mr. Jambulingam serving as chairman of the committee. Our board of directors has determined that Dr. Jambulingam is “independent” as defined in the applicable rules of the Nasdaq Capital Market. The nominating and corporate governance committee’s responsibilities upon completion of this offering will include:
• establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by stockholder;
• identifying individuals qualified to become members of our board of directors;
• recommending to our board of directors the persons to be nominated for election as directors and to each of our board’s committees;
• developing and recommending to our board of directors a set of corporate governance principles;
• articulating to each director what is expected, including reference to the corporate governance principles and directors’ duties and responsibilities;
• reviewing and recommending to our board of directors’ practices and policies with respect to directors;
• reviewing and recommending to our board of directors the functions, duties and compositions of the committees of our board of directors;
• reviewing and assessing the adequacy of the committee charter and submitting any changes to our board of directors for approval;
• considering and reporting to our board of directors any questions of possible conflicts of interest of board of directors’ members;
• providing for new director orientation and continuing education for existing directors on a periodic basis;
• performing an evaluation of the performance of the committee; and
• overseeing the evaluation of our board of directors.
Science and Technology Committee
Our Science and Technology Committee is comprised of Dr. Floyd and Dr. Jambulingam, with Dr. Floyd serving as the chairman of the committee. Our Science and Technology Committee is responsible for, among other things:
• periodically examine management’s strategic direction and investment in our biopharmaceutical research and development and technology initiatives;
• identify and discuss significant emerging science and technology issues and trends;
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• evaluate the soundness/risks associated with the technologies in which we are investing our research and development efforts; and
• periodically review our overall patent strategies.
Code of Business Conduct and Ethics
We have adopted written code of business conduct and ethics (“Code of Ethics”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is available on our website at www.virpaxpharma.com/code-of-ethics. In addition, we intend to post on our website all disclosures that are required by law or the Nasdaq Capital Market rules concerning any amendments to, or waivers from, any provision of the Code of Ethics. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.
Legal Proceedings
We are not aware of any of our directors or officers being involved in any legal proceedings in the past 10 years relating to bankruptcy, insolvency or criminal proceedings (other than traffic and other minor offenses) or being subject to any of the items set forth under Item 401(f) of Regulation S-K, except for Dr. Gary S. Jacob. From 2008 to 2017, Dr. Jacob served as President and Chief Executive Officer of Synergy Pharmaceuticals, Inc. and as Chairman from 2013 to October 2018. In December of 2018, Synergy Pharmaceuticals, Inc. filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code.
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EXECUTIVE AND DIRECTOR COMPENSATION
As an emerging growth company under the JOBS Act we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” which require compensation disclosure for our principal executive officer and the two most highly compensated executive officers (other than our principal executive officer) serving as executive officers at the end of our most recently completed fiscal year (collectively, our “Named Executive Officers”). This section describes the executive compensation program in place for our Named Executive Officers during the year ended December 31, 2019, who are the individuals who served as our principal executive officer and two most highly compensated executive officers.
This section discusses the material components of the executive compensation program for our executive officers who are named in the “Summary Compensation Table” below and the non-employee members of our board of directors. In 2019, our “Named Executive Officers” and their positions were:
• Anthony Mack, our Chief Executive Officer and Chairman of the Board of Directors;
• Jeffrey Gudin, MD, our Executive Vice President, Chief Medical Officer; and
• Michele Linde, our former Executive Vice President, Chief Legal Officer.
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the completion of this offering may differ materially from the currently planned programs summarized in this discussion.
2019 Summary Compensation Table
The following table sets forth information concerning the compensation of our Named Executive Officers for the year ended December 31, 2019 and 2018:
Name & Principal Position |
Year |
Fees |
Salary/Bonus |
Stock
|
Option
|
Non-Equity
|
Change in
|
All Other Compensation |
Total |
|||||||||||||||||||
Anthony Mack |
2019 |
$ |
375,000 |
$ |
— |
$ |
— |
|
$ |
102,000 |
(2) |
$ |
— |
$ |
— |
$ |
— |
$ |
477,000 |
|||||||||
Chief Executive Officer, Chairman(1) |
2018 |
$ |
296,875 |
$ |
— |
$ |
— |
|
$ |
— |
|
$ |
— |
$ |
— |
$ |
— |
$ |
296,875 |
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Jeffrey Gudin, MD |
2019 |
$ |
— |
$ |
— |
$ |
— |
|
$ |
77,000 |
(2) |
$ |
— |
$ |
— |
$ |
— |
$ |
77,000 |
|||||||||
Executive VP, Chief Medical Officer |
2018 |
$ |
— |
$ |
— |
$ |
— |
|
$ |
— |
|
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Michele Linde(3) |
2019 |
$ |
126,000 |
$ |
— |
$ |
288,000 |
(4) |
$ |
153,000 |
(2) |
$ |
— |
$ |
— |
$ |
— |
$ |
567,000 |
|||||||||
Executive VP, Chief Legal Officer |
2018 |
$ |
— |
$ |
— |
$ |
— |
|
$ |
— |
|
$ |
— |
$ |
— |
$ |
— |
$ |
— |
____________
(1) This represents deferred compensation due to Mr. Mack as of December 31, 2019 and 2018, respectively, which is included in accounts payable and accrued expenses on the accompanying balance sheet. See Note 4 to our financial statements included in this prospectus.
(2) Amounts reflect the full grant date fair value of stock options granted during the year ended December 31, 2019 and 2018 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of the option awards in Note 8 to our financial statements included in this prospectus.
(3) Michele Linde was engaged as a consultant during the year ended December 31, 2017 and was hired as a full-time employee on May 1, 2019. We terminated Ms. Linde as our Executive Vice President, Chief Legal Officer as of May 15, 2020.
(4) Represents the full grant date fair value of restricted shares granted during the year ended December 31, 2019 pursuant to the employment agreement entered into with Ms. Linde on May 1, 2019. Upon the termination of Ms. Linde’s employment on May 15, 2020, $200,000 of the fair value of the restricted shares was forfeited.
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Employment arrangements with our Named Executive Officers
Mr. Mack.
On September 18, 2018, we entered into an employment agreement with Mr. Mack. The term of the agreement initiated upon the commencement of the agreement and terminates upon either death, disability, for cause, for good reason, or for other reasons by the Company or Mr. Mack. Under Mr. Mack’s employment agreement, Mr. Mack is paid an annual base salary of $375,000 with reviews by the board of directors for annual increases commencing in 2020 and an annual performance bonus in an amount of up to 50% of his base salary based on the achievement of our corporate objectives and Mr. Mack’s individual performance metrics, in each case as established by the board of directors in consultation with Mr. Mack. For the fiscal year 2019, no bonus was paid to Mr. Mack under his employment agreement. Mr. Mack’s employment agreement may be terminated by us immediately upon written notice to Mr. Mack, or by Mr. Mack upon 30 days’ notice provided to us. Concurrent with the execution of his employment agreement, we and Mr. Mack agreed to an executive confidentiality agreement (the “Executive Confidentiality Agreement”) that contains standard non-disclosure and non-competition provisions. In the event we terminate Mr. Mack’s employment agreement other than for cause, or Mr. Mack terminates the employment agreement for good reason, we will pay him the then effective base salary for a period of twelve months following the effective date of the termination. However, payment of the effective base salary is subject to the execution of a release of claims and the compliance by Mr. Mack with such release and all terms and provisions of the employment agreement and Executive Confidentiality Agreement that survive the termination of Mr. Mack’s employment.
Mr. Mack has elected to forgo his salary and defer his compensation. As of September 30, 2020, Mr. Mack is due approximately $911,000 in deferred compensation payable pursuant to Mr. Mack’s employment agreement.
Mr. Bruce
Mr. Bruce was appointed our Executive VP of Commercial Operations in March 2020 and is currently working as a consultant for us. On March 21, 2020, we entered into a consulting agreement with Mr. Bruce for a 1 year term, under which Mr. Bruce will perform consulting services which include, but are not limited to, reviewing business development opportunities and business analytics and modeling, establishing market segmentation guidelines with business analytics, assisting with commercial infrastructure, advising the Board, President and CEO, overseeing our CSO, and advising commercial strategy for the IPO. Pursuant to the consulting agreement, we granted Mr. Bruce a stock option equivalent to 15,169 shares of our common stock at an exercise price of $9.89 per share. The stock options vest upon one year from the date of grant. This represented the sole compensation under the consulting agreement. The stock option will be subject to the terms of our Amended and Restated 2017 Equity Incentive Plan and a stock option agreement. Mr. Bruce will also be reimbursed for all reasonable, documented travel and direct out-of-pocket expenses related to his consulting services, provided we have approved such expenditures advance. The consulting agreement may be terminated by either party at any time upon 15 days advance written notice. However, if Mr. Bruce remains engaged under the terms of his consulting agreement at the time we complete an IPO or commercially launches its first product, he is to be offered a full time position. Mr. Bruce’s employment agreement contains standard non-solicitation and non-compete provisions.
Severance subject to release of claims. Our obligation to provide an executive with severance payments and other benefits under each executive’s employment or consulting agreement, as applicable, is conditioned on the executive signing (and not subsequently revoking) an effective release of claims in favor of us.
Director compensation
The following table sets forth information concerning the compensation paid to certain of our non-employee directors during the year ended December 31, 2019.
Name |
Option
|
Total
|
||||
Eric Floyd, PhD(2) |
$ |
54,000 |
$ |
54,000 |
||
Jerrold Sendrow, CFP(3) |
$ |
35,000 |
$ |
35,000 |
||
Thani Jambulingam, PhD(4) |
$ |
37,000 |
$ |
37,000 |
____________
(1) Amounts reflect the full grant date fair value of stock options granted during 2019 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual.
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(2) On January 1, 2019, Dr. Floyd was granted an option to purchase 9,382 shares of common stock with an exercise price of $9.89 per share. This option fully vested on the first anniversary of the original grant date and has a term of ten years.
(3) On January 1, 2019, Mr. Sendrow was granted an option to purchase 4,326 shares of common stock with an exercise price of $9.89 per share. This option fully vested on the first anniversary of the original grant date and has a term of ten years. On May 20, 2019, Mr. Sendrow was granted an option to purchase 2,022 shares of common stock with an exercise price of $9.89 per share. This option fully vested on the first anniversary of the original grant date and has a term of ten years.
(4) On January 1, 2019, Dr. Jambulingam was granted an option to purchase 6,348 shares of common stock with an exercise price of $9.89 per share. This option fully vested on the first anniversary of the original grant date and has a term of ten years.
On May 21, 2018, our board of directors approved a director compensation policy applicable to our Non-Employee Directors. This policy provides for:
• On January 1 of each year, each then serving Non-Employee Director of the Board shall be automatically granted that number of stock options having a value of $25,000 calculated on the grant date in accordance with the Black-Scholes option pricing model and shall be exercisable as to 100% of stock option on the first anniversary of the grant date. These stock options have a term of ten years and shall have an exercise price equal to 100% of the fair market value of a share of common stock on the date of grant.
• On January 1 of each year, each then serving member of the Science and Technology Committee shall be automatically granted stock options to purchase 2,022 shares of common stock. These stock options have a term of ten years and shall have an exercise price equal to 100% of the fair market value of a share of common stock on the date of grant.
• On January 1 of each year, the Chair of the Science and Technology Committee shall be granted stock options to purchase an additional 3,033 shares of common stock. These stock options have a term of ten years and shall have an exercise price equal to 100% of the fair market value of a share of common stock on the date of grant.
• On January 1 of each year, the then Chair of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee shall each be automatically granted stock options to purchase 2,022 shares of common stock. These stock options have a term of ten years and shall have an exercise price equal to $9.89 per share.
All options granted under this policy are granted pursuant to the 2017 Plan.
Equity compensation
Outstanding equity awards at fiscal year-end table
The following table sets forth information concerning the outstanding equity awards held by each of our Named Executive Officers as of December 31, 2019:
Option Awards |
Stock Awards |
||||||||||||||||||
Name |
Number of
|
Number of
|
Equity
|
Option
|
Option Expiration Date |
Number of
|
Market
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (#) |
||||||||||
Anthony Mack |
20,225 |
— |
9.89 |
5/18/2029 |
— |
|
— |
— |
— |
||||||||||
Chief Executive Officer |
|
||||||||||||||||||
|
|||||||||||||||||||
Jeffrey Gudin, MD |
15,169 |
— |
9.89 |
5/18/2029 |
— |
|
— |
— |
— |
||||||||||
Chief Medical Officer |
|
||||||||||||||||||
|
|||||||||||||||||||
Michele Linde |
5,056 |
— |
— |
9.89 |
7/20/2028 |
20,225 |
$ |
200,000 |
20,225 |
— |
|||||||||
Executive VP, Chief Legal Officer |
— |
10,112 |
— |
9.89 |
5/18/2029 |
8,849 |
$ |
106,250 |
— |
— |
|||||||||
— |
20,225 |
— |
9.89 |
10/31/2029 |
— |
|
— |
— |
— |
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Employee benefits plans
We currently provide broad-based health and welfare benefits that are available to all of our employees, including our Named Executive Officers, including medical, dental, vision, life and disability insurance.
Limitation of Directors Liability and Indemnification
The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholder for monetary damages for breach of their fiduciary duties. The Certificate of Incorporation to be adopted upon the closing of this offering limits the liability of our directors to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with all of our directors and named executive officers whereby we have agreed to indemnify those directors and officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director, officer, employee or agent of ours, provided that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed to, our best interests.
We have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act. The Certificate of Incorporation and bylaws that will be adopted upon closing of this offering will also provide that we will indemnify our directors and officers who, by reason of the fact that he or she is or was one of our officers or directors of our Company, is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative related to their board role with us.
There is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.
Indemnification Agreements
We have entered into Indemnification Agreements with each of our current directors and executive officers. The Indemnification Agreements provide for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations. The Indemnification Agreements also provide for the advancement of expenses in connection with a proceeding prior to a final, nonappealable judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee is ultimately found not to be entitled to indemnification by us. The Indemnification Agreement sets forth procedures for making and responding to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that will apply to any dispute between us and an indemnitee arising under the Indemnification Agreements.
Incentive plan
2017 Incentive Plan
On May 21, 2018, our Board of Directors adopted the 2017 Plan. The following summary describes the material terms of the 2017 Plan. This summary is not a complete description of all provisions of the 2017 Plan and is qualified in its entirety by reference to the 2017 Plan, which will be filed as an exhibit to the registration statement of which this prospectus is a part.
The purpose of the 2017 Plan is to encourage the participants to contribute materially to our growth as a company, thereby benefitting our stockholder, and will align the economic interests of the participants with those of the stockholder.
Administration. The plan is administered by the Compensation Committee, with the caveat that the entire Board of Directors may act in lieu of the Compensation Committee on any matter of the plan. The Compensation Committee shall have authority in its discretion to determine the eligible persons to whom, and the time or times at which, awards may be granted, the number of shares, units or other rights subject to each award, the exercise, base or purchase price
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of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance criteria, performance goals and other conditions of an award, the duration of the award, and all other terms of the award.
Available shares. The maximum aggregate number of shares of common stock which may be issued under all awards granted to participants under the plan initially shall be 303,382 shares. All 303,382 of such authorized shares initially available may be issued in respect of incentive stock options. The number of authorized shares available for issuance under the plan shall automatically increase on January 1st of each year, in an amount equal to 6% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. However, the Board of Directors may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year shall be a lesser number of shares of common stock than would otherwise occur.
Eligibility for participation. An incentive stock option may only be granted to an employee, officer, director, or consultant who is considered an employee of ours or any subsidiary of ours.
Individual limits. The maximum number of shares of common stock with respect to any award may be granted to any one eligible person under the plan during a calendar year shall be 60,676 shares.
Types of awards. The 2017 Plan provides for the grant of nonqualified stock options, incentive stock options (“ISOs”), stock appreciation rights (“SARs”), restricted stock, stock units, performance shares, performance units, incentive bonus awards, and other cash and stock-based awards.
• Stock options and SARs. The Compensation Committee may grant stock options, including ISOs, and SARs. A stock option is a right entitling the holder to acquire our common shares upon payment of the applicable exercise price. A SAR is a right entitling the holder upon exercise to receive an amount (payable in cash or shares of equivalent value) equal to the excess of the fair market value of the shares subject to the right over the base value from which appreciation is measured. The exercise price of each stock option, and the base value of each SAR, granted under the 2017 Plan shall be no less than 100% of the fair market value of a share of common stock on the date of grant (110% in the case of certain ISOs). Each stock option and SAR will have a maximum term of not more than ten years from the date of grant.
• Restricted and unrestricted stock and stock units. The administrator of the 2017 Plan may grant awards of shares, stock units, restricted stock and restricted stock units. A stock unit is an unfunded and unsecured promise, denominated in shares, to deliver shares or cash measured by the value of shares in the future, and a restricted stock unit is a stock unit that is subject to the satisfaction of specified performance or other vesting conditions. Restricted stock are shares subject to restrictions requiring that they be redelivered or forfeited to the company if specified conditions are not satisfied.
• Performance awards. The administrator of the 2017 Plan may grant performance awards, which are awards subject to performance criteria. Each performance share shall have an initial value equal to the fair market value of a share on the date of grant. The Compensation Committee shall set performance goals in its discretion that, depending on the extent to which they are met over a specified time period, shall determine the number of performance shares that shall be paid to a participant.
• Other stock-based awards. The administrator of the 2017 Plan may grant other awards that are convertible into or otherwise based on our common shares, subject to such terms and conditions as it determines.
• Substitute awards. The administrator of the 2017 Plan may grant substitute awards in connection with certain corporate transactions, which may have terms and conditions that are inconsistent with the terms and conditions of the 2017 Plan.
Change in control. The Compensation Committee may, at the time of the grant of an award and as set forth in the applicable award agreement, provide for the effect of a “Change in Control” on an award. Such provisions may include any one or more of the following: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from any award; (ii) the elimination or modification of performance or other conditions related to the payment or other rights under an award; (iii) provision for the cash settlement of an award for an equivalent cash value, as determined by the Committee, or (iv) such other modification or adjustment to an award as the Committee
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deems appropriate to maintain and protect the rights and interests of participants upon or following a Change in Control. To the extent necessary for compliance with Section 409A of the Code, an award agreement shall provide that an award subject to the requirements of Section 409A that would otherwise become payable upon a Change in Control shall only become payable to the extent that the requirements for a “change in control” for purposes of Section 409A have been satisfied.
“Change in Control” means, unless otherwise provided in an award agreement, the occurrence of any one of the following events:
(i) any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any entity controlling, controlled by or under common control with the Company, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any such entity, and, with respect to any particular Participant, the Participant and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which the Participant is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of either (A) the combined voting power of the Company’s then outstanding securities; or (B) the then outstanding shares of Common Stock (in either such case other than as a result of an acquisition of securities directly from the Company); or
(ii) any consolidation or merger of the Company where our stockholders, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); or
(iii) there shall occur (A) any sale, lease, exclusive license, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of our assets, other than a sale or disposition by us of all or substantially all of our assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership in us immediately prior to such sale; or (B) the approval by our stockholders of any plan or proposal for our liquidation or dissolution.
Notwithstanding the foregoing, no event or condition shall constitute a Change in Control to the extent that, if it were, a 20% tax would be imposed under Section 409A of the Code; provided that, in such a case, the event or condition shall continue to constitute a Change in Control to the maximum extent possible (e.g., if applicable, in respect of vesting without an acceleration of distribution) without causing the imposition of such 20% tax.
Stockholder rights. Except as otherwise provided in the applicable award agreement, and with respect to an award of restricted stock, a participant will have no rights as a stockholder with respect to shares of our common stock covered by any award until the participant becomes the record holder of such shares.
Amendments and termination. The Board of Directors may suspend or terminate the 2017 Plan (or any portion thereof) at any time and may amend the 2017 Plan at any time and from time to time in such respects as the Board of Directors may deem advisable or in our best interests; provided, however, that stockholder approval is required for any amendment to the 2017 Plan that (i) increases the number of shares of common stock available for issuance under the 2017 Plan, or (ii) changes the persons or class of persons eligible to receive awards under the 2017 Plan.
Transferability of awards. Except as the Administrator may otherwise determine, awards may not be transferred other than by will or by the laws of descent and distribution.
Claw back. The administrator of the 2017 Plan may provide that any outstanding award or the proceeds of any award or share acquired thereunder will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an award. Such events shall include, but not limited to, termination of continuous service for cause, violation of material company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the participant, or other conduct by the participant that is detrimental to our business or reputation. The Compensation Committee may also specify in an award agreement that the participant’s rights, payments and benefits with respect to an award shall be
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conditioned upon the participant making a representation regarding compliance with noncompetition, confidentiality or other restrictive covenants. The participant’s rights, payments and benefits with respect to an award shall be subject to reduction, cancellation, forfeiture or recoupment on account of a breach of such representation.
Potential Limitation on Company Deductions. Section 162(m) of the Tax Code generally disallows a tax deduction for compensation in excess of $1 million paid in a taxable year by a publicly held corporation to its chief executive officer and certain other “covered employees”. The Board of Directors and the Compensation Committee intend to consider the potential impact of Section 162(m) on grants made under the 2017 Plan but reserve the right to approve grants of options and other awards for an executive officer that exceed the deduction limit of Section 162(m).
Tax Withholding. As and when appropriate, we shall have the right to require each optionee purchasing shares of common stock and each grantee receiving an award of shares of common stock under the 2017 Plan to pay any federal, state or local taxes required by law to be withheld.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2018 to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets as of December 31, 2019 and 2018, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers, and stockholder.
Initial Capitalization
In May 2017, we issued 2,730,438 shares of our common stock to Virpax Pharmaceuticals, LLC. Anthony Mack, our Chief Executive Officer, and Jeffrey Gudin, our Executive Vice President and Chief Medical Officer, are the members of Virpax Pharmaceuticals, LLC. Virpax Pharmaceuticals, LLC currently owns approximately 87% of our outstanding common stock prior to the closing of this offering and will own approximately 61% of our outstanding common stock immediately after the closing of this offering. These shares were issued to Virpax Pharmaceutical, LLC as consideration for founding our company.
Independent Contractor Agreement with Chipman & Chipman
On May 1, 2020, we entered into an Independent Contractor Agreement (“Contractor Agreement”) with Chipman & Chipman, LLC (“C&C”), whereby C&C will provide us with consulting and advisory services typically provided by a Chief Financial Officer of a company of our size and stage of development. The engagement term is for 1 year, for a fee equal to $6,000 per month. Our Chief Financial Officer, Christopher Chipman, is the managing director of C&C, and was appointed as our CFO pursuant to the Contractor Agreement. Pursuant to the Contractor Agreement, upon the closing of this offering, we will be obligated to pay C&C an amount equal to $6,000 per each month C&C has provided services under the agreement at the time of the closing. Upon the signing of the Contractor Agreement, pursuant to the 2017 Plan we granted to C&C an option exercisable for 40,450 shares of our common stock, with 10,112 shares vesting upon the grant date, 20,225 shares vesting upon closing of this offering and the remaining 10,113 shares vesting on the first anniversary of the closing of this offering.
Promissory Notes with Anthony Mack
We have entered into two promissory notes with our Chief Executive Officer, Anthony Mack. Please refer to the “Description of Certain Indebtedness” section below for further details.
Policies and Procedures for Related Person Transactions
Our Board of Directors intends to adopt a written related person transaction policy, to be effective upon the closing of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets as of December 31, 2019 and 2018 and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.
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The following table sets forth information with respect to the beneficial ownership of our common stock, as of the date of this prospectus by:
• each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock;
• each of our executive officers;
• each of our directors; and
• all of our executive officers and directors as a group.
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Applicable percentage ownership is based on 3,145,153 shares of common stock outstanding as of the date of this prospectus. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to the exercise of options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of the date of this prospectus are counted as outstanding. Unless noted otherwise, the address of all listed stockholder is 1554 Paoli Pike, #279, West Chester, PA 19380. Each of the stockholder listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
Name of Beneficial Owner |
Number of
|
|
|||||||
Prior to Offering |
After
|
||||||||
5% or Greater Stockholders |
|
|
|
||||||
Virpax Pharmaceuticals, LLC |
2,730,438 |
(1) |
86.8 |
% |
60.6 |
% |
|||
|
|
|
|||||||
Executive Officers and Directors Other Than 5% or Greater Stockholders |
|
|
|
||||||
Anthony Mack |
171,912 |
(1)(2) |
5.4 |
% |
3.7 |
% |
|||
Jeffrey Gudin, MD |
22,753 |
(3) |
* |
|
* |
|
|||
Gerald Bruce |
4,045 |
(4) |
* |
|
* |
|
|||
Christopher Chipman |
10,112 |
(5)(6) |
* |
|
* |
|
|||
Eric Floyd, PhD |
33,146 |
(7) |
* |
|
* |
|
|||
Jerrold Sendrow, CFP |
27,179 |
(8) |
* |
|
* |
|
|||
Thani Jambulingam, PhD |
26,573 |
(9) |
* |
|
* |
|
|||
Gary Jacob, PhD |
— |
(10) |
* |
|
* |
|
|||
Vanila Singh, MD, MACM |
— |
(11) |
* |
|
* |
|
|||
Directors and Officers as a Group (9 persons) |
3,026,158 |
|
92.4 |
% |
65.3 |
% |
____________
* Less than 1%.
(1) Anthony Mack, our Chief Executive Officer, and Jeffrey Gudin, our Executive Vice President and Chief Medical Officer, are the members of Virpax Pharmaceuticals, LLC. Due to Mr. Mack’s ownership of 88.8888% of the outstanding member units of Virpax Pharmaceuticals, LLC, he may be deemed to have sole voting and dispositive control over the shares of our common stock held by Virpax Pharmaceuticals, LLC. As a result, Mr. Mack may be deemed to beneficially own the shares of our common stock held by Virpax Pharmaceuticals, LLC.
(2) Includes 151,687 shares of common stock held by Mr. Mack and his spouse and 20,225 shares of common stock held by Mr. Mack issuable upon exercise of stock options that are exercisable within 60 days of the date of this prospectus. Does not include 40,450 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
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(3) Includes 7,584 shares of common stock owned by Mr. Gudin and his spouse. Also, includes 15,169 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of the date of this prospectus. Does not include 30,338 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(4) Includes 4,045 shares of common stock. Does not include 15,169 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(5) The shares of common stock are held by Chipman & Chipman LLC, a consulting firm of which Mr. Chipman is the Managing Member. As a result, Mr. Chipman has the sole voting and dispositive control over the shares of our common stock held by Chipman & Chipman LLC. As a result, Mr. Chipman may be deemed to beneficially own the shares of our common stock held by Chipman & Chipman LLC.
(6) Includes 10,112 shares of common stock issuable upon exercise of stock options exercisable within 60 days of the date of this prospectus. Does not include 30,338 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(7) Includes 3,539 shares of common stock, and 29,607 shares of common stock issuable upon exercise of stock options exercisable within 60 days of the date of this prospectus. Does not include 9,730 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(8) Includes 606 shares of common stock, and 26,573 shares of common stock issuable upon exercise of stock options exercisable within 60 days of the date of this prospectus. Does not include 6,696 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(9) Includes 26,573 shares of common stock issuable upon exercise of stock options exercisable within 60 days of the date of this prospectus. Does not include 6,697 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(10) Does not include 20,225 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
(11) Does not include 20,225 shares of common stock issuable upon exercise of stock options that are not exercisable within 60 days of the date of this prospectus.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain of our indebtedness that is currently outstanding. The following descriptions do not purport to be complete and are qualified in their entirety by reference to the agreements and related documents referred to herein, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part, and may be obtained as described under “Where You Can Find More Information” in this prospectus.
Promissory Notes
On October 1, 2018, we issued a promissory note, as amended (the “2018 Promissory Note”), pursuant to which we are obligated to pay Anthony Mack the principal amount of $500,000. The 2018 Promissory Note has a maturity date of the earlier of an Event of Default (as defined below) and January 15, 2022. As of September 30, 2020, the balance on the 2018 Promissory Note was $500,000, with accrued but unpaid interest of $124,762. As of December 31, 2019, the balance on the 2018 Promissory Note was $500,000, with accrued but unpaid interest of $74,692. As of December 31, 2018, the balance on the 2018 Promissory note was $500,000, with accrued interest of $14,118.
On January 15, 2019, we issued a promissory note, as amended (the “2019 Promissory Note”), pursuant to which we are obligated to pay Mr. Mack the principal amount of $500,000. The 2019 Promissory Note has a maturity date of the earlier of an Event of Default (as defined below) and January 15, 2022. As of September 30, 2020, the balance on the 2019 Promissory Note was $500,000, with accrued but unpaid interest of $104,799. As of December 31, 2019, the balance on the 2019 Promissory Note was $500,000, with accrued but unpaid interest of $56,329.
On October 28, 2020, the Company amended its 2018 Promissory Note dated October 1, 2018 and 2019 Promissory Note dated January 15, 2019 with Anthony Mack, Chief Executive Officer and significant investor, to extend the maturity date to December 31, 2023 for both promissory notes. All other terms and conditions of these agreements remained unchanged.
On August 29, 2019, we agreed to pay certain compensation due to RRD International, LLC (“RRD”) in the form of a service provider convertible note purchase agreement, as amended (the “RRD Note”). The RRD Note states that a maximum principal balance of $400,000 can be applied for services provided to us by RRD, which principal amount can be converted, at RRD’s option, into equity or cash (all or in part) upon the earlier of a RRD Qualified Financing (which we anticipate this offering to be) or November 30, 2020. As of December 31, 2019, the principal balance on the RRD Note was $264,520, with accrued interest of $7,741. On March 20, 2020, we amended the RRD Note to extend the maturity date from March 31, 2020 to September 30, 2020, increase the maximum principal amount from $400,000 to $600,000, extend the RRD Qualified Financing deadline from March 31, 2020 to September 30, 2020, and provide for the payment of all interest accrued up to March 31, 2020, which was $16,435. At September 30, 2020, the principal balance on the RRD Note was $493,480, with accrued interest of $22,207. In October 2020, we amended the RRD Note to extend the maturity date from September 30, 2020 to November 30, 2020, extend the RRD Qualified Financing deadline from September 30, 2020 to November 30, 2020, and provide for the payment of all interest from April 1, 2020 through November 30, 2020, which was $30,431.
Interest Rate and Fees
Borrowings under the 2018 Promissory Note and 2019 Promissory Note bear interest at a rate of 11.19% per annum. Any overdue and unpaid principal amounts will bear interest at a rate of 15% for each day that such amounts are overdue.
Borrowings under the RRD Note bear simple interest on the outstanding principal amount of the RRD Note until paid in full at the fixed rate of 10% per annum.
Conversion
Borrowings under the RRD Note are subject to a qualified conversion feature. If on or prior to November 30, 2020 (the “Conversion Date”), an RRD Qualified Financing has not occurred, then all outstanding principal shall be automatically converted into shares of our common stock at a conversion price of $9.89. A “RRD Qualified Financing” means a transaction prior to November 30, 2020 in which we issue and sell shares of our equity securities to one or more third parties in the amount of at least $1.5 million.
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Amortization and Final Maturity
Under the 2018 Promissory Note, principal and interest shall be due upon the earlier of (i) January 15, 2022 and (ii) an event of default.
Under the 2019 Promissory Note, principal and interest shall be due upon the earlier of (i) January 15, 2022 and (ii) an event of default.
Under the RRD Note, the payment of all amounts is due at the earlier of (i) the date of an RRD Qualified Financing, (ii) an event of default, and (iii) a change in control. Upon one of these events, RRD shall have the option to receive cash or convert any or all of the principal and accrued interest into shares of our common stock. RRD has indicated to us that it plans to elect to receive cash for all amounts due under the RRD Note. A portion of the net proceeds from this offering will be used to pay the total amounts due to RRD under the RRD Note, which, as of November 30, 2020, was $523,911 (which amount includes interest through November 30, 2020).
Certain Covenants and Events of Default
For the borrowings under the 2018 Promissory Note and 2019 Promissory Note, an Event of Default consists of one or more of the following:
• Our failure to make any payment of principal or interest within 5 days of payment due;
• We file for bankruptcy;
• We are adjudicated insolvent or bankrupt; and
• We commence any proceedings under any bankruptcy, reorganization, arrangement, readjustment of debt, insolvency, dissolution or liquidation law or statute of any jurisdiction.
For the borrowings under the RRD Note, an Event of Default consists of one or more of the following:
• Any material breach or failure to perform any of the terms of the Master Services Agreement entered into between us and RRD, dated March 1, 2019;
• We execute a general assignment for the benefit of creditors;
• The filing by or against us of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of a petition in bankruptcy or any petition for relief under the federal bankruptcy act that is filed against us for a period of 90 days or more; or
• The appointment of a receiver or trustee to take possession of our property or assets.
Paycheck Protection Program Loan (“PPP Loan”)
On May 4, 2020, we entered into a Promissory Note (the “PPP Note”) with PNC Bank as the lender (the “Lender”), pursuant to which the Lender agreed to make a loan to us under the Paycheck Protection Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) in a principal amount of $72,100 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to our full time headcount during the period ending October 31, 2020.
The interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, we will be required to make principal and interest payments in monthly installments beginning seven months from April 2020. The PPP Note matures in two years.
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The PPP Note includes customary events of default including, among others, (i) the nonpayment of any principal, interest or other indebtedness under the PPP Note when due; (ii) the occurrence of any event of default or any default and the lapse of any notice or cure period, or our failure to observe or perform any covenant or other agreement, under or contained in any loan document; (iii) the filing by or against us of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding; and (iv) the breach of any representation or warranty on our part. Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against us, including the right to require immediate payment of all amounts due under the PPP Note.
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The following description summarizes some of the terms of our Amended and Restated Certificate of Incorporation and amended and restated bylaws that will become effective upon the closing of this offering. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our restated Certificate of Incorporation and amended and restated bylaws, copies of which have been or will be filed as exhibits to the registration statement of which this prospectus is a part. The description of our common stock reflects changes to our capital structure that will occur immediately prior to the closing of this offering.
Authorized Capitalization
Upon completion of this offering, we will have 110,000,000 shares of capital stock authorized under our Certificate of Incorporation, consisting of 100,000,000 shares of common stock with a par value of $0.00001 per share and 10,000,000 shares of preferred stock with a par value of $0.00001 per share. As of the date of this prospectus, we had 3,145,153 shares of common stock outstanding and no shares of preferred stock outstanding. In addition, as of the date of this prospectus, we had outstanding options to purchase an aggregate of 486,101 shares of our common stock under the 2017 Plan, at a weighted average exercise price of $9.89 per share. Our authorized but unissued shares of common stock and preferred stock are available for issuance without further action by our stockholder, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded in the future.
Common Stock
Holders of our common stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose. The shares of common stock are neither redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.
Each holder of our common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors.
In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets, which are legally available for distribution, after payments of all debts and other liabilities. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares of common stock offered by this prospectus will also be fully paid and non-assessable.
Preferred Stock
Upon completion of this offering, our Board of Directors will have the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more classes or series and to fix the designations, rights, preferences, privileges and restrictions thereof, without further vote or action by the stockholder. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such class or series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Immediately after completion of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.
Stock Options
As of the date of this prospectus, we had reserved the following shares of common stock for issuance pursuant to stock options under the 2017 Plan described below:
• 486,101 shares of our common stock reserved for issuance under stock option agreements issued pursuant to the 2017 Plan with exercise prices of $9.89 per share; and
• 334,695 shares of our common stock reserved for future issuance under the 2017 Plan.
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Underwriter Warrants
We have agreed to sell to the underwriters, for nominal consideration, warrants to purchase 68,181 shares of our common stock as additional consideration to the underwriters in this offering. The underwriter warrants will have an exercise price equal to 125% of the public offering price in this offering and shall be exercisable for a period of four years and six months and provide for cashless exercise. See “Underwriting.”
Anti-Takeover Effects of Delaware law and Our Certificate of Incorporation and Bylaws
The provisions of Delaware law, our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws to be adopted upon the closing of this offering, described below may have the effect of delaying, deferring or discouraging another party from acquiring control of us.
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
• before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
• upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
• on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholder, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
In general, Section 203 defines business combination to include the following:
• any merger or consolidation involving the corporation and the interested stockholder;
• any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
• subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
• any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or
• the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation.
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Certificate of Incorporation and Bylaws
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws to be adopted upon the closing of the offering provides for:
• authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
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• limiting the removal of directors by the stockholders;
• requiring a supermajority vote of stockholders to amend our bylaws or certain provisions our certificate of incorporation;
• prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
• eliminating the ability of stockholders to call a special meeting of stockholders;
• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings;
• establishing Delaware as the exclusive jurisdiction for certain stockholder litigation against us; and
• a classified board of directors.
Potential Effects of Authorized but Unissued Stock
We have shares of common stock and preferred stock available for future issuance without stockholder approval. We may utilize these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or payment as a dividend on the capital stock.
The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, the board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock, all to the fullest extent permissible under the Delaware General Corporation Law and subject to any limitations set forth in our certificate of incorporation. The purpose of authorizing the board of directors to issue preferred stock and to determine the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from acquiring, a majority of our outstanding voting stock.
Choice of Forum
Unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company or the Company’s stockholders, creditors or constituents, (iii) any action asserting a claim against the Company or any director or officer of the Company arising pursuant to, or a claim against the Company or any director or officer of the Company, with respect to the interpretation or application of any provision of, the DGCL, our certificate of incorporation or bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, in each of the aforementioned actions, any claims to which the Court of Chancery of the State of Delaware determines it lacks jurisdiction. This provision will not apply to claims arising under the Exchange Act, the Securities Act or for any other federal securities laws which provide for exclusive federal jurisdiction. However, the exclusive forum provision provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Therefore, this provision could apply to a suit that falls within one or more of the categories enumerated in the exclusive forum provision and that asserts claims under the Securities Act, inasmuch as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. There is uncertainty as to whether a court would enforce such an exclusive forum provision with respect to claims under the Securities Act.
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We note that there is uncertainty as to whether a court would enforce the provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is V-Stock Transfer LLC.
National Securities Exchange Listing
We intend to apply to list our common shares on the Nasdaq Capital Market under the symbol “VRPX,” which listing we expect to occur upon consummation of this offering.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our common shares, and we cannot predict what effect, if any, market sales of our common shares or the availability of our common shares for sale will have on the market price of our common shares prevailing from time to time. Nevertheless, future sales of substantial amounts of our common shares in the public market, or the perception that such sales could occur, could materially and adversely affect the market price of our common shares and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate.
Upon the consummation of this offering, we will have outstanding an aggregate of approximately 4,508,790 common shares. Of the outstanding shares, the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, may be sold only in compliance with the limitations described below.
The remaining outstanding common shares will be deemed restricted securities, as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which we summarize below. Approximately 100% of these shares will be subject to lock-up agreements described below.
Taking into account the lock-up agreements described below, and assuming we do not release stockholders from these agreements, the following shares will be eligible for sale in the public market at the following times, subject to the provisions of Rule 144 and Rule 701:
Date Available for Sale |
Shares Eligible for Sale |
Description |
||
Date of Prospectus |
1,363,637 |
Shares sold in the offering that are not subject to a lock-up |
||
90 Days after Date of Prospectus |
— |
Shares saleable under Rules 144 and 701 that are not subject to a lock-up |
||
6 Months after Date of Prospectus |
118,995 |
Lock-up released; shares saleable under Rules 144 and 701 |
||
9 Months after Date of Prospectus |
3,026,158 |
Lock-up released; shares saleable under Rules 144 and 701 |
Lock-Up Agreements
Pursuant to certain “lock-up” agreements, we, our executive officers and directors and our stockholders, have agreed not to, without the prior written consent of the representative, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, for a period of nine months, in the case of our officers and directors, and six months from the date of this prospectus, in the case of us and all other stockholders. See “Underwriting — Lock-Up Agreements” for additional information.
Rule 144
In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any of our common shares that such person has beneficially owned for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard to volume limitations. Sales of our common shares by any such person would be subject to the availability of current public information about us if the shares to be sold were beneficially owned by such person for less than one year.
Beginning 90 days after the date of this prospectus, our affiliates who have beneficially owned our common shares for at least six months, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
• 1% of the number of our common shares then outstanding, which will equal approximately 45,088 shares immediately after this offering, assuming an initial public offering price of $11.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus; and
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• the average weekly trading volume in our common shares on the Nasdaq Capital Market during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.
Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
In general, under Rule 701, any of an issuer’s employees, directors, officers, consultants or advisors who purchases shares from an issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.
Registration Statements on Form S-8
Shortly after the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all of our common shares issued or reserved for future issuance under our equity incentive plans. Shares registered under the registration statement will generally be available for sale in the open market after the 180-day lock-up period immediately following the date of this prospectus.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of the shares of common stock issued pursuant to this offering but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U IRS, in effect as of the date of this offering. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a non-U.S. holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to non-U.S. holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a non-U.S. holder’s particular circumstances, including the impact of the alternative minimum tax or the unearned income Medicare contribution tax. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:
• U.S. expatriates and certain former citizens or long-term residents of the United States;
• persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
• banks, insurance companies, and other financial institutions;
• regulated investment companies or real estate investment trusts;
• brokers, dealers or traders in securities or currencies;
• controlled foreign corporations, “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
• partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
• tax-exempt organizations or governmental organizations;
• persons deemed to sell our common stock under the constructive sale provisions of the Code;
• persons for whom our common stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code or as “Section 1244 stock” for purposes of Section 1244 of the Code;
• persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an “applicable financial statement” (as defined in the Code);
• persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;
• tax-qualified retirement plans; and
• “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interest of which are held by qualified foreign pension funds
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
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THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS LEGAL OR TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. Holder
For purposes of this discussion, a “non-U.S. holder” is any beneficial owner of our common stock that is not a “U.S. person,” a partnership or an entity disregarded as separate from its owner, each for United States federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is:
• an individual who is a citizen or resident of the United States;
• a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
• an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
• a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has made a valid election under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.
Distributions
As described in the section entitled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions on our common stock, such distributions of cash or property on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a non-U.S. holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below in the section relating to the sale or disposition of our common stock. Because we may not know the extent to which a distribution is a dividend for U.S. federal income tax purposes at the time it is made, for purposes of the withholding rules discussed below we or the applicable withholding agent may treat the entire distribution as a dividend.
Subject to the discussion below on backup withholding and foreign accounts, dividends paid to a non-U.S. holder of our common stock that are not effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty).
Non-U.S. holders will be entitled to a reduction in or an exemption from withholding on dividends as a result of either (a) an applicable income tax treaty or (b) the non-U.S. holder holding our common stock in connection with the conduct of a trade or business within the United States and dividends being effectively connected with that trade or business. To claim such a reduction in or exemption from withholding, the non-U.S. holder must provide the applicable withholding agent with a properly executed (a) IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) claiming an exemption from or reduction of the withholding tax under the benefit of an income tax treaty between the United States and the country in which the non-U.S. holder resides or is established, or (b) IRS Form W-8ECI stating that the dividends are not subject to withholding tax because they are effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, as may be applicable. These certifications must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. Non-U.S. holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
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If dividends paid to a non-U.S. holder are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), then, although exempt from U.S. federal withholding tax (provided the non-U.S. holder provides appropriate certification, as described above), the non-U.S. holder will be subject to U.S. federal income tax on such dividends on a net income basis at the regular graduated rates. In addition, a non-U.S. holder that is a corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty and regarding any applicable treaties that may provide for different rules.
Sale or Other Taxable Disposition of Common Stock
Subject to the discussions below on backup withholding and foreign accounts, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
• the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment fixed base in the United States to which such gain is attributable);
• the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or
• our common stock constitutes U.S. real property interests, or USRPIs, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes.
Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular rates. A non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on any gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder (even though the individual non-U.S. holder is not considered a resident of the United States) provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we are not currently and do not anticipate becoming a USRPHC. Because the determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of our other business assets and our non-U.S. real property interests and our other business assets, however, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such non-U.S. holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the non-U.S. holder’s holding period. If we are a USRPHC and either our common stock is not regularly traded on an established securities market or a non-U.S. holder holds, or is treated as holding, more than 5% of our outstanding common stock, directly or indirectly, during the applicable testing period, such non-U.S. holder’s gain on the disposition of shares of our common stock generally will be taxed in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply. If we are a USRPHC and our common stock is not regularly traded on an established securities market, a non-U.S. holder’s proceeds received on the disposition of shares will also generally be subject to withholding at a rate of 15%. Prospective investors are encouraged to consult their tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC.
Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
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Information Reporting and Backup Withholding
Subject to the discussion below on foreign accounts, a non-U.S. holder will not be subject to backup withholding (currently at a rate of 24%) with respect to distributions on our common stock we make to the non-U.S. holder, provided the applicable withholding agent does not have actual knowledge or reason to know such holder is a United States person and the holder certifies its non-U.S. status, such as by providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns generally will be filed with the IRS in connection with any distributions (including deemed distributions) made on our common stock to the non-U.S. holder, regardless of whether any tax was actually withheld.
In addition, proceeds of a sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that the beneficial owner is a U.S. person, or such holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 through 1474 of the Code (such Sections are commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends (including deemed dividends) paid on our common stock, or, subject to the proposed Treasury Regulations discussed below, gross proceeds from the sale or other disposition of our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends (including deemed dividends) paid on our common stock. While withholding under FATCA would also have applied to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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ThinkEquity, a division of Fordham Financial Management, Inc., is acting as representative of the underwriters of this offering. We have entered into an underwriting agreement dated November , 2020, with the representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase from us, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of common shares listed next to its name in the following table:
Underwriters |
Number of Shares |
|
ThinkEquity, a division of Fordham Financial Management, Inc. |
||
Total |
The underwriting agreement provides that the underwriters are committed to purchase all shares offered by us other than those covered by the over-allotment option described below, if any are purchased. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
The underwriters are offering the shares subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, and other conditions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
The underwriters propose to offer the shares offered by us to the public at the public offering price set forth on the cover of the prospectus. After the shares are released for sale to the public, the underwriters may change the offering price and other selling terms at various times
Over-Allotment Option
We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the representative to purchase a maximum of 5 additional shares of common stock (15% of the shares sold in this offering) from us to cover over-allotments, if any. If the representative exercises all or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total offering price to the public will be approximately $17.3 million and the total net proceeds, before expenses, to us will be approximately $15.3 million.
Discount
The following table shows the public offering price, underwriting discounts, and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
Per Share |
Total Without
|
Total With
|
|||||||
Public offering price |
$ |
$ |
$ |
||||||
Underwriting discount(1) |
$ |
$ |
$ |
||||||
Proceeds, before expense, to us |
$ |
$ |
$ |
____________
(1) We have agreed to pay ThinkEquity an underwriting discount or spread of 7.5% of the public offering price.
We have agreed to pay a non-accountable expense allowance to the underwriters equal to 1% of the gross proceeds received in this offering (excluding proceeds received from exercise of the underwriters’ over-allotment option).
We have paid a $20,000 advance to ThinkEquity upon execution of our engagement letter with ThinkEquity, and will pay an additional $15,000 upon filing of this Registration Statement, which shall be applied against actual out-of-pocket-accountable expenses, which will be returned to us to the extent such out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).
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In addition, we have agreed to pay the following expenses of the underwriters relating to the offering: (a) all fees, expenses and disbursements relating to background checks of our officers, directors and entities in an amount not to exceed $1,000 per individual or entity or $15,000 in the aggregate; (b) the fees and expenses of the Underwriter’s legal counsel not to exceed $90,000; (c) the $29,500 cost associated with the use of Ipreo’s book building, prospectus tracking and compliance software for the Offering and (d) up to $20,000 of ThinkEquity’s actual accountable “road show” expenses for the offering.
We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount and non-accountable expense allowance, will be approximately $565,000.
Representative’s Warrants
We have agreed to issue to the representative warrants to purchase up to 5% of the aggregate number of shares of common stock sold in this offering, excluding shares of common stock sold upon exercise of the underwriters’ over-allotment option (the “Representative’s Warrants”). The Representative’s Warrants will be exercisable at a per share exercise price equal to 125% of the public offering price per share of the shares of common stock sold in this offering. The Representative’s Warrants are exercisable at any time, from time to time, in whole or in part, during the four and one half year period commencing six months from the effective date of the registration statement related to this offering.
The Representative’s Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to FINRA Rule 5110(g)(1). Except as permitted by Rule 5110(g)(2), the underwriters (or permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate the warrants or the securities underlying the warrants, nor will any of them engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the option or the underlying securities for a period of 180 days from the date of effectiveness of the registration statement of which this prospectus forms a part or the commencement of sales under this prospectus. We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants, other than underwriting commissions incurred and payable by the holders.
Discretionary Accounts
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-Up Agreement
Pursuant to certain “lock-up” agreements, we, our executive officers and directors and our stockholders, have agreed not to, without the prior written consent of the representative, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, for a period of nine months, in the case of our officers and directors, and six months from the date of this prospectus, in the case of us and all other stockholders.
Right of First Refusal
Subject to certain limited exceptions, until eighteen months after the closing of this offering, ThinkEquity has a right of first refusal to act as sole investment banker, sole book-runner and/or sole placement agent, at ThinkEquity’s sole discretion, for each and every future public and private equity and debt offering, including all equity-linked offerings, by us or any of our successors during such eighteen-month period on terms customary to the representative.
Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.
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Electronic Offer, Sale and Distribution of Shares
A prospectus in electronic format may be made available on the websites maintained by one or more underwriters or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representative may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Stabilization
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum and are engaged in for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress.
Over-allotment transactions involve sales by the underwriters of securities in excess of the number of securities that underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriters is not greater than the number of securities that they may purchase in the over-allotment option. In a naked short position, the number of securities involved is greater than the number of securities in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing securities in the open market.
Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared with the price at which they may purchase securities through exercise of the over-allotment option. If the underwriters sell more securities than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the securities in the open market that could adversely affect investors who purchase in the offering.
Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the securities originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of our securities in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our securities. These transactions may be effected on The Nasdaq Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Passive Market Making
In connection with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock on The Nasdaq Capital Market or on the OTCQB in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the securities and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
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Other Relationships
Certain of the underwriters and their affiliates may provide in the future, various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they may receive customary fees and commissions. However, we have not yet had, and have no present arrangements with any of the underwriters for any further services.
Listing
We intend to apply to have our common stock approved for listing on The Nasdaq Capital Market under the trading symbol “VRPX”.
Offer restrictions outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and Netherlands
The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
• to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
131
• to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);
• to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of the Company or any underwriter for any such offer; or
• in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.
France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2°and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2°and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), or ISA, nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with this offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
132
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa, “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
• to Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and
• in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
• made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and
• in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the
133
Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the Company.
No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to the Company. In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
134
Canada
The securities may be sold in Canada 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 securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. 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 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI33-105 regarding underwriter conflicts of interest in connection with this offering.
135
Lowenstein Sandler LLP, New York, New York, will pass upon the validity of the shares of common stock offered by this prospectus and certain other legal matters. Sheppard, Mullin, Richter & Hampton LLP, New York, New York, is acting as legal counsel to the underwriters.
The balance sheets of Virpax Pharmaceuticals, Inc. as of December 31, 2019 and 2018 and the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended have been audited by EisnerAmper LLP, independent registered public accounting firm, as stated in their report which is incorporated herein. Such financial statements have been incorporated herein in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering of such securities was employed for such purpose on a contingency basis. At the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our Company. Nor was any such person connected with our Company as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. Upon completion of this offering, we will be required to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. Securities and Exchange Commission also maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov.
136
VIRPAX PHARMACEUTICALS, INC
Audited Financial Statements |
||
F-2 |
||
Balance Sheets as of December 31, 2019 and December 31, 2018 |
F-3 |
|
Statements of Operations for the Years Ended December 31, 2019 and December 31, 2018 |
F-4 |
|
F-5 |
||
Statements of Cash Flows for the Years Ended December 31, 2019 and December 31, 2018 |
F-6 |
|
F-7 |
||
Interim Unaudited Financial Statements |
||
Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019 |
F-21 |
|
F-22 |
||
F-23 |
||
F-24 |
||
F-25 |
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Virpax Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Virpax Pharmaceuticals, Inc. (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying 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 not generated revenues and has not yet achieved profitable operations nor generated positive cash flows from operations that raises 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.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ EisnerAmper LLP
We have served as the Company’s auditor since 2020.
EISNERAMPER LLP
Philadelphia, Pennsylvania
August 10, 2020, except with respect to Note 13, as to which the date is November 19, 2020
F-2
BALANCE SHEETS
December 31,
|
December 31,
|
|||||||
ASSETS |
|
|
|
|
||||
Current assets |
|
|
|
|
||||
Cash |
$ |
41,536 |
|
$ |
48,370 |
|
||
Prepaid expenses and other current assets |
|
5,183 |
|
|
13,130 |
|
||
Total current assets |
|
46,719 |
|
|
61,500 |
|
||
Total assets |
$ |
46,719 |
|
$ |
61,500 |
|
||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
||||
Accounts payable and accrued expenses |
$ |
1,514,474 |
|
$ |
754,224 |
|
||
Convertible notes payable |
|
264,520 |
|
|
— |
|
||
Related party notes payable |
|
1,000,000 |
|
|
500,000 |
|
||
Total current liabilities |
|
2,778,994 |
|
|
1,254,224 |
|
||
Total liabilities |
|
2,778,994 |
|
|
1,254,224 |
|
||
|
|
|
|
|||||
Commitments and contingencies |
|
|
|
|
||||
|
|
|
|
|||||
Stockholders’ deficit |
|
|
|
|
||||
Preferred stock, par value $0.00001, 1,000,000 shares authorized, no shares issued and outstanding |
|
— |
|
|
— |
|
||
Common stock, $0.00001 par value; 20,000,000 shares authorized, 3,018,673 shares issued and outstanding as of December 31, 2019; 2,874,437 shares issued and outstanding as of December 31, 2018 |
|
30 |
|
|
29 |
|
||
Additional paid-in capital |
|
3,575,886 |
|
|
1,808,926 |
|
||
Accumulated deficit |
|
(6,308,191 |
) |
|
(3,001,679 |
) |
||
Total stockholders’ deficit |
|
(2,732,275 |
) |
|
(1,192,724 |
) |
||
Total liabilities and stockholders’ deficit |
$ |
46,719 |
|
$ |
61,500 |
|
See Notes to the Financial Statements
F-3
STATEMENTS OF OPERATIONS
For the Year
|
For the Year
|
|||||||
OPERATING EXPENSES |
|
|
|
|
||||
General and administrative |
$ |
2,559,127 |
|
$ |
1,483,786 |
|
||
Research and development |
|
622,741 |
|
|
1,142,176 |
|
||
Total operating expenses |
|
3,181,868 |
|
|
2,625,962 |
|
||
Loss from operations |
|
(3,181,868 |
) |
|
(2,625,962 |
) |
||
|
|
|
|
|||||
OTHER EXPENSE |
|
|
|
|
||||
Interest expense |
|
(124,644 |
) |
|
(14,976 |
) |
||
Other expense |
|
(124,644 |
) |
|
(14,976 |
) |
||
Loss before tax provision |
|
(3,306,512 |
) |
|
(2,640,938 |
) |
||
Benefit from income taxes |
|
— |
|
|
— |
|
||
Net loss |
$ |
(3,306,512 |
) |
$ |
(2,640,938 |
) |
||
|
|
|
|
|||||
Basic and diluted net loss per share |
$ |
(1.13 |
) |
$ |
(0.93 |
) |
||
Basic and diluted weighted average common stock outstanding |
|
2,929,005 |
|
|
2,838,709 |
|
See Notes to the Financial Statements
F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Preferred stock |
Common stock |
Additional
|
Accumulated
|
Total
|
|||||||||||||||||
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||
Balance at January 1, 2018 |
— |
$ |
— |
2,746,005 |
$ |
28 |
$ |
153,972 |
$ |
(360,741 |
) |
$ |
(206,741 |
) |
|||||||
|
|
|
|
|
|
|
|||||||||||||||
Common stock issued pursuant to subscription agreements |
— |
|
— |
113,263 |
|
1 |
|
1,119,999 |
|
— |
|
|
1,120,000 |
|
|||||||
Issuance of common stock upon conversion of convertible note |
— |
|
— |
15,169 |
|
— |
|
150,000 |
|
— |
|
|
150,000 |
|
|||||||
Stock-based compensation |
— |
|
— |
— |
|
— |
|
384,955 |
|
— |
|
|
384,955 |
|
|||||||
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
(2,640,938 |
) |
|
(2,640,938 |
) |
|||||||
Balance at December 31, 2018 |
— |
|
— |
2,874,437 |
|
29 |
|
1,808,926 |
|
(3,001,679 |
) |
|
(1,192,724 |
) |
|||||||
Common stock issued pursuant to subscription agreements |
— |
|
— |
63,203 |
|
1 |
|
624,999 |
|
— |
|
|
625,000 |
|
|||||||
Common stock issued in payment of consulting services and settlement of accounts payable |
— |
|
— |
46,903 |
|
— |
|
463,815 |
|
— |
|
|
463,815 |
|
|||||||
Stock-based compensation |
— |
|
— |
— |
|
— |
|
678,146 |
|
— |
|
|
678,146 |
|
|||||||
Restricted stock awards granted |
— |
|
— |
34,130 |
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
Net loss |
— |
|
— |
— |
|
— |
|
— |
|
(3,306,512 |
) |
|
(3,306,512 |
) |
|||||||
Balance at December 31, 2019 |
— |
$ |
— |
3,018,673 |
$ |
30 |
$ |
3,575,886 |
$ |
(6,308,191 |
) |
$ |
(2,732,275 |
) |
See Notes to the Financial Statements
F-5
STATEMENTS OF CASH FLOWS
For the Year
|
For the Year
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
||||
Net loss |
$ |
(3,306,512 |
) |
$ |
(2,640,938 |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
||||
Non-cash interest expense |
|
124,644 |
|
|
14,976 |
|
||
Stock-based compensation |
|
678,146 |
|
|
384,955 |
|
||
Common stock issued in payment of consulting services and settlement of accounts payable |
|
439,999 |
|
|
— |
|
||
Change in operating assets and liabilities: |
|
|
|
|
||||
Prepaid expenses and other current assets |
|
7,947 |
|
|
(13,130 |
) |
||
Accounts payable and accrued expenses |
|
923,942 |
|
|
454,501 |
|
||
Net cash used in operating activities |
|
(1,131,834 |
) |
|
(1,799,636 |
) |
||
|
|
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
||||
Proceeds from issuance of debt |
|
500,000 |
|
|
554,766 |
|
||
Proceeds from the issuance of stock |
|
625,000 |
|
|
1,120,000 |
|
||
Net cash provided by financing activities |
|
1,125,000 |
|
|
1,674,766 |
|
||
Net change in cash |
|
(6,834 |
) |
|
(124,870 |
) |
||
Cash, beginning of year |
|
48,370 |
|
|
173,240 |
|
||
Cash, end of year |
$ |
41,536 |
|
$ |
48,370 |
|
||
|
|
|
|
|||||
Supplemental disclosure of cash and non-cash financing activities |
|
|
|
|
||||
Cash paid for interest |
$ |
— |
|
$ |
— |
|
||
Cash paid for taxes |
$ |
— |
|
$ |
— |
|
||
Issuance of common stock upon conversion of convertible note |
$ |
— |
|
$ |
150,000 |
|
||
Debt issued in payment of consulting services and settlement of accounts payable |
$ |
264,520 |
|
$ |
— |
|
||
Common stock issued in payment of consulting services and settlement of accounts payable |
$ |
23,816 |
|
$ |
— |
|
See Notes to the Financial Statements
F-6
NOTES TO FINANCIAL STATEMENTS
Note 1. Business and Liquidity
Business
Virpax Pharmaceuticals, Inc. (“Virpax” or “Company”) was incorporated on May 12, 2017 in the state of Delaware. Virpax is a company specializing in developing pharmaceutical products for pain management by using new drug delivery systems. Virpax has exclusive global rights to a proprietary patented Topical Spray Film Delivery Technology for acute musculoskeletal pain (“Epoladerm”). Virpax also has exclusive global rights to a proprietary patented injectable “local anesthetic” Liposomal Gel Technology for postoperative pain management (“Probudur”). Additionally, Virpax has exclusive global rights to a proprietary patented Nanomerics’ Molecular Envelope Technology (“MET”) that uses an intranasal device to deliver enkephalin for the management of acute and chronic pain, including pain associated with cancer (“NES100”). NES100 would support the current effort among prescribers, regulators, and patients to seek non-opioid and non-addictive treatment options to combat the opioid epidemic. Virpax will utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and new chemical entity (“NCE”) candidates for commercialization.
Liquidity and Going Concern
The Company, since inception, has been engaged in organizational activities, including raising capital and research and development activities. The Company has not generated revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. The Company is subject to those risks associated with any preclinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital.
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern for 12 months after the issuance date of these financial statements. The accompanying financial statements have been prepared on a going concern basis which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The Company incurred a net loss of $3,306,512 and $2,640,938 for the years ended December 31, 2019 and 2018, respectively, and had an accumulated deficit of $6,308,191 as of December 31, 2019. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its product candidates currently in development. The Company’s primary source of capital has been the issuance of debt and equity securities. In addition, with respect to the ongoing and evolving coronavirus (“COVID-19”) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international and U.S. economies and markets and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business. Management believes that current cash is sufficient to fund operations and capital requirements through October 2020. Additional financings will be needed by the Company to fund its operations, to complete preclinical and clinical development of and to commercially develop its product candidates. There is no assurance that such financing will be available when needed or on acceptable terms.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation — The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
F-7
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies (cont.)
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates.
Significant items subject to such estimates and assumptions include research and development accruals and the valuation of stock-based compensation. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.
Basic and Diluted Loss per Share — Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock. The computation of diluted net loss per shares does not include the conversion of securities that would have an antidilutive effect. Equivalent common shares, consisting of 236,458 and 136,515 stock options, and 26,746 and 0 common shares related to the conversion of the RRD Note, are excluded from the calculation of diluted net loss per share for the years ended December 31, 2019 and 2018, respectively, since their effect is antidilutive due to the net loss of the Company.
Cash — At times, the Company’s cash balances may exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”). There were no accounts that exceeded federally insured limits at December 31, 2019 or December 31, 2018.
Fair Value of Financial Instruments — The carrying amounts of the Company’s financial instruments, including cash and accounts payable approximate fair value due to the short-term nature of those instruments.
Research and Development — Research and development costs are expensed as incurred. These expenses include the costs of proprietary efforts, as well as costs incurred in connection with certain licensing arrangements and external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”) and consultants. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved, and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available.
Stock-based Compensation — Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company early adopted ASU No. 2018-07 on January 1, 2018 which permits the valuation of stock-based awards granted to non-employees to be measured at fair value at the grant date rather than on an accelerated attribution basis over the vesting period.
Determining the appropriate fair value of share-based awards requires the use of subjective assumptions, including the fair value of the Company’s common shares, and for options, the excepted life of the option and expected share price volatility. The Company using the Black-Scholes option pricing model to value its option awards. The assumptions used in calculating the fair value of share-based awards represents management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
The expected life of options was estimated using the simplified method, as the Company has historical information to develop reasonable expectations about future exercise patterns and post-vesting employment.
F-8
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies (cont.)
Income Taxes — The Company accounts for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.
The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more likely than not to be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. As of December 31, 2019, the Company had no uncertain income tax positions.
Recent Accounting Pronouncements
In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, as amended Leases (Topic 842), which superseded Topic 840. The new pronouncement requires the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The pronouncement requires that lease arrangements longer than 12 months result in an entity classifying leases as finance or operating leases. However, unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, Topic 842 will require both types of leases to be recognized on the balance sheet. Topic 842 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The effective date of Topic 842 for non-public business entities, including smaller reporting companies, to fiscal years beginning after December 15, 2021. The Company intends to adopt the new guidance as of January 1, 2022. The adoption of this standard is not expected to have any material impact on the financial statements and related disclosures.
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
December 31,
|
December 31,
|
|||||
Prepaid insurance |
$ |
3,328 |
$ |
2,630 |
||
Governmental affairs consulting |
|
— |
|
10,500 |
||
Accounts receivable, related party |
|
1,388 |
|
— |
||
Other prepaid expenses and current assets |
|
467 |
|
— |
||
$ |
5,183 |
$ |
13,130 |
F-9
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
December 31,
|
December 31,
|
|||||
Accrued payroll |
$ |
680,400 |
$ |
291,600 |
||
Research and development expenses |
|
275,429 |
|
180,168 |
||
Legal expenses |
|
200,062 |
|
184,580 |
||
Professional fees |
|
177,096 |
|
55,911 |
||
Interest payable/accrued |
|
138,762 |
|
14,118 |
||
Accounting consulting fees |
|
24,765 |
|
13,829 |
||
Tax expenses |
|
14,465 |
|
7,465 |
||
Other |
|
3,495 |
|
6,553 |
||
$ |
1,514,474 |
$ |
754,224 |
Note 5. Notes Payable
On May 26, 2017 and October 4, 2017, Virpax entered into convertible promissory notes (the “Convertible Notes”), which promised to pay Anthony Mack, Chief Executive Officer and significant investor, the principal amounts of $100,000 and $20,000, respectively. On December 31, 2017, the Company entered into an Amended and Restated Unsecured Convertible Promissory Note (“Amended Convertible Note”) with Anthony Mack. The Amended Convertible Note consolidated the Convertible Notes (including accrued interest of $22,917) with an additional loan from Anthony Mack to the Company of $27,083. The Amended Convertible Note had an initial principal balance of $150,000. The Convertible Notes were not fully funded upon execution and the amount of debt outstanding as of January 1, 2018 was $95,234. Under this agreement, the maturity date was extended to December 31, 2018. If a qualified equity financing occurs before the maturity date, the Amended Convertible Note would be automatically converted into common shares of Virpax equal to the outstanding principal and accrued interest of the note at the time of qualified equity financing. On February 8, 2018, Anthony Mack exercised the conversion of the Amended Convertible Note payable upon the closing of a qualified equity financing. The Amended Convertible Note balance of $150,000 was converted into 15,169 shares of common stock at $9.89 per share. As of December 31, 2018, there was no outstanding balance for the Amended Convertible Note.
On October 1, 2018, Virpax entered into a promissory note (the “2018 Promissory Note”), which promises to pay Anthony Mack, Chief Executive Officer and significant investor, the principal amount of $500,000, and bear interest at a rate of 11.19% per annum. The 2018 Promissory Note states that the principal shall be paid at the earlier of an event of default and the first anniversary of the date of the note. As of December 31, 2019, the balance on the 2018 Promissory Note was $500,000, with accrued interest of $74,692. As of December 31, 2018, the balance on the 2018 Promissory note was $500,000, with accrued interest of $14,118. Please refer to Note 12. Subsequent Events for further detail regarding an amendment to the 2018 Promissory Note.
On January 15, 2019, Virpax entered into a promissory note (the “2019 Promissory Note”), which promises to pay Anthony Mack the principal amount of $500,000, and bear interest at a rate of 11.19% per annum. The 2019 Promissory Note states that the principal shall be paid at the earlier of an event of default and the first anniversary of the date of the note. As of December 31, 2019, the balance on the 2019 Promissory Note was $500,000, with accrued interest of $56,329. Please refer to Note 12. Subsequent Events for further detail regarding an amendment to the 2019 Promissory Note.
On August 29, 2019, Virpax entered into a service provider convertible note purchase agreement (the “RRD Note”) with RRD International, LLC (“RRD”). Under this agreement, Virpax and RRD agreed to make certain compensation payable in the form of a convertible promissory note. The convertible promissory note states that a maximum principal balance of $400,000 can be applied for services provided by RRD to Virpax, which can be converted into equity or cash (all or in part) upon a Qualified Financing or the Conversion Date of March 31, 2020. Borrowings under the
F-10
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 5. Notes Payable (cont.)
RRD Note bear simple interest on the outstanding principal amount of the RRD Note until paid in full at the fixed rate of 10% per annum. As of December 31, 2019, the balance on the RRD Note was $264,520, with accrued interest of $7,741. Please refer to Note 12. Subsequent Events for further detail regarding an amendment to the RRD Note.
The following table summarizes the Company’s notes payable:
December 31, 2019 |
||||||||||||
Balance as of
|
Notes
|
Conversions of notes to equity |
Outstanding principal |
|||||||||
Anthony Mack 2018 Promissory Note |
$ |
500,000 |
$ |
— |
$ |
— |
$ |
500,000 |
||||
Anthony Mack 2019 Promissory Note |
|
— |
|
500,000 |
|
— |
|
500,000 |
||||
Total related party notes payable |
|
500,000 |
|
500,000 |
|
— |
|
1,000,000 |
||||
RRD Note |
|
— |
|
264,520 |
|
— |
|
264,520 |
||||
Total notes payable |
$ |
500,000 |
$ |
764,520 |
$ |
— |
$ |
1,264,520 |
December 31, 2018 |
|||||||||||||
Balance as of
|
Notes
|
Conversions of notes to equity |
Outstanding principal |
||||||||||
Anthony Mack Convertible Note |
$ |
95,234 |
$ |
54,766 |
$ |
(150,000 |
) |
$ |
— |
||||
Anthony Mack 2018 Promissory Note |
|
— |
|
500,000 |
|
— |
|
|
500,000 |
||||
Total related party notes payable |
$ |
95,234 |
$ |
554,766 |
$ |
(150,000 |
) |
$ |
500,000 |
The interest expense associated with the notes payable was $124,644 and $14,976 for the years, ended December 31, 2019 and 2018, respectively.
Note 6. Commitments and Contingencies
Leases
The Company leases its Malvern, PA office under a non-cancelable operating lease that expires in 2020. Total rental expense was $42,468 and $38,963 for the year ended December 31, 2019 and 2018, respectively.
Employment Agreements
The Company has an employment agreement with the Chief Executive Officer, effective September 18, 2018. The agreement may be terminated by either party at any time upon written notice provided to the other party. Concurrent with the employment agreement, the CEO and the Company agreed to an Executive Confidentiality Agreement that contains standard non-closure and non-competition provisions. In the event we terminate the employment agreement other than for cause, or the CEO terminates the agreement for good reason, we will pay the CEO the then effective base salary for a period of twelve months following the effective date of the termination. However, payment of the effective base salary is subject to the execution of a release form and the compliance by the CEO with the release and all terms and provisions of the employment agreement and Executive Confidentiality Agreement that survive the termination of employment. The Company’s Chief Executive Officer has also elected to forego a salary temporarily and defer compensation. Deferred compensation due to the Company’s Chief Executive Officer amounted to $630,000 and $270,000 as of December 31, 2019 and 2018, respectively, which is included in accounts payable and accrued expenses on the accompanying balance sheet.
F-11
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 6. Commitments and Contingencies (cont.)
The Company has an employment agreement with the Executive VP of Global Corporate Governance, effective May 1, 2019. The term of the agreement will continue in effect until notice is provided 10 days prior to the termination by either party. Upon termination of the agreement by the Company for any reason other than for cause, death or disability, or by the Executive VP of Global Corporate Governance for good reason, the Company shall pay any accrued salary, bonuses, or benefits that have not yet been paid to the Executive VP of Global Corporate Governance. Please refer to Note 12. Subsequent Events for further detail regarding the subsequent departure of the Executive VP of Global Corporate Governance from the Company.
Litigation
The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of December 31, 2019, the Company did not have any pending legal actions.
Note 7. Stockholders’ Equity
Overview
Preferred Stock
The Company’s Certificate of Incorporation, filed on May 12, 2017, authorizes the issuance of preferred stock. The total number of shares which the Company is authorized to issue is 1,000,000, each with a par value of $0.00001 per share.
Common Stock
The Company’s Certificate of Incorporation, filed on May 12, 2017, authorizes the issuance of common stock. The total number of shares which the Company is authorized to issue is 20,000,000, each with a par value of $0.00001 per share.
Since inception, the Company has raised funds through private placements at $9.89 per share utilizing subscriptions agreements.
During the year ended December 31, 2019, the Company issued 63,203 shares of common stock for gross proceeds totaling $625,000. The Company’s CEO purchased 60,674 of these shares of common stock for gross proceeds totaling $600,000.
During the year ended December 31, 2018, the Company issued 113,263 shares of common stock for gross proceeds totaling $1,120,000, and the Company issued 15,169 shares of common stock in conversion of the Amended Convertible Note balance of $150,000. The Company’s CEO and CMO purchased 50,564 and 7,585 of these shares of common stock for gross proceeds totaling $500,000 and $75,000, respectively.
In addition, during the year ended December 31, 2019, the Company issued 46,903 shares of common stock in payment of consulting services and settlement of accounts payable for gross proceeds totaling $463,815. No shares were issued in payment of consulting services and settlement of accounts payable during the year ended December 31, 2018.
F-12
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 7. Stockholders’ Equity (cont.)
Restricted Stock Awards
On May 20, 2017, the Company established the Virpax Pharmaceuticals, Inc. Amended and Restated 2017 Equity Incentive Plan (the “Plan”). The Company’s Board of Directors, acting through its Equity Incentive Plan Committee, has determined that it would be to the advantage and best interest of the Company and its stockholders to grant restricted stock awards to certain individuals as compensation to serve as an employee of the Company and as an incentive for increased efforts during such service.
As of December 31, 2019, there were 34,130 restricted stock awards issued and unvested totaling $337,500 of unearned deferred stock based compensation, based on a fair value of stock of $9.89 per share as determined by recent sales of stock to unrelated third parties. There were no restricted stock awards issued as of December 31, 2018.
Note 8. Stock-Based Compensation
The Company’s Plan provides a means whereby eligible employees, officers, non-employee directors and other individual service providers develop a sense of proprietorship and personal involvement in the development and financial success of the Company and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The Company, by means of the Plan, seeks to retain the services of such eligible persons and to provide incentives for such persons to exert maximum efforts for the success of the Company. The Plan commenced on the Effective Date and the Plan is administered by the Compensation Committee (“Committee”); provided that the entire Board may act in lieu of the Committee on any matter. The maximum aggregate number of shares of common stock which may be issued under all Awards granted to Participants under the Plan initially shall be 303,382 shares. The number of authorized shares available for issuance under the Plan shall automatically increase on January 1st of each year commencing with the January 1 following the Effective Date and on each January 1 thereafter until the expiration date, in an amount equal to six percent (6%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Plan shall remain in effect, subject to the right of the board of directors of the Company to amend or terminate the Plan at any time until the earlier of the tenth (10th) anniversary of the Effective Date. In the event of a termination of continuous service (other than as a result of a change of control, as defined in the Plan), unvested stock options generally shall terminate and, with regard to vested stock options, the exercise period shall be the lesser of the original expiration date or three months from the date continuous service terminates.
On May 21, 2018, the Company amended the Plan to grant stock options to Non-Employee Directors. Stock options to purchase 5,056 shares of common stock shall automatically be granted under the Plan to each Non-Employee Director who is first appointed or elected to the Board. In addition, On January 1 of each year, each then serving Non-Employee Director of the Company shall automatically be granted under the Plan (i) that number of options having a value of $25,000 calculated on the grant date in accordance with the Black-Scholes option pricing model and shall be exercisable as to 100% of the number of shares of Stock covered thereby on the twelve-month anniversary of the grant date, and shall have an exercise price equal to 100% of the Fair Market Value of a share of Common Stock on the Date of Grant. Also, on January 1, of each year, each then serving member of the Science and Technology Committee shall automatically be granted stock options to purchase 2,022 shares of Common Stock under the Plan, and the Chair of the Science and Technology Committee shall be granted stock options to purchase an additional 3,033 shares of Common Stock under the Plan. These options have the same terms and conditions as the Non-Employee Directors noted above.
Stock-based compensation expense for the year ended December 31, 2019 and 2018 was $678,146 and $384,955, respectively, which is included in general and administrative expense on the accompanying statement of operations.
F-13
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 8. Stock-Based Compensation (cont.)
The fair value of option awards is estimated using the Black-Scholes option-pricing model. Exercise price of each award is generally not less than the per share fair value in effect as of that award date. The determination of fair value using the Black-Scholes model is affected by the Company’s share fair value as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, risk-free interest rate and projected employee share option exercise behaviors. Options granted or modified under the Plan during the years ended December 31, 2019 and 2018 were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:
For the Years Ended
|
||||||
2019 |
2018 |
|||||
Expected term (years) |
5.54 |
|
5.50 |
|
||
Risk-free interest rate |
2.03 |
% |
2.81 |
% |
||
Expected volatility |
57.23 |
% |
65.00 |
% |
||
Expected dividend yield |
0.00 |
% |
0.00 |
% |
In the absence of a public trading market for our common stock, on each grant date, the Company develops an estimate of the fair value of our common stock underlying the option grants. The Company estimated the fair value of our common stock by referencing arms-length transactions inclusive of the common stock underlying which occurred on or near the valuation date(s). Once the Company’s common stock is publicly traded, the Company will no longer have to estimate the fair value of the common stock, rather the value will be determined based on quoted market prices. The Company determined the fair value of common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from an independent third-party valuation firm.
The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The expected option term assumption is estimated using the simplified method and is based on the mid-point between vest date and the remaining contractual term of the option, since the Company does not have sufficient exercise history to estimate expected term of its historical option awards.
The following is a summary of stock option activity under the stock option plans for the years ended December 31, 2019 and 2018:
Number of Shares |
Weighted- Average Exercise Price |
Weighted- Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value |
||||||||
Options outstanding at January 1, 2018 |
— |
|
$ |
— |
$ |
— |
|||||
Forfeited |
— |
|
|
— |
|
||||||
Cancelled |
— |
|
|
— |
|
||||||
Exercised |
— |
|
|
— |
|
||||||
Granted |
136,515 |
|
|
9.89 |
|
||||||
Options outstanding at December 31, 2018 |
136,515 |
|
|
9.89 |
9.51 |
|
— |
||||
Forfeited |
(30,337 |
) |
|
9.89 |
|
||||||
Cancelled |
(5,056 |
) |
|
9.89 |
|
||||||
Exercised |
— |
|
|
— |
|
||||||
Granted |
135,336 |
|
|
9.89 |
|
||||||
Options outstanding at December 31, 2019 |
236,458 |
|
$ |
9.89 |
8.96 |
$ |
— |
||||
|
|
|
|||||||||
Options exercisable at December 31, 2019 |
121,347 |
|
$ |
9.89 |
8.51 |
$ |
— |
F-14
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 8. Stock-Based Compensation (cont.)
The weighted-average grant-date fair value of stock options granted during the year ended December 31, 2019 and 2018 was $5.21 and $5.81, respectively.
As of December 31, 2019, there was $268,393 of total time-based unrecognized compensation costs related to unvested stock options stock. These costs are expected to be recognized over a weighted average period of 1.51 years.
Note 9. Income Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet basis differences. In accordance with ASC 740, the Company recorded a valuation allowance to fully offset the gross deferred tax asset, because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets at December 31, 2019. During the years ended December 31, 2019 and 2018, there was no income tax expense.
At December 31, 2019, the Company had deferred tax assets of $1,826,000, against which a full valuation allowance had been recorded. The change in the valuation allowance for the year ended December 31, 2019 was an increase of $954,000.
At December 31, 2018, the Company had deferred tax assets of $872,000, against which a full valuation allowance had been recorded. The change in the valuation allowance for the year ended December 31, 2018 was an increase of $768,000.
Significant components of the Company’s deferred tax assets at December 31, 2019 and 2018:
December 31, 2019 |
December 31, 2018 |
|||||||
Deferred tax assets: |
|
|
|
|
||||
Net-operating loss carryforwards |
$ |
1,267,000 |
|
$ |
655,000 |
|
||
Stock-based compensation |
|
307,000 |
|
|
111,000 |
|
||
Accrued payroll |
|
197,000 |
|
|
84,000 |
|
||
R&D credit |
|
10,000 |
|
|
10,000 |
|
||
Other |
|
45,000 |
|
|
12,000 |
|
||
Total deferred tax assets |
|
1,826,000 |
|
|
872,000 |
|
||
Valuation allowance |
|
(1,826,000 |
) |
|
(872,000 |
) |
||
Net deferred tax asset |
$ |
— |
|
$ |
— |
|
A reconciliation of the federal statutory tax rate and the effective tax rates for the years ended December 31, 2019 and 2018 is as follows:
December 31, 2019 |
December 31, 2018 |
|||||
Federal statutory rate |
21.0 |
% |
21.0 |
% |
||
Increase (decrease) in tax expense at federal statutory rate |
|
|
||||
Change in valuation allowance |
-20.9 |
% |
-20.5 |
% |
||
Other |
-0.1 |
% |
-0.5 |
% |
||
Effective tax rate |
0.0 |
% |
0.0 |
% |
The Company had approximately $4,387,000 and $4,387,000 of gross net operating loss (“NOL”) carryforwards (federal and state, respectively) as of December 31, 2019.
F-15
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 9. Income Taxes (cont.)
Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited.
The Company’s federal NOL of $326,000 expires in 2037 and the remaining federal NOL’s have an indefinite carryover period. The Company’s state NOL’s of $4,387,000 begin to expire after 2037 through 2039.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law to address the COVID-19 crisis. The CARES Act is an approximately $2 trillion emergency economic stimulus package that includes numerous U.S. federal income tax provisions, including the modification of: (i) net operating loss rules, (ii) the alternative minimum tax refund and (iii) business interest deduction limitations under Section 163(j) of the Internal Revenue Code of 1986, as amended, or the Code. The effects of this legislation will be taken into consideration in the period of enactment in 2020. The changes in federal tax will not have a material effect on the tax liability of the Company.
Note 10. Related-Party Transactions
As discussed in Note 5, in October 2018 and January 2019 the Company issued notes with an aggregate principal amount of $1,000,000. These notes were issued to Anthony Mack, Chief Executive Officer and significant investor of the Company.
As discussed in Note 3, The Company maintained an account receivable, related party balance of $1,388 as of December 31, 2019. This amount relates to the reimbursement due back to the Company for healthcare insurance on behalf of Jeffrey Gudin, the Company’s Chief Medical Officer.
Note 11. Research and Development and License Agreements
MedPharm Limited
On April 11, 2017, the Company entered into a research and option agreement, as amended on May 30, 2018 (the “MedPharm Research and Option Agreement”), with MedPharm Limited, a company organized and existing under the laws of the United Kingdom (“MedPharm”), pursuant to which MedPharm granted the Company an option to obtain an exclusive, world-wide, royalty bearing license to use certain technology developed by MedPharm. Pursuant to the agreement, MedPharm will conduct certain research and development of proprietary formulations incorporating certain MedPharm technologies and certain of the Company’s proprietary molecules.
Under the MedPharm Research and Option Agreement, MedPharm granted the Company an option (the “MedPharm Option”) to obtain an exclusive (even to MedPharm), worldwide, sub-licensable (through multiple tiers), royalty bearing, irrevocable license to research, develop, market, commercialize, and sell any product utilizing MedPharm’s spray formulation technology which is the result of the activities performed under the MedPharm Research and Option Agreement, subject to the Company’s entry into a definitive license agreement with MedPharm. In order to exercise the MedPharm Option, the Company must provide MedPharm with written notice of such exercise before the end of the Option Period (as defined in the MedPharm Research and Option Agreement). The Option Period is subject to extension upon mutual agreement with MedPharm.
Pursuant to the MedPharm Research and Option Agreement, the Company has a right of first refusal with respect to any license or commercial arrangement involving any Licensed Intellectual Property (as defined in the MedPharm Research and Option Agreement) in combination with any Virpax Molecule (as defined in the MedPharm Research and Option Agreement). In the event that MedPharm reaches an agreement with respect to a license or other commercial arrangement that involves technology or molecules covered by the right of first refusal, the Company has ten business days from the date of notice to notify MedPharm of its intention to exercise the right of first refusal and the Company’s intention to match the financial terms of the other license or commercial arrangement.
F-16
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 11. Research and Development and License Agreements (cont.)
On June 6, 2017, the Company entered into a license agreement, as amended (the “MedPharm License Agreement”) with MedPharm for the rights to discover, develop, make, sell, market, and otherwise commercialize any pharmaceutical composition or preparation (in any and all dosage forms) in final form containing one or more compounds that was developed, manufactured or commercialized utilizing MedPharm’s spray formulation technology (“Product”). Under the MedPharm License Agreement, the Company is required to make future milestone and royalty payments to MedPharm. The Company is obligated to make aggregate milestone payments to MedPharm of up to 1 million Great British pounds upon the achievement of specified development milestones and an additional 100,000 GBP per the first marketing approval of a product in each country in the European market for any indication. Royalty payments must be paid to MedPharm in an amount equal to a single digit percentage (5% or lower) of net sales of all MedPharm sold by the Company during the royalty term in the territory. Each party has the right to terminate the agreement in its entirety upon written notice to the other party if such other party is in material breach of the agreement and has not cured such breach within ninety (90) days after notice from the terminating party indicating the nature of such breach.
LipoCureRx, Ltd.
On March 19, 2018, the Company entered into a license and sublicense agreement (the “LipoCure Agreement”) with LipoCureRx, Ltd. (“LipoCure”), for the rights to discover, make, sell, market, and otherwise commercialize bupivacaine liposome, in injectable gel or suspension (“Licensed Compound”) or any pharmaceutical composition or preparation (in any and all dosage forms) in final form, including any combination product, containing a Licensed Compound (“Licensed Product”). Under the LipoCure Agreement, the Company is required to pay an upfront fee upon signing and is required to make future milestone and royalty payments to LipoCure. The upfront fee of $150,000 was recorded as research and development expense in April 2018. The Company is obligated to make aggregate milestone payments of up to $19.8 million upon the achievement of specified development and commercial milestones. Royalty payments must be paid in an amount equal to a single digit to low double digit percentage of annual net sales of royalty qualifying products, subject to certain adjustments. These royalty payments are based upon aggregate net sales of certain qualifying products by Virpax and related parties in each calendar year of such royalty term, at 8% for the annual portion of sales less than or equal to $250 million, at 9% for the portion of annual net sales between $250-$500 million, and 11% for the portion that is greater than $500 million. Each party has the right to terminate the agreement in its entirety upon written notice to the other party if such other party is in material breach of the agreement and has not cured such breach within ninety (90) days after notice from the terminating party indicating the nature of such breach.
Nanomerics Ltd.
On April 11, 2019, the Company entered into an exclusive collaboration and license agreement, as amended (the “Nanomerics Agreement”), with Nanomerics Ltd. (“Nanomerics”), for the exclusive world-wide license to develop and commercialize products which contain hydrophilic neuropeptide Leucin5-Enkephalin and an amphiphile compound which is quaternary ammonium palmitoyl glycol chitosan, and to engage in a collaborative program utilizing Nanomerics’ knowledge, skills and expertise in the clinical development of products and in attracting external funding for such development.
Under the Nanomerics Agreement, the Company are required to make royalty payments equal to a single digit percentage (7.5%) of annual net sales of the licensed product and a certain percentage of annual net sales of combination products containing the compound together with one or more other active ingredients. The Company are also required to make aggregate milestone payments of up to $103 million upon the achievement of specified development and commercial milestones, and sublicense fees for any sublicense relationships the Company enters into subsequent to the Nanomerics Agreement. The Company has the right to terminate the agreement upon 180 days’ prior written notice to Nanomerics. Upon termination, the Company shall assign to Nanomerics all its right title and interest in the Virpax Results (as defined in the Nanomerics Agreement). Through December 31, 2019, none of the development and commercial milestones were met.
F-17
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 11. Research and Development and License Agreements (cont.)
Yissum
On August 11, 2019, the Company entered into an exclusive research and license agreement, as amended (the “Yissum Agreement”), with Yissum Research Development Company of the Hebrew University of Jerusalem, Ltd., a company organized and existing under the laws of Israel (“Yissum”). Under the Yissum Agreement, the Company shall provide funding for research and development studies to be performed by researchers at Hebrew University related to technology enabling the creation of quick-onset and long-acting formulations of opioid antagonists. Under the Yissum Agreement, the Company has the exclusive right to license the commercial technology resulting from the activities of the researchers at the Hebrew University. The Company has agreed to use commercially reasonable efforts to carry out the development, regulatory, manufacturing and marketing work necessary to develop and commercialize any of the products which result from such research.
The Yissum Agreement requires us to pay an annual license maintenance fee, a royalty fee equal to a single digit percentage of annual net sales of any product, aggregate milestone payments of up to $1.19 million upon the achievement of various development and commercial milestones, and a percentage of sublicense fees based on the timing of execution of a sublicense agreement. The Company has the right to terminate the Yissum Agreement by written notice immediately if the licensor passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within 60 days. Additionally, we may terminate the Yissum Agreement if either a receiver or liquidator is appointed for the licensor, or the licensor enters into a winding up or insolvency or bankruptcy proceeding.
Research and development expense was $622,741 and $1,142,176 for the year ended December 31, 2019 and 2018, respectively.
Note 12. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through August 10, 2020. The following are material subsequent events:
Subsequent to the year ended December 31, 2019 and through the date these financial statements have been issued, the Company has raised gross proceeds of approximately $1,348,682 from the issuance of 136,401 shares of its common stock.
Subsequent to the year ended December 31, 2019 and through the date these financial statements have been issued, the Company granted a total of 269,868 stock options to its officers, directors, employees and consultants under the Company’s Plan as incentive compensation. The stock options have a term of ten years and shall vest and become exercisable either over a period of one year or upon reaching certain milestones. The exercise price of the stock options was $9.89 per share. In addition, on January 1, 2020, the number of authorized shares available for issuance under the 2017 Plan automatically increased by 181,121 shares.
On August 7, 2020, the Company entered into a collaboration and license agreement with Nanomerics Ltd. (the “Nanomerics License Agreement”), a company organized and existing under the laws of United Kingdom, for the exclusive North American license to develop and commercialize a High-Density Molecular Masking Spray (MMS019) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. Under the Nanomerics License Agreement, the Company is required to make royalty payments equal to a low double digit percentage of annual net sales of royalty qualifying products. The Company also is required to make aggregate milestone payments of up to $50 million upon the achievement of specified development and commercial milestones, and sublicense fees for any sublicense relationships the Company enters into subsequent to the Nanomerics License Agreement. The Company has the right to terminate the agreement upon 60 days’ prior written notice to Nanomerics. Upon termination, the Company shall assign to Nanomerics all its rights, title and interest in all results of the Company. Nanomerics has the right to terminate the agreement upon 60 days’ prior written notice upon if the Company has not secured funding by the Funding Expiry Date (as defined in the Nanomerics License Agreement).
F-18
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 12. Subsequent Events (cont.)
Notes Payable
On April 6, 2020 Virpax and Anthony Mack entered into an amendment to the 2018 Promissory Note which extended the maturity date from the first anniversary of the date of the 2018 Promissory Note to October 1, 2020 with all other terms remaining consistent.
On April 6, 2020, Virpax and Anthony Mack entered into an amendment to the 2019 Promissory Note which extended the maturity date from the first anniversary of the date of the 2019 Promissory Note to January 15, 2021 with all other terms remaining consistent.
On March 20, 2020, Virpax and RRD entered into an amendment to the service provider convertible note purchase agreement which extended the maturity date from March 31, 2020 to September 30, 2020, increased the amount of principal from $400,000 to $600,000, extended the Qualified Financing deadline from March 31, 2020 to September 30, 2020, and provided for the payment of all interest accrued up to March 31, 2020 which totaled $16,435.
Global Pandemic Outbreak
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic. The outbreak has become increasingly widespread in the United States, impacting the markets in which the Company operates. While the full impact of the pandemic continues to evolve, the financial markets have been subject to significant volatility that adversely impacts the Company’s ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing initiatives. The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values also affect the Company’s ability to enter into collaborations, joint ventures, and license and royalty agreements. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the outbreak and its effects on our business and operations are uncertain. We may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in our clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak.
While expected to be temporary, these disruptions may negatively impact the Company’s sales, its results of operations, financial condition, and liquidity in 2020.
Paycheck Protection Program Loan (“PPP Loan”)
On May 4, 2020, the Company entered into a Promissory Note (the “PPP Note”) with PNC Bank as the lender (the “Lender”), pursuant to which the Lender agreed to make a loan to us under the Paycheck Protection Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) in a principal amount of $72,100 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full time headcount during the period ending October 31, 2020.
F-19
VIRPAX Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
Note 12. Subsequent Events (cont.)
The interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, we will be required to make principal and interest payments in monthly installments beginning seven months from April 2020. The PPP Note matures in two years.
The PPP Note includes events of default. Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against us, including the right to require immediate payment of all amounts due under the PPP Note.
Note 13. Reverse Stock Split
On November 19, 2020, the Company filed an amendment to its Articles of Incorporation and effected a slightly less than 1-for-5 reverse stock split of its issued and outstanding shares of common stock, $0.00001 par value, whereby 15,550,627 outstanding shares of the Company’s common stock were exchanged for 3,145,153 newly issued shares of the Company’s common stock. Under the terms of the reverse stock split, fractional shares issuable to stockholders were rounded down to the nearest share, with cash being paid in lieu of fractional shares, resulting in a reverse split ratio of 1-for-4.944260256. All per share amounts and number of shares (other than authorized shares) in the consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split resulting in the transfer of $119 and $113 from common stock to additional paid in capital at December 31, 2019 and 2018, respectively.
F-20
VIRPAX Pharmaceuticals, Inc.
CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30,
|
December 31, 2019 |
|||||||
(Unaudited) |
* |
|||||||
ASSETS |
|
|
|
|
||||
Current assets |
|
|
|
|
||||
Cash |
$ |
256,505 |
|
$ |
41,536 |
|
||
Prepaid expenses and other current assets |
|
18,056 |
|
|
5,183 |
|
||
Total current assets |
|
274,561 |
|
|
46,719 |
|
||
Deferred financing costs |
|
176,391 |
|
|
— |
|
||
Total assets |
$ |
450,952 |
|
$ |
46,719 |
|
||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
||||
Current liabilities |
|
|
|
|
||||
Accounts payable and accrued expenses |
$ |
2,731,805 |
|
$ |
1,514,474 |
|
||
Notes payable |
|
535,537 |
|
|
264,520 |
|
||
Related party notes payable |
|
— |
|
|
1,000,000 |
|
||
Total current liabilities |
|
3,267,342 |
|
|
2,778,994 |
|
||
Notes payable, net of current portion |
|
30,043 |
|
|
— |
|
||
Related party notes payable |
|
1,000,000 |
|
|
— |
|
||
Total long-term liabilities |
|
1,030,043 |
|
|
— |
|
||
Total liabilities |
|
4,297,385 |
|
|
2,778,994 |
|
||
|
|
|
|
|||||
Commitments and contingencies |
|
|
|
|
||||
|
|
|
|
|||||
Stockholders’ deficit |
|
|
|
|
||||
Preferred stock, par value $0.00001, 1,000,000 shares authorized, -0- shares issued and outstanding as of both September 30, 2020 and December 31, 2019 |
|
— |
|
|
— |
|
||
Common stock, $0.00001 par value; 20,000,000 shares authorized; 3,145,153 shares issued and outstanding as of September 30, 2020; 3,018,673 shares issued and outstanding as of December 31, 2019 |
|
31 |
|
|
30 |
|
||
Additional paid-in capital |
|
6,096,169 |
|
|
3,575,886 |
|
||
Accumulated deficit |
|
(9,942,633 |
) |
|
(6,308,191 |
) |
||
Total stockholders’ deficit |
|
(3,846,433 |
) |
|
(2,732,275 |
) |
||
Total liabilities and stockholders’ deficit |
$ |
450,952 |
|
$ |
46,719 |
|
____________
(*) Derived from audited financial statements
See Notes to the Condensed Financial Statements
F-21
VIRPAX Pharmaceuticals, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the
|
For the
|
|||||||
OPERATING EXPENSES |
|
|
|
|
||||
General and administrative |
$ |
2,321,509 |
|
$ |
2,050,193 |
|
||
Research and development |
|
1,187,333 |
|
|
468,369 |
|
||
Total operating expenses |
|
3,508,842 |
|
|
2,518,562 |
|
||
Loss from operations |
|
(3,508,842 |
) |
|
(2,518,562 |
) |
||
|
|
|
|
|||||
OTHER INCOME (EXPENSE) |
|
|
|
|
||||
Interest expense |
|
(129,600 |
) |
|
(87,937 |
) |
||
Other income |
|
4,000 |
|
|
— |
|
||
Other expense |
|
(125,600 |
) |
|
(87,937 |
) |
||
Loss before tax provision |
|
(3,634,442 |
) |
|
(2,606,499 |
) |
||
Benefit from income taxes |
|
— |
|
|
— |
|
||
Net loss |
$ |
(3,634,442 |
) |
$ |
(2,606,499 |
) |
||
|
|
|
|
|||||
Basic and diluted net loss per share |
$ |
(1.18 |
) |
$ |
(0.90 |
) |
||
Basic and diluted weighted average common stock outstanding |
|
3,091,108 |
|
|
2,904,540 |
|
See Notes to the Condensed Financial Statements
F-22
VIRPAX Pharmaceuticals, Inc.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Preferred stock |
Common stock |
Additional paid-in capital |
Accumulated deficit |
Total stockholders’ deficit |
||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||
Balance at January 1, 2020 |
— |
$ |
— |
3,018,673 |
|
$ |
30 |
$ |
3,575,886 |
$ |
(6,308,191 |
) |
$ |
(2,732,275 |
) |
|||||||
Common stock issued pursuant to subscription agreements |
— |
|
— |
139,220 |
|
|
1 |
|
1,367,899 |
|
— |
|
|
1,376,900 |
|
|||||||
Common stock issued in payment of consulting services and settlement of accounts payable |
— |
|
— |
533 |
|
|
— |
|
5,288 |
|
— |
|
|
5,288 |
|
|||||||
Stock-based compensation |
— |
|
— |
— |
|
|
— |
|
1,138,096 |
|
— |
|
|
1,138,096 |
|
|||||||
Restricted stock awards granted |
— |
|
— |
6,952 |
|
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
Restricted stock awards forfeited |
— |
|
— |
(20,225 |
) |
|
— |
|
— |
|
— |
|
|
— |
|
|||||||
Net loss |
— |
|
— |
— |
|
|
— |
|
— |
|
(3,634,442 |
) |
|
(3,634,442 |
) |
|||||||
Balance at September 30, 2020 |
— |
$ |
— |
3,145,153 |
|
$ |
31 |
$ |
6,096,169 |
$ |
(9,942,633 |
) |
$ |
(3,846,433 |
) |
|||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at January 1, 2019 |
— |
$ |
— |
2,874,437 |
|
|
29 |
|
1,808,926 |
|
(3,001,679 |
) |
|
(1,192,724 |
) |
|||||||
Common stock issued pursuant to subscription agreements |
— |
|
— |
42,977 |
|
|
— |
|
425,000 |
|
— |
|
|
425,000 |
|
|||||||
Common stock issued in payment of consulting services and settlement of accounts payable |
— |
|
— |
44,897 |
|
|
— |
|
443,965 |
|
— |
|
|
443,965 |
|
|||||||
Stock-based compensation |
— |
|
— |
— |
|
|
— |
|
556,756 |
|
— |
|
|
556,756 |
|
|||||||
Restricted stock awards granted |
— |
|
— |
5,056 |
|
|
|
— |
|
— |
|
|
— |
|
||||||||
Net loss |
— |
|
— |
— |
|
|
— |
|
— |
|
(2,606,499 |
) |
|
(2,606,499 |
) |
|||||||
Balance at September 30, 2019 |
— |
$ |
— |
2,967,367 |
|
$ |
29 |
$ |
3,234,647 |
$ |
(5,608,178 |
) |
$ |
(2,373,502 |
) |
See Notes to the Condensed Financial Statements
F-23
VIRPAX Pharmaceuticals, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the
|
For the
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
||||
Net loss |
$ |
(3,634,442 |
) |
$ |
(2,606,499 |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
||||
Non-cash interest expense |
|
129,600 |
|
|
87,937 |
|
||
Stock-based compensation |
|
1,138,096 |
|
|
556,756 |
|
||
Common stock issued in payment of consulting services and settlement of accounts payable |
|
5,288 |
|
|
443,965 |
|
||
Change in operating assets and liabilities: |
|
|
|
|
||||
Prepaid expenses and other current assets |
|
(12,873 |
) |
|
(65,090 |
) |
||
Accounts payable and accrued expenses |
|
1,140,300 |
|
|
716,916 |
|
||
Due from related party, net |
|
— |
|
|
435 |
|
||
Net cash used in operating activities |
|
(1,234,031 |
) |
|
(865,580 |
) |
||
|
|
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
||||
Proceeds from issuance of debt |
|
72,100 |
|
|
500,000 |
|
||
Proceeds from the issuance of stock |
|
1,376,900 |
|
|
425,000 |
|
||
Net cash provided by financing activities |
|
1,449,000 |
|
|
925,000 |
|
||
Net increase in cash |
|
214,969 |
|
|
59,420 |
|
||
Cash, beginning of period |
|
41,536 |
|
|
48,370 |
|
||
Cash, end of period |
$ |
256,505 |
|
$ |
107,790 |
|
||
|
|
|
|
|||||
Supplemental disclosure of cash and non-cash financing activities |
|
|
|
|
||||
Cash paid for interest |
$ |
— |
|
$ |
— |
|
||
Cash paid for taxes |
$ |
— |
|
$ |
— |
|
||
Debt issued in payment of consulting services and settlement of accounts payable |
$ |
228,960 |
|
$ |
265,381 |
|
||
Common stock issued in payment of consulting services and settlement of accounts payable |
$ |
5,288 |
|
$ |
443,965 |
|
||
Deferred financing costs, included in accounts payable and accrued expenses |
$ |
176,391 |
|
$ |
— |
|
See Notes to the Condensed Financial Statements
F-24
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Business and Liquidity
Business
Virpax Pharmaceuticals, Inc. (“Virpax” or “Company”) was incorporated on May 12, 2017 in the state of Delaware. Virpax is a company specializing in developing pharmaceutical products for pain management by using new drug delivery systems. Virpax has exclusive global rights to a proprietary patented Topical Spray Film Delivery Technology for acute musculoskeletal pain (“Epoladerm”). Virpax also has exclusive global rights to a proprietary patented injectable “local anesthetic” Liposomal Gel Technology for postoperative pain management (“Probudur”). Additionally, Virpax has exclusive global rights to a proprietary patented Nanomerics’ Molecular Envelope Technology (“MET”) that uses an intranasal device to deliver enkephalin for the management of acute and chronic pain, including pain associated with cancer (“NES100”). NES100 would support the current effort among prescribers, regulators, and patients to seek non-opioid and non-addictive treatment options to combat the opioid epidemic. Virpax will utilize these delivery technologies to selectively develop a portfolio of patented 505(b)(2) and new chemical entity (“NCE”) candidates for commercialization.
Liquidity and Going Concern
The Company, since inception, has been engaged in organizational activities, including raising capital and research and development activities. The Company has not generated revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. The Company is subject to those risks associated with any preclinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital.
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern for 12 months after the issuance date of these financial statements. The accompanying financial statements have been prepared on a going concern basis which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. The Company incurred a net loss of $3,634,442 and $2,606,499 for the nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of $9,942,633 as of September 30, 2020. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its product candidates currently in development. The Company’s primary source of capital has been the issuance of debt and equity securities. In addition, with respect to the ongoing and evolving coronavirus (“COVID-19”) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international and U.S. economies and markets and if repercussions of the outbreak are prolonged, could have a significant adverse impact on the Company’s business. Management believes that current cash is sufficient to fund operations and capital requirements through December 2020. Additional financings will be needed by the Company to fund its operations, to complete preclinical and clinical development of and to commercially develop its product candidates. There is no assurance that such financing will be available when needed or on acceptable terms.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation of Interim Unaudited Condensed Financial Statements — The interim condensed financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position of Virpax at September 30, 2020, and its results of operations and its cash flows for the nine months ended September 30, 2020 and 2019. The interim results of operations are not necessarily indicative of the results to be expected for a full year. These interim unaudited financial statements should be read in conjunction with the audited financial statements for
F-25
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Summary of Significant Accounting Policies (cont.)
the years ended December 31, 2019 and 2018 and notes thereto. The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (ASC) of the Financial Accounting Standards Board (FASB). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations of the SEC relating to interim financial statements. The December 31, 2019 balance sheet information was derived from the audited financial statements as of that date.
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates.
Significant items subject to such estimates and assumptions include research and development accruals and the valuation of stock-based compensation. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes.
Basic and Diluted Loss per Share — Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock. The computation of diluted net loss per shares does not include the conversion of securities that would have an antidilutive effect. Equivalent common shares excluded from the calculation of diluted net loss per share since their effect is antidilutive due to the net loss of the Company consisted of the following:
|
Nine Months Ended
|
Nine Months Ended
|
||
Equivalent common shares |
||||
Stock options |
486,101 |
206,121 |
||
Warrants |
5,056 |
— |
||
RRD note conversion |
49,897 |
19,606 |
Cash — At times, the Company’s cash balances may exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”). There were no accounts that exceeded federally insured limits as of September 30, 2020 or December 31, 2019.
Fair Value of Financial Instruments — The carrying amounts of the Company’s financial instruments, including cash, prepaids and other current assets, notes payable, and accounts payable approximate fair value due to the short-term nature of those instruments.
Research and Development — Research and development costs are expensed as incurred. These expenses include the costs of proprietary efforts, as well as costs incurred in connection with certain licensing arrangements and external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”) and consultants. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved, and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available.
F-26
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Summary of Significant Accounting Policies (cont.)
Stock-based Compensation — Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period.
Determining the appropriate fair value of share-based awards requires the use of subjective assumptions, including the fair value of the Company’s common shares, and for options and warrants, the excepted life of the option and expected share price volatility. The Company using the Black-Scholes option pricing model to value its option and warrant awards. The assumptions used in calculating the fair value of share-based awards represents management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
The expected life of options was estimated using the simplified method, as the Company does not have historical information to develop reasonable expectations about future exercise patterns and post-vesting employment. The expected life of warrants was based on the contractual term of the warrant for non-employees.
Income Taxes — The Company accounts for income taxes using the asset-and-liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.
The Company follows the guidance in ASC Topic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more likely than not to be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. As of September 30, 2020, the Company had no uncertain income tax positions.
Recent Accounting Pronouncements
In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, as amended Leases (Topic 842), which superseded Topic 840. The new pronouncement requires the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The pronouncement requires that lease arrangements longer than 12 months result in an entity classifying leases as finance or operating leases. However, unlike current U.S. GAAP, which requires only capital leases to be recognized on the balance sheet, Topic 842 will require both types of leases to be recognized on the balance sheet. Topic 842 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The effective date of Topic 842 for non-public business entities, including smaller reporting companies, to fiscal years beginning after December 15, 2021. The Company intends to adopt the new guidance as of January 1, 2022. The adoption of this standard is not expected to have any material impact on the financial statements and related disclosures.
F-27
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Summary of Significant Accounting Policies (cont.)
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are assessing the impact of ASU 2020-06 on our financial statements.
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
September 30,
|
December 31, 2019 |
|||||
Prepaid insurance |
$ |
7,541 |
$ |
3,328 |
||
Legal fees |
|
3,643 |
|
— |
||
Consulting fees |
|
3,724 |
|
— |
||
Accounts receivable, related party |
|
— |
|
1,388 |
||
Other prepaid expenses and current assets |
|
3,148 |
|
467 |
||
$ |
18,056 |
$ |
5,183 |
Note 4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
September 30,
|
December 31, 2019 |
|||||
Accrued payroll |
$ |
944,834 |
$ |
680,400 |
||
Research and development expenses |
|
734,700 |
|
275,429 |
||
Legal expenses |
|
151,580 |
|
200,062 |
||
Professional fees |
|
557,964 |
|
177,096 |
||
Interest payable |
|
251,768 |
|
138,762 |
||
Accounting consulting fees |
|
39,544 |
|
24,765 |
||
Audit fees |
|
33,280 |
|
— |
||
Tax preparation fees |
|
11,365 |
|
14,465 |
||
Other |
|
6,770 |
|
3,495 |
||
$ |
2,731,805 |
$ |
1,514,474 |
Note 5. Notes Payable
On October 1, 2018, the Company entered into a promissory note (the “2018 Promissory Note”), which promises to pay Anthony Mack, Chief Executive Officer and significant investor, the principal amount of $500,000, and bear interest at a rate of 11.19% per annum. The 2018 Promissory Note states that the principal shall be paid at the earlier of an event of default and the first anniversary of the date of the note. As of September 30, 2020, the balance on the 2018 Promissory Note was $500,000, with accrued interest of $124,762. As of December 31, 2019, the balance on the 2018 Promissory note was $500,000, with accrued interest of $74,692.
On January 15, 2019, the Company entered into a promissory note (the “2019 Promissory Note”), which promises to pay Anthony Mack the principal amount of $500,000, and bear interest at a rate of 11.19% per annum. The 2019 Promissory Note states that the principal shall be paid at the earlier of an event of default and the first anniversary of the date of the note. On April 6, 2020, VIRPAX and Anthony Mack entered into an amendment to the 2019 Promissory Note which extended the maturity date from the first anniversary of the date of the 2019 Promissory Note to January 15,
F-28
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5. Notes Payable (cont.)
2021 with all other terms remaining consistent. As of September 30, 2020, the balance on the 2019 Promissory Note was $500,000, with accrued interest of $104,799. As of December 31, 2019, the balance on the 2019 Promissory Note was $500,000, with accrued interest of $56,329.
On October 28, 2020, the Company amended its 2018 Promissory Note dated October 1, 2018 and its 2019 Promissory Note dated January 15, 2019 with Anthony Mack, Chief Executive Officer and significant investor, to extend the maturity date to December 31, 2023 for both promissory notes. All other terms and conditions of these promissory notes remained unchanged.
On August 29, 2019, the Company entered into a service provider convertible note purchase agreement (the “RRD Note”) with RRD International, LLC (“RRD”). Under this agreement, Virpax and RRD agreed to make certain compensation payable in the form of a convertible promissory note. The convertible promissory note states that a maximum principal balance of $400,000 can be applied for services provided by RRD to Virpax, which can be converted into equity or cash (all or in part) upon a Qualified Financing or the Conversion Date of March 31, 2020. Borrowings under the RRD Note bear simple interest on the outstanding principal amount of the RRD Note until paid in full at the fixed rate of 10% per annum. On March 20, 2020, VIRPAX and RRD entered into an amendment which extended the maturity date from March 31, 2020 to September 30, 2020, increased the amount of principal from $400,000 to $600,000, extended the Qualified Financing deadline from March 31, 2020 to September 30, 2020, and provided for the payment of all interest accrued up to March 31, 2020 which totaled $16,435. As of September 30, 2020, the balance on the RRD Note was $493,480, with accrued interest of $22,207. As of December 31, 2019, the balance on the RRD Note was $264,520, with accrued interest of $7,741. In October 2020, we amended the RRD Note to extend the maturity date from September 30, 2020 to November 30, 2020, extend the RRD Qualified Financing deadline from September 30, 2020 to November 30, 2020, and provide for the payment of all interest from April 1, 2020 through November 30, 2020, which was $30,431.
On May 4, 2020, the Company entered into a Promissory Note (the “PPP Note”) with PNC Bank as the lender (the “Lender”), pursuant to which the Lender agreed to make a loan to us under the Paycheck Protection Program (the “PPP Loan”) offered by the U.S. Small Business Administration (the “SBA”) in a principal amount of $72,100 pursuant to Title 1 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Company’s full time headcount during the period ending October 31, 2020. The interest rate on the PPP Note is a fixed rate of 1% per annum. To the extent that the amounts owed under the PPP Loan, or a portion of them, are not forgiven, the note shall convert to an amortizing term loan and the Company will be required to make principal and interest payments in monthly installments beginning seven months from April 2020. The PPP Note matures in two years. The PPP Note includes events of default. Upon the occurrence of an event of default, the Lender will have the right to exercise remedies against us, including the right to require immediate payment of all amounts due under the PPP Note.
F-29
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5. Notes Payable (cont.)
The following table summarizes the Company’s notes payables:
September 30, 2020 |
|||||||||
Balance as of
|
Notes
|
Balance as of
|
|||||||
Related party notes payable |
|
|
|
||||||
Anthony Mack 2018 Promissory Note |
$ |
500,000 |
$ |
— |
$ |
500,000 |
|||
Anthony Mack 2019 Promissory Note |
|
500,000 |
|
— |
|
500,000 |
|||
Total related party notes payable |
|
1,000,000 |
|
— |
|
1,000,000 |
|||
RRD Note |
|
264,520 |
|
228,960 |
|
493,480 |
|||
SBA PPP Loan |
|
— |
|
72,100 |
|
72,100 |
|||
Total notes payable |
$ |
1,264,520 |
$ |
301,060 |
$ |
1,565,580 |
|||
Less: Current portion of notes payable |
|
264,520 |
|
271,017 |
|
535,537 |
|||
Total non-current portion of notes payable |
$ |
1,000,000 |
$ |
30,043 |
$ |
1,030,043 |
December 31, 2019 |
|||||||||
Balance as of
|
Notes
|
Balance as of
|
|||||||
Related party notes payable |
|
|
|
||||||
Anthony Mack 2018 Promissory Note |
$ |
500,000 |
$ |
— |
$ |
500,000 |
|||
Anthony Mack 2019 Promissory Note |
|
— |
|
500,000 |
|
500,000 |
|||
Total related party notes payable |
|
500,000 |
|
500,000 |
|
1,000,000 |
|||
RRD Note |
|
— |
|
264,520 |
|
264,520 |
|||
Total notes payable |
|
500,000 |
|
764,520 |
|
1,264,520 |
|||
Less: Current portion of notes payable |
|
500,000 |
|
764,520 |
|
1,264,520 |
|||
Total non-current portion of notes payable |
$ |
— |
$ |
— |
$ |
— |
Interest expense was $129,600 and $87,937 for the nine months ended September 30, 2020 and 2019, respectively.
Principal payments on note payables are due as follows:
Years ending December 31, |
|
||
2020 (Remaining three months) |
$ |
497,670 |
|
2021 |
|
50,552 |
|
2022 |
|
17,358 |
|
2023 |
|
1,000,000 |
|
Total payments |
$ |
1,565,580 |
Note 6. Commitments and Contingencies
Employment Agreements
The Company has an employment agreement with the Chief Executive Officer, effective September 18, 2018. The agreement may be terminated by either party at any time upon written notice provided to the other party. Concurrent with the employment agreement, the CEO and the Company agreed to an Executive Confidentiality Agreement that contains standard non-closure and non-competition provisions. In the event we terminate the employment agreement other than for cause, or the CEO terminates the agreement for good reason, we will pay the CEO the then effective base salary for a period of twelve months following the effective date of the termination. However, payment of the
F-30
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Commitments and Contingencies (cont.)
effective base salary is subject to the execution of a release form and the compliance by the CEO with the release and all terms and provisions of the employment agreement and Executive Confidentiality Agreement that survive the termination of employment. The Company’s Chief Executive Officer has also elected to forego a salary temporarily and defer compensation. Deferred compensation due to the Company’s CEO amounted to $911,250 and $630,000 as of September 30, 2020 and December 31, 2019, respectively, which is included in accounts payable and accrued expenses on the accompanying balance sheet.
Litigation
The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of September 30, 2020, the Company did not have any pending legal actions.
Global Pandemic Outbreak
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic. The outbreak has become increasingly widespread in the United States, impacting the markets in which the Company operates. While the full impact of the pandemic continues to evolve, the financial markets have been subject to significant volatility that adversely impacts the Company’s ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing initiatives. The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values also affect the Company’s ability to enter into collaborations, joint ventures, and license and royalty agreements. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the outbreak and its effects on our business and operations are uncertain. We may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in our clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak.
While expected to be temporary, these disruptions may negatively impact the Company’s sales, its results of operations, financial condition, and liquidity in 2020 and potentially beyond.
Note 7. Stockholders’ Equity
Overview
Preferred Stock
The Company’s Certificate of Incorporation, filed on May 12, 2017, authorizes the issuance of preferred stock. The total number of shares which the Company is authorized to issue is 1,000,000, each with a par value of $0.00001 per share.
Common Stock
The Company’s Certificate of Incorporation, filed on May 12, 2017, authorizes the issuance of common stock. The total number of shares which the Company is authorized to issue is 20,000,000, each with a par value of $0.00001 per share. See Note 11 — Subsequent Events for effect of reverse stock split.
F-31
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7. Stockholders’ Equity (cont.)
During the nine months ended September 30, 2020, the Company issued 139,220 shares of common stock for gross proceeds totaling $1,376,900. The Company’s CEO and an immediate family member purchased 40,450 and 8,999 of these shares of common stock for gross proceeds totaling $400,000 and $89,000, respectively.
During the nine months ended September 30, 2019, the Company issued 42,977 shares of common stock for gross proceeds totaling $425,000. The Company’s CEO purchased 40,450 of these shares of common stock for gross proceeds totaling $400,000.
In addition, during the nine months ended September 30, 2020, the Company issued 533 shares of common stock in payment of consulting services and settlement of accounts payable for gross proceeds totaling $5,288. The Company issued 44,897 shares of common stock in payment of consulting services and settlement of accounts payable for gross proceeds totaling $443,965 during the nine months ended September 30, 2019.
Restricted Stock Awards
On May 20, 2017, the Company established the Virpax Pharmaceuticals, Inc. Amended and Restated 2017 Equity Incentive Plan (the “Plan”). The Company’s Board of Directors, acting through its Equity Incentive Plan Committee, has determined that it would be to the advantage and best interest of the Company and its stockholders to grant restricted stock awards to certain individuals as compensation to serve as an employee of the Company and as an incentive for increased efforts during such service.
As of September 30, 2020, there were 5,056 unvested restricted stock awards issued totaling $50,000 of unearned deferred stock based compensation, based on a fair value of stock of $9.89 per share as determined by recent sales of stock to unrelated third parties. As of December 31, 2019, there were 34,130 unvested restricted stock awards issued totaling $337,500 of unearned deferred stock based compensation. In addition, during the nine months ended September 30, 2020, there were 6,952 restricted stock awards granted and 20,225 of restricted stock awards forfeited during the period. During the nine months September 30, 2019, there were 5,056 restricted stock awards granted during the period. Also, during the nine months ended September 30, 2020, there were 15,800 restricted stock awards that vested resulting in $156,250 in stock-based compensation expense during the period.
Note 8. Stock-Based Compensation
The Company’s Plan provides a means whereby eligible employees, officers, non-employee directors and other individual service providers develop a sense of proprietorship and personal involvement in the development and financial success of the Company and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The Company, by means of the Plan, seeks to retain the services of such eligible persons and to provide incentives for such persons to exert maximum efforts for the success of the Company. The Plan commenced on the Effective Date and the Plan is administered by the Compensation Committee (“Committee”); provided that the entire Board may act in lieu of the Committee on any matter. The maximum aggregate number of shares of common stock which may be issued under all Awards granted to Participants under the Plan initially shall be 303,382 shares. The number of authorized shares available for issuance under the Plan shall automatically increase on January 1st of each year commencing with the January 1 following the Effective Date and on each January 1 thereafter until the expiration date, in an amount equal to six percent (6%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Plan shall remain in effect, subject to the right of the board of directors of the Company to amend or terminate the Plan at any time until the earlier of the tenth (10th) anniversary of the Effective Date. In the event of a termination of continuous service (other than as a result of a change of control, as defined in the Plan), unvested stock options generally shall terminate and, with regard to vested stock options, the exercise period shall be the lesser of the original expiration date or three months from the date continuous service terminates.
F-32
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8. Stock-Based Compensation (cont.)
On May 21, 2018, the Company amended the Plan to grant stock options to Non-Employee Directors. Stock options to purchase 5,056 shares of common stock shall automatically be granted under the Plan to each Non-Employee Director who is first appointed or elected to the Board. In addition, On January 1 of each year, each then serving Non-Employee Director of the Company shall automatically be granted under the Plan (i) that number of options having a value of $25,000 calculated on the grant date in accordance with the Black-Scholes option pricing model and shall be exercisable as to 100% of the number of shares of Stock covered thereby on the twelve-month anniversary of the grant date, and shall have an exercise price equal to 100% of the Fair Market Value of a share of Common Stock on the Date of Grant. Also, on January 1, of each year, each then serving member of the Science and Technology Committee shall automatically be granted stock options to purchase 2,022 shares of Common Stock under the Plan, and the Chair of the Science and Technology Committee shall be granted stock options to purchase an additional 3,033 shares of Common Stock under the Plan. These options have the same terms and conditions as the Non-Employee Directors noted above.
Stock-based compensation expense for the nine months ended September 30, 2020 and 2019 was $1,138,096 and $556,756, respectively, which is included in general and administrative expense on the accompanying statement of operations.
The fair value of option and warrant awards is estimated using the Black-Scholes option-pricing model. Exercise price of each award is generally not less than the per share fair value in effect as of that award date. The determination of fair value using the Black-Scholes model is affected by the Company’s share fair value as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, risk-free interest rate and projected employee share option exercise behaviors. Options granted or modified under the Plan and warrants issued to consultants outside the Plan during the years ended September 30, 2020 and December 31, 2019 were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:
For the
|
For the
|
|||||
Expected term (years) |
5.24 |
|
5.54 |
|
||
Risk-free interest rate |
0.48 |
% |
2.03 |
% |
||
Expected volatility |
68.50 |
% |
57.23 |
% |
||
Expected dividend yield |
0.00 |
% |
0.00 |
% |
In the absence of a public trading market for our common stock, on each grant date, the Company develops an estimate of the fair value of our common stock underlying the option and warrant grants. The Company estimated the fair value of our common stock by referencing arms-length transactions inclusive of the common stock underlying which occurred on or near the valuation date(s). Once the Company’s common stock is publicly traded, the Company will no longer have to estimate the fair value of the common stock, rather the value will be determined based on quoted market prices. The Company determined the fair value of common stock using methodologies, approaches and assumptions consistent with the AICPA Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and based in part on input from a valuation firm.
The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The expected option term assumption is estimated using the simplified method and is based on the mid-point between vest date and the remaining contractual term of the option and warrant, since the Company does not have sufficient exercise history to estimate expected term of its historical option awards.
F-33
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8. Stock-Based Compensation (cont.)
The following is a summary of stock option activity under the stock option plans for the nine months ended September 30, 2020:
Number of Shares |
Weighted- Average
|
Weighted- Average
|
Aggregate
|
||||||||
Options outstanding at January 1, 2020 |
236,458 |
|
|
9.89 |
8.96 |
|
— |
||||
Forfeited |
(20,225 |
) |
|
9.89 |
|
||||||
Cancelled |
— |
|
|
— |
|
||||||
Exercised |
— |
|
|
— |
|
||||||
Granted |
269,868 |
|
|
9.89 |
|
|
|
||||
Options outstanding at September 30, 2020 |
486,101 |
|
$ |
9.89 |
8.93 |
$ |
— |
||||
Options exercisable at September 30, 2020 |
251,733 |
|
$ |
9.89 |
8.34 |
$ |
— |
On September 22, 2020, the Company issued stock warrants to purchase 5,056 shares of common stock with an exercise price of $9.89 per share to a consultant in payment of services provided. The stock warrants have a term of ten years and are exercisable at any time during that period. The Company recorded $28,500 in stock based compensation expense which is included in general and administrative expense on the accompanying statement of operations.
The weighted-average grant-date fair value of stock options and warrants granted during the year ended September 30, 2020 and December 31, 2019 was $5.66 and $5.21, respectively.
As of September 30, 2020, there was $880,421 of total time-based unrecognized compensation costs related to unvested stock options stock. These costs are expected to be recognized over a weighted average period of 0.75 years.
On June 15, 2020, the Company and Michele Linde entered into a consulting agreement in conjunction with Ms. Linde separating from the Company as Executive Vice President, General Counsel and Corporate Secretary of the Company with an effective date of May 15, 2020. As part of the consulting agreement, Ms. Linde agreed to perform consulting and advisory services in exchange for 40,450 nonqualified stock options in the Company pursuant to a nonqualified stock option grant. The options shall vest evenly over a six-month term beginning on the effective date. The options from the consulting agreement were granted in exchange for the forfeiture of the 20,225 unvested restricted stock award and 15,169 unvested nonqualified stock options that were originally granted on October 30, 2019. These modifications are treated as an option modification and the Company accounted for the option modification under ASC Topic 718, Compensation — Stock Compensation. The fair value of the forfeited options and restricted stock award was determined to be in excess of the fair value of the options granted from the consulting agreement. As a result, the fair value of the forfeited options and restricted stock award were recognized over the six-month term of the consulting award, beginning with the effective date.
On June 15, 2020, the Company and Ms. Linde also executed an amendment with an effective date of May 15, 2020 to modify three nonqualified stock option grant agreements (the “NQSO Amendment”) that were entered into on July 20, 2018, May 18, 2019, and October 30, 2019, respectively. The nonqualified stock option grants were for 5,056, 10,112, and 5,056 options, respectively. The NQSO Amendment extended the post-termination exercisability period of the vested nonqualified stock options held by Ms. Linde from 90 days following termination of employment to ten years after the initial option grant. The NQSO Amendment also amended the May 19, 2019 grant agreement to vest all 10,112 options on May 18, 2020, regardless if Ms. Linde was employed by the Company at that date. These modifications are treated as an option modification and the Company accounted for the option modification under ASC Topic 718, Compensation — Stock Compensation. As a result of the modification, the Company recognized $90,050 in incremental compensation expense during the nine months ended September 30, 2020.
F-34
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9. Related-Party Transactions
As discussed in Note 5, in October 2018 and January 2019 the Company issued notes with an aggregate principal amount of $1,000,000. These notes were issued to Anthony Mack, Chief Executive Officer and significant investor of the Company.
As discussed in Note 3, The Company maintained an account receivable, related party balance of $0 and $1,388 as of September 30, 2020 and December 31, 2019, respectively. This amount related to the reimbursement due back to the Company for healthcare insurance on behalf of Jeffrey Gudin, the Company’s Chief Medical Officer.
Note 10. Research and Development and License Agreements
On August 7, 2020, the Company entered into a collaboration and license agreement with Nanomerics Ltd. (the “Nanomerics License Agreement”), a company organized and existing under the laws of United Kingdom, for the exclusive North American license to develop and commercialize a High-Density Molecular Masking Spray (MMS019) as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans. Under the Nanomerics License Agreement, the Company is required to make royalty payments equal to a low double digit percentage of annual net sales of royalty qualifying products. The Company also is required to make aggregate milestone payments of up to $50 million upon the achievement of specified development and commercial milestones, and sublicense fees for any sublicense relationships the Company enters into subsequent to the Nanomerics License Agreement. The Company has the right to terminate the agreement upon 60 days’ prior written notice to Nanomerics. Upon termination, the Company shall assign to Nanomerics all its rights, title and interest in all results of the Company. Nanomerics has the right to terminate the agreement upon 60 days’ prior written notice upon if the Company has not secured funding by the Funding Expiry Date (as defined in the Nanomerics License Agreement).
On August 25, 2020, the Company entered into a cooperative research and development agreement with the National Center for Advancing Translational Sciences (NCATS), an institute/center of the National Institutes of Health (NIH), U.S. Department of Health and Human Services. This collaboration is for the continued development of Virpax’s product candidate, NES100, an intranasal peptide, for the management of acute and chronic non-cancer pain. The term of the agreement is for a period of four years from the effective date of the agreement and can be terminated by both parties at any time by mutual written consent. In addition, either party may unilaterally terminate this agreement at any time by providing written notice of at least sixty (60) days before the desired termination date. The agreement provides for the further development of NES100 through IND enabling studies.
Note 11. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through November 20, 2020. The following are material subsequent events:
In October 2020, the Company amended the RRD Note to extend the maturity date from September 30, 2020 to November 30, 2020, and to extend the RRD Qualified Financing deadline from September 30, 2020 to November 30, 2020, and provide for the payment of all interest accrued from April 1, 2020 through November 30, 2020, which was $30,431.
Research and Development and License Agreements
On October 11, 2020, the Company entered into an Agreement for Rendering of Research Services with Yissum under the same terms and conditions as detailed above in the Yissum Research Agreement. Under this agreement, the Company shall provide funding for research and development studies to be performed by researchers at Hebrew University related to the formulation of Liposomal Bupivacaine as well as efficacy and PK studies in animals. In consideration for the research services, the Company agreed to pay research service fees of $81,000 in six equal monthly installments. In the event the Company completes a funding event before December 31, 2020, the Company agreed to pay Yissum $40,500 towards the consideration of $81,000. All services to be provided under the Yissum Research Agreement will be completed by June 30, 2021.
F-35
VIRPAX Pharmaceuticals, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 11. Subsequent Events (cont.)
Reverse Stock Split
On November 19, 2020, the Company filed an amendment to its Articles of Incorporation and effected 1-for-4.944260256 reverse stock split of its issued and outstanding shares of common stock, $0.00001 par value, whereby 15,550,627 outstanding shares of the Company’s common stock were exchanged for 3,145,153 newly issued shares of the Company’s common stock. Under the terms of the reverse stock split, fractional shares issuable to stockholders were rounded to the nearest whole share, with cash paid in lieu of any fractional shares, resulting in a reverse split of 1-for-4.944260256. All per share amounts and number of shares (other than authorized shares) in the consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split resulting in the transfer of $119 and $113 from common stock to additional paid in capital at January 1, 2020 and 2019, respectively.
F-36
Shares of Common Stock
VIRPAX PHARMACEUTICALS, INC
____________________________
PROSPECTUS
____________________________
ThinkEquity
a division of Fordham Financial Management, Inc.
, 2020
Through and including , 2020 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and the Nasdaq Capital Market listing fee.
Amount |
|||
Securities and Exchange Commission registration fee |
$ |
1,999.60 |
|
FINRA filing fee |
$ |
3,250.00 |
|
Underwriter Legal Fees and Expenses |
$ |
90,000.00 |
|
Nasdaq Capital Market listing fees |
$ |
50,000.00 |
|
Accountants’ fees and expenses |
$ |
100,000.00 |
|
Legal fees and expenses |
$ |
300,000.00 |
|
Transfer Agent’s fees and expenses |
$ |
10,000.00 |
|
Printing and engraving expenses |
$ |
45,000.00 |
|
Non-accountable expenses to underwriters |
$ |
150,000.00 |
|
Miscellaneous |
$ |
4,750.40 |
|
Total expenses |
$ |
755,000.00 |
Item 14. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our restated certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our
II-1
restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any other company or enterprise to which the person provides services at our request.
We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, or the Securities Act, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Initial Capitalization
In May 2017, we issued 2,730,438 shares of our common stock to Virpax Pharmaceuticals, LLC. Anthony Mack, our Chief Executive Officer, and Jeffrey Gudin, our Executive Vice President and Chief Medical Officer, are the members of Virpax Pharmaceuticals, LLC. These shares were issued to Virpax Pharmaceutical, LLC as consideration for founding the Company.
Issuances of Capital Stock
Between June 2017 and November 20, 2020, we issued a total of 346,303 shares of our common stock in private placements to certain investors at a purchase price of $9.89 per share.
Stock Options
Between June 2017 and November 20, 2020, we granted stock options to purchase an aggregate of 541,719 shares of our common stock with an exercise price of $9.89 per share to our employees, consultants and directors pursuant to the 2017 Plan.
Service Provider Warrant
On April 2, 2020, as compensation under a Contractor Agreement between us and a service provider, we granted a stock option to purchase 5,056 shares of our common stock with an exercise price of $9.89 per share to the service provider. The Contractor Agreement terminated pursuant to its terms in March 2020. Pursuant to the terms of the stock option agreement, the stock option was forfeited 90 days after grant if it had not been exercised earlier. Upon discussions with the service provider and in satisfaction of all compensation due under the Contractor Agreement, we issued to the service provider a warrant exercisable for 5,056 shares of our common stock with an exercise price of $9.89 per share.
II-2
Securities Act Exemptions
We deemed the offers, sales and issuances of the securities described above under “Initial Capitalization,” “Issuances of Stock” and “Service Provider Warrant” to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.
We deemed the grants of stock options and issuances of common stock upon exercise of such options described above under “Stock Options” to be exempt from registration under the Securities Act in reliance on Rule 701 of the Securities Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No. |
Description of Document |
|
1.1 |
Form of Underwriting Agreement.** |
|
3.1 |
Certificate of Incorporation of Virpax Pharmaceuticals, Inc., as currently in effect.*** |
|
3.2 |
||
3.3 |
Bylaws of Virpax Pharmaceuticals, Inc., as currently in effect.*** |
|
3.4 |
||
3.5 |
Certificate of Amendment to the Certificate of Incorporation of Virpax Pharmaceuticals, Inc.* |
|
4.1 |
Specimen Certificate representing shares of common stock of Virpax Pharmaceuticals, Inc.*** |
|
4.2 |
Form of Underwriter’s Warrant.** |
|
4.3 |
||
5.1 |
Opinion of Lowenstein Sandler LLP regarding the validity of the common stock being registered.** |
|
10.1 |
||
10.2 |
Virpax Pharmaceuticals, Inc. 2017 Equity Incentive Plan.†*** |
|
10.3 |
Form of Nonqualified Stock Option Award under 2017 Equity Incentive Plan.†*** |
|
10.4 |
Form of Incentive Stock Option Award under 2017 Equity Incentive Plan.†*** |
|
10.5 |
||
10.6 |
||
10.7 |
||
10.8 |
||
10.9 |
||
10.10 |
||
10.11 |
||
10.12 |
||
10.13 |
II-3
Exhibit No. |
Description of Document |
|
10.14 |
||
10.15 |
||
10.16 |
||
10.17 |
||
10.18 |
||
10.19 |
||
10.20 |
Promissory Note, dated October 1, 2018, between Anthony Mack and Virpax Pharmaceuticals, Inc.*** |
|
10.21 |
||
10.22 |
Promissory Note, dated January 15, 2019, between Anthony Mack and Virpax Pharmaceuticals, Inc.*** |
|
10.23 |
||
10.24 |
||
10.25 |
||
10.26 |
||
10.27 |
||
10.28 |
||
10.29 |
||
10.30 |
||
10.31 |
||
23.1 |
||
23.2 |
Consent of Lowenstein Sandler LLP (included in Exhibit 5.1)** |
|
24.1 |
Power of Attorney (included on the signature page of this Registration Statement)*** |
____________
* Filed herewith
** To be filed by amendment
*** Previously filed
† Denotes management compensation plan or contract.
# Certain portions of this exhibit have been omitted because the omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.
II-4
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
II-5
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 of 1933 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 of 1933 and will be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Chester, Pennsylvania, on the 20th day of November, 2020.
Virpax Pharmaceuticals, Inc. |
||||||
By: |
/s/ Anthony Mack |
|||||
Name: |
Anthony Mack |
|||||
Title: |
Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated:
Signature |
Title |
Date |
||
/s/ Anthony Mack |
Chief Executive Officer (Principal Executive Officer) |
November 20, 2020 |
||
Anthony Mack |
and Chairman of the Board of Directors |
|||
/s/ Christopher Chipman |
Chief Financial Officer |
November 20, 2020 |
||
Christopher Chipman |
||||
* |
Director and Chairman, Compensation Committee, |
November 20, 2020 |
||
Eric Floyd, PhD |
Scientific and Technology Committee |
|||
* |
Chief Medical Officer, Director |
November 20, 2020 |
||
Jeffrey Gudin, MD |
||||
* |
Director and Chairman, Audit Committee |
November 20, 2020 |
||
Jerrold Sendrow, CFP |
||||
* |
Director and Chairman, Corporate Governance |
November 20, 2020 |
||
Thani Jambulingam, PhD |
||||
* |
Director |
November 20, 2020 |
||
Gary Jacob, PhD |
||||
* |
Director |
November 20, 2020 |
||
Vanila M. Singh, MD |
||||
*By: /s/ Christopher Chipman |
||||
Christopher Chipman, Attorney-in-Fact |
II-7
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
VIRPAX PHARMACEUTICALS, INC.
Virpax Pharmaceuticals, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:
1. The name of this corporation is Virpax Pharmaceuticals, Inc. The date of the filing of its original certificate of incorporation with the Secretary of State of the State of Delaware was May 12, 2017.
2. This Amended and Restated Certificate of Incorporation, which restates, integrates and further amends the certificate of incorporation of this corporation as heretofore amended and restated, has been duly adopted by the corporation in accordance with Sections 242 and 245 of the DGCL and has been adopted by the requisite vote of the stockholders of the corporation, acting by written consent in lieu of a meeting in accordance with Section 228 of the DGCL.
3. The certificate of incorporation of this corporation is hereby amended and restated in its entirety to read as follows:
ARTICLE I
The name of the corporation is “Virpax Pharmaceuticals, Inc.” (hereinafter called the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is Corporation Service Company, 251 Little Falls Drive, city of Wilmington, county of New Castle, Delaware 19808. The name of its registered agent at such address is Corporate Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware or any applicable successor act thereto, as the same may be amended from time to time (the “DGCL”).
ARTICLE IV
(A) Classes of Stock. The total number of shares of all classes of capital stock that the Corporation is authorized to issue is one hundred and ten million (110,000,000) shares which shall be divided into two classes of stock to be designated “Common Stock” and “Preferred Stock”. The total number of shares of Common Stock that the Corporation is authorized to issue is one hundred million (100,000,000) shares, par value $0.00001 per share. The total number of shares of Preferred Stock that the Corporation is authorized to issue is ten million (10,000,000) shares, par value $0.00001 per share. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.
1
(B) Common Stock. The powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations and restrictions of the Common Stock are as follows:
1. Ranking. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors of the Corporation (the “Board”) upon any issuance of the Preferred Stock of any series.
2. Voting. Except as otherwise provided by law or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall have the exclusive right to vote for the election and removal of directors and for all other purposes. Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation (as the same may be amended and/or restated from time to time, including by the terms of any Preferred Stock Designation (as defined below), this “Certificate of Incorporation”) to the contrary, except as required by law the holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation) or the DGCL.
3. Dividends. Subject to the rights of the holders of Preferred Stock, holders of shares of Common Stock shall be entitled to receive such dividends and distributions and other distributions in cash, stock or property of the Corporation when, as and if declared thereon by the Board from time to time out of assets or funds of the Corporation legally available therefor.
4. Liquidation. Subject to the rights of the holders of Preferred Stock, shares of Common Stock shall be entitled to receive the assets and funds of the Corporation available for distribution in the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary. A liquidation, dissolution or winding up of the affairs of the Corporation, as such terms are used in this Section B(4), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other person or a sale, lease, exchange or conveyance of all or a part of its assets.
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(C) Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or more series. The Board is hereby authorized to provide by resolution or resolutions from time to time for the issuance, out of the unissued shares of Preferred Stock, of one or more series of Preferred Stock, without stockholder approval, by filing a certificate pursuant to the applicable law of the State of Delaware (the “Preferred Stock Designation”), setting forth such resolution and, with respect to each such series, establishing the number of shares to be included in such series, and fixing the voting powers, full or limited, or no voting power of the shares of such series, and the designation, preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof. The powers, designation, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. The authority of the Board with respect to each series of Preferred Stock shall include, but not be limited to, the determination of the following:
(a) the designation of the series, which may be by distinguishing number, letter or title;
(b) the number of shares of the series, which number the Board may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding);
(c) the amounts or rates at which dividends will be payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative;
(d) the dates on which dividends, if any, shall be payable;
(e) the redemption rights and price or prices, if any, for shares of the series;
(f) the terms and amount of any sinking fund, if any, provided for the purchase or redemption of shares of the series;
(g) the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;
(h) whether the shares of the series shall be convertible into or exchangeable for, shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;
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(i) restrictions on the issuance of shares of the same series or any other class or series;
(j) the voting rights, if any, of the holders of shares of the series generally or upon specified events; and
(k) any other powers, preferences and relative, participating, optional or other special rights of each series of Preferred Stock, and any qualifications, limitations or restrictions thereof, all as may be determined from time to time by the Board and stated in the resolution or resolutions providing for the issuance of such Preferred Stock.
Without limiting the generality of the foregoing, the resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law.
ARTICLE V
This Article V is inserted for the management of the business and for the conduct of the affairs of the Corporation.
(A) General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as otherwise provided by this Certificate of Incorporation or the DGCL.
(B) Number of Directors; Election of Directors. Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of the directors of the Corporation shall be fixed from time to time solely by resolution of the Board. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director of the Corporation shall hold office until the expiration of the term for which he or she is elected and until his or her successor has been duly elected and qualified or until his or her earlier resignation, death or removal.
(C) Classes of Directors. Subject to the rights of holders of any series of Preferred Stock to elect directors, the Board shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be practicable, of one third of the total number of directors constituting the entire Board. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III at the time such classification becomes effective.
(D) Terms of Office. Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held following the time at which the initial classification of the Board becomes effective; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held following the time at which the initial classification of the Board becomes effective; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held following the time at which the initial classification of the Board becomes effective; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal.
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(E) Vacancies. Subject to the rights of holders of any series of Preferred Stock, any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall, in the case of a newly created directorship, hold office for the full term of the class in which the newly created directorship was created or, in the case of a vacancy, hold office for the remaining term of his or her predecessor and in each case until his or her successor shall be elected and qualified, subject to his or her earlier death, disqualification, resignation or removal.
(F) Removal. Subject to the rights of the holders of any series of Preferred Stock, any director or the entire Board may be removed from office at any time, but only for cause.
(G) Committees. Pursuant to the Amended and Restated Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”), the Board may establish one or more committees to which may be delegated any or all of the powers and duties of the Board to the fullest extent permitted by law.
(H) Stockholder Nominations and Introduction of Business. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the Bylaws.
(I) Preferred Stock Directors. During any period when the holders of any series of Preferred Stock have the right to elect additional directors as provided for or fixed pursuant to the provisions of Article IV hereof or any Preferred Stock Designation, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total number of authorized directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as otherwise provided for or fixed pursuant to the provisions of Article IV hereof or any Preferred Stock Designation, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
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ARTICLE VI
Unless and except to the extent that the Bylaws shall so require, the election of directors of the Corporation need not be by written ballot.
ARTICLE VII
To the fullest extent permitted by the DGCL as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that nothing contained in this Article VII shall eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to the provisions of Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. No repeal or modification of this Article VII shall apply to or have any adverse effect on any right or protection of, or any limitation of the liability of, a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
ARTICLE VIII
The Corporation may indemnify, and advance expenses to, to the fullest extent permitted by law, any person who was or is a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
ARTICLE IX
Subject to the terms of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders and may not be effected by written consent in lieu of a meeting.
ARTICLE X
Special meetings of stockholders for any purpose or purposes may be called at any time by the Board, the Chairman of the Board or the Chief Executive Officer of the Corporation, and may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
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ARTICLE XI
The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the DGCL may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article XI. Notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any series of Preferred Stock required by law, by this Certificate of Incorporation or by any Preferred Stock Designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) in voting power of the stock of the Corporation entitled to vote thereon shall be required to amend, alter, change or repeal, or adopt any provision inconsistent with, any of Article V, Article VII, Article VIII, Article IX, Article X, Article XII, Article XIII, and this sentence of this Certificate of Incorporation, or in each case, the definition of any capitalized terms used therein or any successor provision (including, without limitation, any such article or section as renumbered as a result of any amendment, alteration, change, repeal or adoption of any other provision of this Certificate of Incorporation). Any amendment, repeal or modification of any of Article VII, Article VIII and this sentence shall not adversely affect any right or protection of any person existing thereunder with respect to any act or omission occurring prior to such repeal or modification.
ARTICLE XII
In furtherance and not in limitation of the powers conferred upon it by law, the Board is expressly authorized and empowered to adopt, amend and repeal the Bylaws. Notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any series of Preferred Stock required by law, by this Certificate of Incorporation or by any Preferred Stock Designation, the Bylaws may also be amended, altered or repealed and new Bylaws may be adopted by the stockholders of the Corporation by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) in voting power of the outstanding stock of the Corporation entitled to vote thereon.
ARTICLE XIII
Unless the Corporation consents in writing to the selection of an alternative forum, (A) (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, this Certificate of Incorporation or the Bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Notwithstanding the foregoing, this Article XIII shall not apply to claims seeking to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XIII.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed this __ day of _______________, 2020.
VIRPAX PHARMACEUTICALS, INC. | ||
By: | ||
Name: | ||
Title: |
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Exhibit 3.4
AMENDED AND RESTATED BYLAWS
OF
VIRPAX PHARMACEUTICALS, INC.
(as amended through November 18, 2020)
ARTICLE
I
STOCKHOLDERS
1.1 Place of Meetings. All meetings of stockholders shall be held at such place, if any, as may be designated from time to time by the Board of Directors (the “Board”) of Virpax Pharmaceuticals, Inc. (the “Corporation”), the Chairman of the Board or the Chief Executive Officer or, if not so designated, at the principal office of the Corporation. The Board may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication in accordance with Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”).
1.2 Annual Meeting. The annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board, the Chairman of the Board or the Chief Executive Officer. The Board may postpone, recess, reschedule or cancel any previously scheduled annual meeting of stockholders.
1.3 Special Meetings. Special meetings of stockholders for any purpose or purposes may be called in the manner set forth in the Certificate of Incorporation. The Board may postpone, recess, reschedule or cancel any previously scheduled special meeting of stockholders. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting. The notices of all meetings shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting). The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called.
1.5 Voting List. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
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1.6 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority in voting power of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of capital stock is required by law or the Certificate of Incorporation, the holders of a majority in voting power of the shares of such class or classes or series of the capital stock of the Corporation issued and outstanding and entitled to vote on such matter, present in person, present by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on such matter. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.
1.7 Adjournments. Any meeting of stockholders, annual or special, may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the Board, the chairman of the meeting or, if directed to be voted on by the chairman of the meeting, by the stockholders present or represented at the meeting and entitled to vote thereon, although less than a quorum. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.
1.8 Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by applicable law. No such proxy shall be voted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.
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1.9 Action at Meeting. When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the vote of the holders of shares of stock having a majority in voting power of the votes cast by the holders of all of the shares of stock present or represented at the meeting and voting affirmatively or negatively on such matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each such class or series, the holders of a majority in voting power of the shares of stock of that class or series present or represented at the meeting and voting affirmatively or negatively on such matter), except when a different vote is required by express provision of applicable law, regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such express provisions shall govern. Voting at meetings of stockholders need not be by written ballot. At all meetings of stockholders for the election of directors at which a quorum is present a plurality of the votes cast shall be sufficient to elect.
1.10 Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board or any committee thereof or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 1.10 is delivered by such stockholder to the Secretary of the Corporation, who is entitled to vote at the meeting upon such election of directors or upon such other business, as the case may be, and who complies with the notice procedures set forth in this Section 1.10.
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(2) For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 1.10, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation (and must timely provide any updates or supplements to such notice at such times and in such forms provided by this Section 1.10) and any such proposed business (other than the nominations of persons for election to the Board) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment, postponement or recess of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. The number of nominees a stockholder may nominate for election at the annual meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such annual meeting. To be in proper form for purposes of this Section 1.10, such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business and residence address, and principal occupation or employment of the nominee, (ii) and all other information relating to such nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, (iii) a reasonably detailed description of any compensatory, payment or other financial agreement, arrangement or understanding that such nominee has with any other person or entity other than the Corporation including the amount of any payment or payments received or receivable thereunder, in each case in connection with candidacy or service as a director of the Corporation, (iv) such person’s written consent to being named in the Corporation’s proxy statement and associated proxy card as a nominee of the stockholder and to serving as a director if elected and (v) all information with respect to such nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 1.10 if such nominee were the stockholder giving notice hereunder; (b) as to any other business that the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), (iii) the reasons for conducting such business at the meeting, (iv) any direct or indirect material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons with whom such stockholder or beneficial owner, if any, has any agreement, arrangement or understanding in connection with such proposal and (v) such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for stockholder action; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation which are, directly or indirectly, owned beneficially (within the meaning of Rule 13d-3 under the Exchange Act) or of record by such stockholder and such beneficial owner (provided, that such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made shall in all events be deemed to beneficially own any shares of any class or series and number of shares of capital stock of the Corporation as to which such stockholder or beneficial owner, if any, has a right to acquire beneficial ownership at any time in the future), (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing (including their names), including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting upon such business or nomination, as the case may be, and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation as to whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements of this paragraph (A) of this Section 1.10 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation. If requested by the Corporation, the information required by clause (c) of this paragraph (A)(2) shall be supplemented by such stockholder and any such beneficial owner not later than ten (10) days after the record date for the meeting to disclose such information as of the record date. In addition, a stockholder seeking to nominate a director candidate or bring other business before the annual meeting shall promptly provide any other information reasonably requested by the Corporation.
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(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.10 to the contrary, in the event that the number of directors to be elected to the Board at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 1.10 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 1.10 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board or any committee thereof or (2) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 1.10 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.10. The number of nominees a stockholder may nominate for election at the special meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Section 1.10 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which the public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment, postponement or recess of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
(C) General. (1) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.10 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.10. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made, solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (A)(2)(c)(vi) of this Section 1.10) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.10, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.10, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 1.10, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of such writing or electronic transmission, at the meeting of stockholders.
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(2) For purposes of this Section 1.10, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(3) Notwithstanding the foregoing provisions of this Section 1.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 1.10; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 1.10 (including paragraphs (A)(1)(c) and (B) hereof), and compliance with paragraphs (A)(1)(c) and (B) of this Section 1.10 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of (A)(2), business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 1.10 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
1.11 Conduct of Meetings; Inspectors of Election.
(A) Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman’s absence by the Vice Chairman of the Board, if any, or in the Vice Chairman’s absence by the Chief Executive Officer, or in the Chief Executive Officer’s absence, by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board. The Secretary shall act as secretary of the meeting, but in the Secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
(B) The Board may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the Corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board, the chairman of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
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(C) The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted.
(D) The Corporation may, and if required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees, agents or representatives of the Corporation. Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and, when the vote is completed, shall certify the inspector’s determination of the result of the vote taken and of such other facts as may be required by law. Every vote taken by ballots shall be counted by a duly appointed inspector or duly appointed inspectors.
ARTICLE
II
DIRECTORS
2.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all of the powers of the Corporation except as otherwise provided by law or the Certificate of Incorporation.
2.2 Number, Election; Term and Qualification. The total number of directors constituting the Board shall be as fixed in, or in the manner provided by, the Certificate of Incorporation. Election of directors need not be by written ballot. The term of office of each director shall be as specified in the Certificate of Incorporation. Directors need not be stockholders of the Corporation.
2.3 Chairman of the Board; Vice Chairman of the Board. The Board may appoint from its members a Chairman of the Board and a Vice Chairman of the Board, neither of whom need be an employee or officer of the Corporation. If the Board appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board and, if the Chairman of the Board is also designated as the Corporation’s Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.7 of these Bylaws. If the Board appoints a Vice Chairman of the Board, such Vice Chairman shall perform such duties and possess such powers as are assigned by the Board. Unless otherwise provided by the Board, the Chairman of the Board or, in the Chairman’s absence, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board.
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2.4 Quorum. The greater of (a) a majority of the directors at any time in office and (b) one-third of the whole Board shall constitute a quorum of the Board. If at any meeting of the Board there shall be less than a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
2.5 Action at Meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, unless a greater number is required by law or by the Certificate of Incorporation.
2.6 Removal. Subject to the rights of holders of any series of Preferred Stock, directors of the Corporation may be removed only as expressly provided in the Certificate of Incorporation.
2.7 Newly Created Directorships; Vacancies. Any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled in accordance with the Certificate of Incorporation.
2.8 Resignation. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event.
2.9 Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as shall be determined from time to time by the Board; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board may be held without notice immediately after and at the same place as the annual meeting of stockholders.
2.10 Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the Chief Executive Officer, the affirmative vote of a majority of the directors then in office, or by one director in the event that there is only a single director in office.
2.11 Notice of Special Meetings. Notice of the date, place and time of any special meeting of the Board shall be given to each director (a) in person or by telephone at least twenty-four (24) hours in advance of the meeting, (b) by sending written notice by reputable overnight courier, telecopy, electronic mail, facsimile or other means of electronic transmission, or delivering written notice by hand, to such director’s last known business, home or means of electronic transmission address at least twenty-four (24) hours in advance of the meeting, or (c) by sending written notice by first-class mail to such director’s last known business or home address at least seventy-two (72) hours in advance of the meeting. Such notice may be given by the Secretary or by the Chairman of the Board, the Chief Executive Officer or one of the directors calling the meeting. A notice or waiver of notice of a meeting of the Board need not specify the purposes of the meeting.
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2.12 Meetings by Conference Communications Equipment. Directors may participate in meetings of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
2.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board, or the committee thereof, in the same paper or electronic form as the minutes are maintained.
2.14 Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation with such lawfully delegable powers and duties as the Board thereby confers, to serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board and subject to the provisions of law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board may from time to time request. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
2.15 Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board may from time to time determine. No such payment shall preclude any director from serving the Corporation or any of its parent or subsidiary entities in any other capacity and receiving compensation for such service.
ARTICLE
III
OFFICERS
3.1 Titles. The officers of the Corporation may consist of a Chief Executive Officer, a President, a Chief Financial Officer, a Treasurer and a Secretary and such other officers with such other titles as the Board shall from time to time determine. The Board may appoint such other officers, including one or more Vice Presidents and one or more Assistant Treasurers or Assistant Secretaries, as it may deem appropriate from time to time. The only individuals who shall be considered the officers of the Corporation shall be those individuals who have been appointed or elected as an officer of the Corporation by the Board.
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3.2 Election. The officers of the Corporation shall be elected by the Board.
3.3 Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, resignation, disqualification or removal.
3.5 Resignation and Removal. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. Any officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the directors then in office. Except as the Board may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the Corporation
3.6 Vacancies. The Board may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified, or until such officer’s earlier death, resignation, disqualification or removal.
3.7 President; Chief Executive Officer. Unless the Board has designated another person as the Corporation’s Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall have general charge and supervision of the business of the Corporation subject to the direction of the Board, and shall perform all duties and have all powers that are commonly incident to the office of chief executive or that are delegated to such officer by the Board. The President shall perform such other duties and shall have such other powers as the Board or the Chief Executive Officer (if the President is not the Chief Executive Officer) may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer or the President (if the President is not the Chief Executive Officer), the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board) shall perform the duties of the Chief Executive Officer and when so performing such duties shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.
3.8 Vice Presidents/Other Officers. Each Vice President and any other officer designated by the Board shall perform such duties and possess such powers as the Board or the Chief Executive Officer may from time to time prescribe. The Board may assign to any Vice President the title of Executive Vice President or Senior Vice President, and may assign to any Vice President or other officer any other title selected by the Board.
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3.9 Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board, to attend all meetings of stockholders and the Board (other than executive sessions of the Board) and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers as the Board, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board) shall perform the duties and exercise the powers of the Secretary.
The chairman of any meeting of the Board or of stockholders may designate a temporary secretary to keep a record of any meeting.
3.10 Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board, to make proper accounts of such funds, and to render as required by the Board statements of all such transactions and of the financial condition of the Corporation.
The Assistant Treasurers shall perform such duties and possess such powers as the Board, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board) shall perform the duties and exercise the powers of the Treasurer.
3.11 Salaries. Officers of the Corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board.
3.12 Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.
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ARTICLE
IV
CAPITAL STOCK
4.1 Issuance of Stock. Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the Corporation or the whole or any part of any shares of the authorized capital stock of the Corporation held in the Corporation’s treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board in such manner, for such lawful consideration and on such terms as the Board may determine.
4.2 Stock Certificates; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Every holder of stock of the Corporation represented by certificates shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board, representing the number of shares held by such holder registered in certificate form. Each such certificate shall be signed in a manner that complies with Section 158 of the DGCL and each of the Chief Executive Officer, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer are duly authorized to sign such certificates by, or in the name of, the Corporation, unless otherwise expressly provided in the resolution of the Board electing such officer.
Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these Bylaws, applicable securities laws or any agreement among any number of stockholders or among such holders and the Corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.
If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each certificate representing shares of such class or series of stock, provided that in lieu of the foregoing requirements there may be set forth on the face or back of each certificate representing shares of such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated shares, the registered owner thereof shall be given a notice, in writing or by electronic transmission, containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the DGCL or, with respect to Section 151 of DGCL, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
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4.3 Transfers. Shares of stock of the Corporation shall be transferable in the manner prescribed by law, the Certificate of Incorporation and in these Bylaws. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation or by transfer agents designated to transfer shares of stock of the Corporation. Subject to applicable law, shares of stock represented by certificates shall be transferred only on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the Corporation in accordance with the requirements of these Bylaws.
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate or uncertificated shares in place of any previously issued certificate alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity and posting of such bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
4.5 Record Date. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
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4.6 Regulations. The issue and registration of shares of stock of the Corporation shall be governed by such other regulations as the Board may establish.
ARTICLE
V
GENERAL PROVISIONS
5.1 Fiscal Year. Except as from time to time otherwise designated by the Board, the fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board.
5.3 Waiver of Notice. Whenever notice is required to be given by law, by the Certificate of Incorporation or by these Bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time of the event for which notice is to be given, shall be deemed equivalent to notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in any such waiver. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
5.4 Voting of Securities. Except as the Board may otherwise designate, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer may waive notice, vote, consent, or appoint any person or persons to waive notice, vote or consent, on behalf of the Corporation, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for the Corporation (with or without power of substitution and re-substitution), with respect to the securities of any other entity which may be held by this Corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and/or restated and in effect from time to time.
5.7 Severability. Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.
5.8 Pronouns. All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.
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5.9 Manner of Notice. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation. Notice shall be given (i) if mailed, when deposited in the United States mail, (ii) if delivered by courier service, the earlier of when the notice is received or left at the stockholder’s address, or (iii) if given by electronic mail, when directed at to such stockholder’s electronic mail address (unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail or such notice is prohibited by the DGCL to be given by electronic transmission). A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation. A notice by electronic mail shall be deemed to include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files or information. Any notice to stockholders under any provision of the DGCL, the Certificate of Incorporation or these Bylaws provided by electronic transmission (other than any such notice given by electronic mail) may only be given in a form consented to by such stockholder, and any such notice by electronic transmission shall be deemed to be given as provided by the DGCL.
5.10 Electronic Transmission. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
ARTICLE
VI
AMENDMENTS
These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the Board or by the stockholders as expressly provided in the Certificate of Incorporation.
ARTICLE
VII
INDEMNIFICATION AND ADVANCEMENT
7.1 Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 7.3, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
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7.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 7.3, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
7.3 Authorization of Indemnification. Any indemnification under this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 7.1 or Section 7.2, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding set forth in Section 7.1 or Section 7.2 or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
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7.4 Good Faith Defined. For purposes of any determination under Section 7.3, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on good faith reliance on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term “another enterprise” as used in this Section 7.4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 7.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 7.1 or 7.2, as the case may be.
7.5 Right of Claimant to Bring Suit. Notwithstanding any contrary determination in the specific case under Section 7.3, and notwithstanding the absence of any determination thereunder, if a claim under Sections 7.1 or 7.2 of the Article VII is not paid in full by the Corporation within (i) ninety (90) days after a written claim for indemnification has been received by the Corporation, or (ii) thirty (30) days after a written claim for an advancement of expenses has been received by the Corporation, the claimant may at any time thereafter (but not before) bring suit against the Corporation in the Court of Chancery in the State of Delaware to recover the unpaid amount of the claim, together with interest thereon, or to obtain advancement of expenses, as applicable. It shall be a defense to any such action brought to enforce a right to indemnification (but not in an action brought to enforce a right to an advancement of expenses) that the claimant has not met the standards of conduct which make it permissible under the DGCL (or other applicable law) for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither a contrary determination in the specific case under Section 7.3 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the claimant has not met any applicable standard of conduct. If successful, in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim, including reasonable attorneys’ fees incurred in connection therewith, to the fullest extent permitted by applicable law.
7.6 Expenses Payable in Advance. Expenses, including without limitation attorneys’ fees, incurred by a current or former director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such current or former director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VII.
7.7 Nonexclusivity of Indemnification and Advancement of Expenses. The rights to indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that, subject to Section 7.11, indemnification of the persons specified in Sections 7.1 and 7.2 shall be made to the fullest extent permitted by law. The provisions of this Article VII shall not be deemed to preclude the indemnification of any person who is not specified in Section 7.1 or 7.2 but whom the Corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.
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7.8 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VII.
7.9 Certain Definitions. For purposes of this Article VII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VII, references to “fines” shall include any excise taxes assessed on a person with respect of any employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VII.
7.10 Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
7.11 Limitation on Indemnification. Notwithstanding anything contained in this Article VII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 7.5), the Corporation shall not be obligated to indemnify any director, officer, employee or agent in connection with an action, suit proceeding (or part thereof) initiated by such person unless such action, suit or proceeding (or part thereof) was authorized by the Board.
7.12 Contract Rights. The obligations of the Corporation under this Article VII to indemnify, and advance expenses to, a person who is or was a director or officer of the Corporation shall be considered a contract between the Corporation and such person, and no modification or repeal of any provision of this Article VII shall affect, to the detriment of such person, such obligations of the Corporation in connection with a claim based on any act or failure to act occurring before such modification or repeal.
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Exhibit 3.5
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VIRPAX PHARMACEUTICALS, INC.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware, Virpax Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
1. The date of filing of the original Certificate of Incorporation of this corporation with the Secretary of State of the State of Delaware was May 12, 2017.
2. The Certificate of Incorporation of the Corporation is hereby amended to effect a reverse stock split of the Corporation’s common stock by adding the following after the first paragraph of Article IV:
“Effective upon the effective time of this Certificate of Amendment of the Certificate of Incorporation (the “Split Effective Time”), (i) every 4.944260256 shares of Common Stock of the Company issued and outstanding immediately prior to the Split Effective Time shall be changed, combined and reclassified into one (1) whole share of Common Stock.
Notwithstanding the foregoing, there shall be no fractional shares of Common Stock issued in connection with the reclassification of Common Stock effected hereby. In lieu of fractional interests in shares of Common Stock to which any stockholder would otherwise be entitled pursuant hereto (after aggregating all fractions of a share to which such stockholder would otherwise be entitled), such stockholder shall be entitled to receive a cash payment equal to the fair value of one share of Common Stock as determined by the Board of Directors of the Company multiplied by such fraction. From and after the Split Effective Time, certificates representing shares Common Stock issued and outstanding prior to the Split Effective Time shall represent the number of whole shares of Common Stock after the Split Effective Time into which such shares Common Stock shall have been reclassified pursuant to this Certificate of Amendment of the Certificate of Incorporation and the right to receive cash in lieu of fractional shares as provided herein. Upon surrender by stockholders of certificates representing shares of Common Stock issued and outstanding prior to the Split Effective Time, cash in lieu of fractional shares, if any, will be issued to such stockholders.”
3. Pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, the holders of outstanding shares of the Corporation having no less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and voted, consented to the adoption of the aforesaid amendments without a meeting, without a vote and without prior notice and that written notice of the taking of such actions was given in accordance with Section 228(e) of the General Corporation Law of the State of Delaware.
4. The foregoing amendments were duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.
5. This Certificate of Amendment and the amendments to the Certificate of Incorporation effected hereby shall be effective immediately upon filing.
[Signature Page Follows]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 19th day of November, 2020.
VIRPAX PHARMACEUTICALS, INC. | ||
By: | /s/ Anthony P. Mack | |
Name: | Anthony P. Mack | |
Title: | Chief Executive Officer |
Exhibit 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“Agreement”) is made as of _________ __, 2020 by and between Virpax Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and ______________ (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation and due to the fact that such exposure frequently bears no relationship to compensation paid to such officers and directors;
WHEREAS, the Company and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers;
WHEREAS, the Company’s Bylaws provide for the indemnification of the officers and directors of the Company to the fullest extent permitted by the General Corporation Law of the State of Delaware (the “DGCL”). The Bylaws expressly provide that the indemnification provisions set forth therein are not exclusive and contemplate that contracts may be entered into between the Company and its directors and officers with respect to indemnification;
WHEREAS, Section 145 of the DGCL empowers the Company to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the Company’s request, as the directors, officers, employees or agents of other corporations or enterprises;
WHEREAS, Section 102(b)(7) of the DGCL allows the Company to include in its Certificate of Incorporation a provision limiting or eliminating the personal liability of a director for monetary damages in respect of claims by shareholders and corporations for breach of certain fiduciary duties, and the Company has so provided in its Certificate of Incorporation that each director shall be exculpated from such liability to the maximum extent permitted by law;
WHEREAS, the Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company may be inadequate in certain circumstances to cover all possible exposure for which Indemnitee should be protected.
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining highly competent persons to serve as directors and officers. The Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation and Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the Company’s Certificate of Incorporation, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving at the Company’s request as a director, officer, employee, agent or fiduciary). The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer or director of the Company.
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Section 2. Definitions. As used in this Agreement:
(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
i. Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding securities;
ii. Change in Board. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;
iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;
iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and
v. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
For purposes of this Section 2(a), the following terms shall have the following meanings:
(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(B) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
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(C) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.
(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, limited liability company, partnership or joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company.
(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 13(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
(e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
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(f) “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, or investigative nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any action on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement; except one initiated by an Indemnitee to enforce his rights under this Agreement.
Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that his conduct was unlawful.
Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.
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Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section and without limiting the foregoing, if any Proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Company, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for purposes of this Agreement to have been successful with respect thereto.
Section 6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise participates in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
Section 7. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with the Proceeding.
(b) For purposes of Section 7(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:
i. to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and
ii. to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
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Section 8. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or
(b) for any Proceedings with respect to which final judgment is rendered against Indemnitee for payment of (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(a) hereof) or similar provisions of state statutory law or common law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), or
(c) any Proceeding involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements the Indemnitee may be a party to with the Company or any subsidiary of the Company or any other applicable foreign or domestic corporation, partnership, joint venture, trust or other enterprise, if any; or
(d) except as provided in Section 13(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
Section 9. Advances of Expenses. The Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after receipt by the Corporation of (i) a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of any Proceeding, and (ii) an undertaking by or on behalf of Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment. Advances shall be unsecured and interest free. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. This Section 9 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 8 or to any Proceeding for which the Company has assumed the defense thereof in accordance with Section 10(b) of this Agreement.
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Section 10. Procedure for Notification and Defense of Claim.
(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such action, suit or proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.
(b) In the event the Company shall be obligated to pay the Expenses of Indemnitee with respect to a Proceeding, as provided in this Agreement, the Company shall be entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to Indemnitee, upon delivery of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding at Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Company, (ii) counsel to the Company or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Company and the Indemnitee in the conduct of such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided by this Agreement.
(c) The Company will be entitled to participate in the Proceeding at its own expense.
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Section 11. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred after the date of this Agreement, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred after the date of this Agreement, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Disinterested Directors, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be selected as provided in this Section 11(b). If a Change in Control shall not have occurred after the date of this Agreement, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred after the date of this Agreement, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after the submission by Indemnitee or the Company, as the case may be, of a written objection, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
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Section 12. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b) Subject to Section 13(e), if the person, persons or entity empowered or selected under Section 11 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 12(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 11(a) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this Agreement.
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(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary, including financial statements, or on information supplied to Indemnitee by the officers of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary in the course of their duties, or on the advice of legal counsel for the enterprise or on information or records given or reports made to the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary. The provisions of this Section 12(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.
(e) Actions of Others. The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or other corporation, limited liability company, partnership, joint venture, trust employee benefit plan or other enterprise of which Indemnitee was serving as a director, officer, employee, agent or fiduciary shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Section 13. Remedies of Indemnitee.
(a) Subject to Section 13(e), in the event that (i) a determination is made pursuant to Section 11 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 11(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 or the last sentence of Section 11(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3, 4 or 7 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 13(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
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(b) In the event that a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 13 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 11(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 13, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 13 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
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Section 14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Certificate of Incorporation, the Company’s By-laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Certificate of Incorporation, the Company’s By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company and the Indemnitee shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise.
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Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.
Section 17. Entire Agreement. Supersedes Prior Agreements. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation of the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 18. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise except to the extent the Corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.
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Section 20. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:
(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.
(b) If to the Company to
Virpax Pharmaceuticals, Inc.
1554 Paoli Pike, #279
West Chester, PA 19380
Attention: Chairman of the Board
or to any other address as may have been furnished to Indemnitee by the Company.
Section 21. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
Section 22. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably Corporation Services Company as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
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Section 23. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.
VIRPAX PHARMACEUTICALS, INC. | |||
By: | |||
Name: | |||
Title: |
INDEMNITEE
Name: |
Address: | ||
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Exhibit 10.7
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
LICENSE AGREEMENT
by and between
MEDPHARM LIMITED
and
VIRPAX PHARMACEUTICALS, LLC
June 10, 2017
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
TABLE OF CONTENTS
PAGES | ||
Article 1. | DEFINITIONS | 2 |
Article 2. | LICENSE GRANT | 10 |
2.1 | License Grant | 10 |
2.2 | Sublicensing | 10 |
2.3 | Non-Compete | 11 |
Article 3. | DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION | 11 |
3.1 | Responsibility | 11 |
3.2 | Diligence | 11 |
3.3 | Records | 12 |
3.4 | Reports | 12 |
3.5 | Compliance with Applicable Laws | 12 |
3.6 | MedPharm Manufacturing Option | 12 |
Article 4. | PAYMENTS | 13 |
4.1 | Upfront Payment | 13 |
4.2 | Milestone Payments | 13 |
4.3 | Royalties | 14 |
4.4 | Royalty Term | 14 |
4.5 | Adjustment for Generic Competition | 14 |
Article 5. | PAYMENT; RECORDS; AUDITS | 14 |
5.1 | Payment; Reports | 14 |
5.2 | Exchange Rate; Manner and Place of Payment | 15 |
5.3 | Income Tax Withholding | 15 |
5.4 | Audits | 15 |
Article 6. | CONFIDENTIALITY AND PUBLICATION | 16 |
6.1 | Confidential Information | 16 |
6.2 | Exceptions | 16 |
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
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Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Article 11. | DISPUTE RESOLUTION | 31 |
11.1 | Disputes | 31 |
11.2 | Arbitration | 31 |
11.3 | Court Actions | 32 |
Article 12. | MISCELLANEOUS | 32 |
12.1 | Rights Upon Bankruptcy | 32 |
12.2 | Governing Law | 33 |
12.3 | Entire Agreement; Amendments | 33 |
12.4 | Non-Waiver | 33 |
12.5 | Assignment | 33 |
12.6 | Force Majeure | 34 |
12.7 | Severability | 34 |
12.8 | Notices | 34 |
12.9 | Interpretation | 35 |
12.10 | Relationship between the Parties | 36 |
12.11 | Cumulative Remedies | 36 |
12.12 | No Third Party Rights | 36 |
12.13 | Further Assurances | 36 |
12.14 | Costs | 36 |
12.15 | Counterparts | 36 |
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Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
LICENSE AGREEMENT
This License Agreement (“Agreement”), effective as of June 10, 2017 (the “Effective Date”), is made by and between MedPharm Limited, a company organized and existing under the laws of the United Kingdom (“MedPharm”), and Virpax Pharmaceuticals, LLC, a limited liability company organized and existing under the laws of the State of Delaware (“Virpax”).
Recitals
Whereas, MedPharm owns intellectual property, including as covered by patent application PCT/GB2006/003408 entitled “TOPICAL FILM-FORMING MONOPHASIC FORMULATIONS”, as well as know-how covering its spray formulation technology and the formulation of active pharmaceutical ingredients within spray formulation technology, necessary or useful to the development and commercialization of products in the Field (the “MedSpray Technology”);
Whereas, Virpax has been formed to engage in the discovery, development, marketing and sale of pharmaceutical products; and
Whereas, MedPharm and Virpax have entered into that certain Research and Option Agreement, dated as of April 11, 2017 (the “Option Agreement”), pursuant to which Virpax has the right to license the MedPharm Technology in connection with Virpax Molecules (as therein defined) pending the negotiation of a definitive license agreement; and
Whereas, Virpax and MedPharm intend this Agreement to be the initial Definitive License Agreement entered into in connection with the Option Agreement and accordingly Virpax desires to obtain, and MedPharm is willing to grant to Virpax, a license under the MedPharm Technology to discover, develop, make, have made, use, sell, have sold, offer for sale, market, export, import and otherwise commercialize Products in the Field, on the terms and subject to the conditions set forth herein.
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms shall have the respective meanings set forth below:
1.1 “Accounting Standards” shall mean (a) U.S. generally accepted accounting principles or (b) international financial reporting standards; in either case, consistently applied throughout the organization of a Party (or a Related Party, as applicable).
1.2 “Act” shall mean, as applicable, the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§301 et seq., and/or the Public Health Service Act, 42 U.S.C. §§262 et seq., as such may be amended from time to time.
1.3 “Administrator” shall have the meaning provided in Section 11.2.
1.4 “Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. A Person shall be deemed to control another Person if such Person possesses the power to direct or cause the direction of the management, business and policies of such Person, whether through the ownership of more than fifty percent (50%) of the voting securities of such Person, by contract or otherwise.
1.5 “Agreement” shall mean this License Agreement, including all Schedules and Exhibits hereto, as it may be amended, supplemented or modified from time to time in accordance with its terms.
1.6 “Applicable Laws” shall mean the applicable laws and regulations of any jurisdiction, which are applicable to any of the Parties or their respective Affiliates in carrying out activities hereunder or to which any of the Parties or their respective Affiliates in carrying out the activities hereunder is subject, and shall include all statutes, enactments, acts of legislature, laws, ordinances, rules, regulations, notifications, guidelines, policies, directions, directives and orders of any statutory authority, tribunal, board, or court or any central or state government or local authority or other governmental entity in such jurisdictions.
1.7 “Bankruptcy Laws” shall have the meaning provided in Section 12.1.
1.8 “Compound” shall mean a compound that is categorized as an NSAID and is listed in Exhibit B.
1.9 “Claim” shall have the meaning provided in Section 10.1.
1.10 “Commercially Reasonable Efforts” shall mean, with respect to the efforts to be expended by a Party with respect to any objective, the level of reasonable, diligent, good faith efforts that biopharmaceutical companies (or manufacturers of over-the-counter medicines, as the case may be) typically devote to products owned by them that are at a similar stage in their development or product life and are of similar market potential, in order to develop the product in a timely manner and maximize the economic return to the Parties from its commercialisation, taking into account efficacy, safety, approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval, the profitability of the product, and other relevant factors. As used in this Section 1.11 “biopharmaceutical companies” shall mean companies in the biopharmaceutical industry of a size and stage of development similar to that of such Party, including having human pharmaceutical product candidates or products in a similar stage of development to the Products. Commercially Reasonable Efforts shall be determined on a market-by-market and Product-by-Product basis, and it is anticipated that the level of effort will be different for different markets, and will change over time, reflecting changes in the status of the Product and the market(s) involved.
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Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
1.11 “Competitive Infringement” shall have the meaning provided in Section 8.4.
1.12 “Confidential Information” shall mean any and all Information, whether communicated in writing or orally or by any other method, which is provided by or on behalf of one Party to the other Party in connection with this Agreement, the Option Agreement or pursuant to that certain Confidential Disclosure Agreement between MedPharm and Virpax dated October 12, 2016.
1.13 “Control”, “Controls” or “Controlled by” shall mean, with respect to any Patent Rights, Information, Know How or other intellectual property rights, the possession by Person of the ability (whether by ownership, license or other right, other than pursuant to a license granted under this Agreement) to grant access to, or a license or sublicense of, such Patent Rights, Know-How, Information or other intellectual property rights without violating the terms of any agreement or other arrangement with any other Person.
1.14 “Cover” means (a) with respect to Know-How, such Know-How was used in making, having made, using, selling, offering to sell, importing, having sold, exporting or making improvements to the Product, and (b) with respect to a Patent Right, a Valid Patent Claim would (absent a license thereunder or ownership thereof) be Infringed by making, having made, using, selling, offering to sell, importing, having sold, exporting or making improvements to the Product including research and development. Cognates of the word “Cover” shall have correlative meanings.
1.15 “Developmental Milestone” shall have the meaning provided in Section 4.2(a).
1.16 “Dispute” shall have the meaning provided in Section 11.1.
1.17 “Effective Date” shall have the meaning provided in the Preamble.
1.18 “EMA” shall mean the European Medicines Agency or any successor entity thereto.
1.19 “European Market” shall mean France, Germany, Italy, Spain and United Kingdom.
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1.20 “Export Control Laws” shall mean all applicable U.S. laws and regulations relating to (a) sanctions and embargoes imposed by the Office of Foreign Assets Control of the U.S. Department of Treasury or (b) the export or re-export of commodities, technologies, or services, including the Export Administration Act of 1979, 24 U.S.C. §§2401-2420, the International Emergency Economic Powers Act, 50 U.S.C. §§1701-1706, the Trading with the Enemy Act, 50 U.S.C. §§1 et. seq., the Arms Export Control Act, 22 U.S.C. §§2778 and 2779, and the International Boycott Provisions of Section 999 of the U.S. Internal Revenue Code of 1986 (as amended).
1.21 “FCPA” shall mean the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1, et. seq.) as amended.
1.22 “FDA” shall mean the U.S. Food and Drug Administration and any successor entity thereto.
1.23 “Field” shall mean any and all uses in humans (including all diagnostic, therapeutic and preventative uses).
1.24 “First Commercial Sale” shall mean, with respect to a given Product in a given country, the first commercial transfer or disposition for value of such Product by Virpax or a Related Party to a Third Party (other than a Related Party) for end use or consumption of such Product in such country in such country, excluding, however, transfers or dispositions of Product, without consideration: (i) in connection with patient assistance programs; (ii) for charitable or promotional purposes; (iii) for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient” or other limited access programs; or (iv) for use in any tests or studies reasonably necessary to comply with Applicable Law, regulation or request by a Regulatory Authority. For clarity, First Commercial Sale shall be determined on a Product-by-Product and country-by-country basis.
1.25 “Generic Version” shall mean, with respect to a Product, on a country-by-country basis, a pharmaceutical product that: (a) is sold in a given country by a Third Party, other than a Related Party, a licensee or sub-licensee of a Related Party, or any other Person in a chain of distribution originating from Virpax, a Related Party or any of their respective licensees or sub-licensees; (b) contains the same Compound as such Product in the same dosage form as such Product; and (c) has been approved for marketing by the relevant Regulatory Authority in such country in a pressurized aerosol spray form as a generic product where the Product is the reference product and which may be substituted for the Product without any action by the physician or health care practitioner.
1.26 “GCP” shall mean the then current “good clinical practices” as such term is defined from time to time by the FDA, EMA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
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1.27 “GLP” shall mean the then current “good laboratory practices” as such term is defined from time to time by the FDA, EMA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
1.28 “GMP” shall mean the then current “good manufacturing practices” as such term is defined from time to time by the FDA, EMA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
1.29 “IND” shall mean an investigational new drug application, clinical study application, clinical trial exemption, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority, including any such application filed with the FDA pursuant to 21 CFR Part 312.
1.30 “Indemnified Party” shall have the meaning provided in Section 10.3.
1.31 “Indemnifying Party” shall have the meaning provided in Section 10.3
1.32 “Indication” shall mean a separate and distinct disease or medical condition in humans: (a) which a Product is intended to treat or prevent, as evidenced by the protocol for a clinical trial of such Product or by the proposed Product labeling in an NDA filed with a Regulatory Authority for such Product; or (b) which is contained in a Product’s labeling approved by a Regulatory Authority as part of the Marketing Approval for such Product.
1.33 “Information” shall mean any and all proprietary data, information, materials and know-how (whether patentable or not) that are not in the public domain, including, (a) ideas, discoveries, inventions, improvements, technology or trade secrets, (b) pharmaceutical, chemical and biological materials, products, components or compositions, (c) methods, procedures, formulas, processes, tests, assays, techniques, regulatory requirements and strategies, (d) biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical, safety, manufacturing and quality control data and information related thereto, (e) technical and non-technical data and other information related to the foregoing, and (f) drawings, plans, designs, diagrams, sketches, specifications or other documents containing or relating to such information or materials.
1.34 “Infringe” or “Infringement” means any infringement as determined by Applicable Law, including, without limitation, direct infringement, contributory infringement or any inducement to infringe.
1.35 “Initiates” or “Initiation” shall mean, with respect to a human clinical trial, the administration of the first dose to the first patient/subject in such trial.
1.36 “Invention” shall mean any invention, whether or not patentable, made in the course and as a result of the conduct of the activities contemplated by this Agreement.
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1.37 “JAMS” shall mean Judicial Arbitration and Mediation Services, Inc.
1.38 “Joint Invention” shall have the meaning provided in Section 8.1.
1.39 “Joint Patent Rights” shall have the meaning provided in Section 8.1.
1.40 “Know-How” shall mean any and all Information related to MedSpray Technology and/or a Product, or any formulation, product improvement and/or indication thereof, or necessary or useful for the development, manufacture, commercialization or use of any of the foregoing.
1.41 “Losses” shall have the meaning provided in Section 10.1.
1.42 “Marketing Approval” shall mean all approvals from the relevant Regulatory Authority in a given country necessary to market and sell a pharmaceutical product in such country, excluding pricing or reimbursement approvals whether or not required for marketing or sale of such product in such country.
1.43 “MedPharm” shall have the meaning provided in the Preamble.
1.44 “MedPharm Indemnitees” shall have the meaning provided in Section 10.1.
1.45 “MedPharm Know-How” shall mean all Know-How Controlled by MedPharm or any of its Affiliates as of the Effective Date, or that is developed or Controlled by MedPharm after the Effective Date, related to MedSpray Technology or otherwise necessary or useful for the research, development, manufacture and/or commercialization of any Product and that, in each case, MedPharm has the right to disclose and license to Virpax.
1.46 “MedPharm Patent Rights” shall mean any and all Patent Rights Controlled by MedPharm or any of its Affiliates as of the Effective Date, or at any time during the Term, that claim or Cover the composition, manufacture, use, sale, offer for sale and/or import of any Product in the Field, including, but not be limited to: (i) the MedSpray Patent Rights; (ii) MedPharm’s interest in any Joint Patent Rights; and (iii) those in-licensed by MedPharm under any agreement with a Third Party that constitute MedSpray Patent Rights.
1.47 “MedPharm Technology” shall mean MedPharm Patent Rights and MedPharm Know-How.
1.48 “MedSpray Patent Rights” shall mean MedPharm Patent Rights that are specific to the MedSpray Technology that are (i) set forth on Exhibit A under the heading “MedSpray Patent Rights”, or (ii) Controlled by MedPharm or any of its Affiliates as of the Effective Date, or at any time during the Term. The foregoing shall include any modifications to the MedPharm Patent Rights or MedSpray Patent Rights conceived, made or reduced to practice by MedPharm during the Term.
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1.49 “NDA” shall mean: (a) in the United States, a New Drug Application (as more fully defined in 21 CFR 314.5, et seq.) filed with the FDA, or any successor application thereto; or (b) in any other country or group of countries, the equivalent application or submission for approval to market a pharmaceutical product filed with the governing Regulatory Authority in such country or group of countries.
1.50 “Net Sales” shall mean, with respect to any Product, the gross amount invoiced with respect thereto, whether by Virpax, any Affiliate of Virpax, any Sub-licensee, co-marketer, collaborator, joint venturer or other partner with Virpax or any of its Affiliates (collectively, the “Selling Parties”), in the Territory, in an arm’s length transaction exclusively for money or, where the sale is not at arm’s length or not exclusively for money, the price that would have been so invoiced if it had been at arm’s length exclusively for money, less the following to the extent allowed, paid or accrued with respect to such sales consistent with relevant Accounting Standards:
(a) normal and customary trade, cash and/or quantity discounts allowed and taken, and wholesaler and inventory management fees paid, with respect to sales of such Product or Products;
(b) amounts paid, repaid or credited by reason of defects, rejection, recalls, returns and allowances with respect to such Product or Products;
(c) any applicable sales, use or value-added taxes;
(d) bad debt deductions and uncollectible amounts actually written off;
(e) charges, chargebacks, rebates, discounts and amounts under rebate programs paid or accrued on sale or dispensing of the such Product;
(f) royalties payable to any Third Party with respect to sales of such Products;
(g) all transportation charges, including freight, postage and insurance related directly to such Product, in each case to the extent included in the invoice price to a buyer; and
(h) all other deductions allowed by relevant Accounting Standards, as consistently applied by Virpax and its Affiliates (or their licensees or sub-licensees, as applicable) in determining net product sales.
For clarification, sale of Product by a Selling Party to another Selling Party for resale by such entity to a Third Party shall not be deemed a sale for purposes of this definition of “Net Sales,” provided that the subsequent resale is included in the computation of Net Sales. Further, transfers or dispositions of Product, without consideration: (A) in connection with patient assistance programs; (B) for charitable or promotional purposes; (C) for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient” or other limited access programs; or (D) for use in any tests or studies reasonably necessary to comply with Applicable Law, regulation or request by a Regulatory Authority, shall not, in each case of (A) through (D), be deemed sales of such Product for purposes of this definition of “Net Sales.”
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1.51 “NSAID” shall have the meaning given to such term in Section 2.3.
1.52 “Option Agreement” shall have the meaning provided in the Recitals.
1.53 “Other Market” shall mean a market other than the United States or any country which is in the European Union from time to time (including the United Kingdom, whether or not it is at the relevant time a member state of the European Union).
1.54 “Party” shall mean Virpax and MedPharm, individually, and “Parties” shall mean Virpax and MedPharm, collectively.
1.55 “Patent Certification” shall have the meaning provided in Section 8.3.
1.56 “Patent Rights” shall mean (i) patents and patent applications (which for the purposes of this Agreement shall be deemed to include certificates of invention and applications for certificates of invention); (ii) any and all divisionals, continuations, continuations-in-part, reissues, renewals, substitutions, registrations, re-examinations, revalidations, patent term extensions, supplementary protection certificates and the like of any such patents and patent applications; and (iii) any and all foreign equivalents of the foregoing.
1.57 “Person” means any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.
1.58 “Phase 2 Clinical Trial” shall mean a human clinical trial of Product, the principal purpose of which is a determination of safety and an assessment of its efficacy in the target patient population and to determine the common short-term side effects and risks associated with the drug, as further described in 21 C.F.R. § 312.21(b) or its successor regulation, including any equivalent clinical trial conducted in any country other than the United States.
1.59 “Phase 3 Clinical Trial” shall mean a human clinical trial of a Product designed to: (i) establish that such Product is safe and efficacious for its intended use; (ii) define warnings, precautions and adverse reactions that are associated with the Product in the dosage range to be prescribed; and (iii) support regulatory approval of such Product that would satisfy the requirements of 21 CFR 312.21(c) or its non-US equivalents.
1.60 “Product” shall mean any pharmaceutical composition or preparation (in any and all dosage forms) in final form containing one or more Compounds that was developed, manufactured or commercialized utilizing MedPharm Technology.
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1.61 “Regulatory Authority” shall mean any country, federal, regional, supranational, state or local regulatory agency, department, bureau or other governmental or regulatory authority having the administrative authority to regulate the development or marketing of pharmaceutical products in any country or other jurisdiction.
1.62 “Regulatory Documentation” shall mean all regulatory applications, registrations, licenses, authorizations and approvals (including all INDs, NDAs and Marketing Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), and all reports and documentation in connection with clinical studies and tests (including study reports and study protocols, and copies of all interim study analyses), and all data contained in any of the foregoing, including all INDs, NDAs, advertising and promotion documents, manufacturing data, drug master files, clinical data, adverse event files and complaint files, in each case related to MedPharm Technology or a Product.
1.63 “Regulatory Exclusivity” shall mean marketing exclusivity conferred by the applicable Regulatory Authority in a country or jurisdiction on the holder of a Marketing Approval for a pharmaceutical product in such country or jurisdiction, including, by way of example and not of limitation, regulatory data exclusivity, orphan drug exclusivity, new chemical entity exclusivity and pediatric exclusivity.
1.64 “Related Party” shall mean each of Virpax’s Affiliates and its and their respective Sub-licensees hereunder.
1.65 “Relevant Patent Rights” shall have the meaning provided in Section 8.4(a).
1.66 “Royalty Term” shall have the meaning provided in Section 4.4.
1.67 “Rules” shall have the meaning provided in Section 11.2.
1.68 “Sale Transaction” shall have the meaning provided in Section 12.5(a).
1.69 “Sub-licensee” shall mean a Third Party sub-licensee under the license granted by MedPharm to Virpax pursuant to Section 2.1.
1.70 “Term” shall have the meaning provided in Section 9.1.
1.71 “Territory” shall mean the entire world.
1.72 “Third Party” shall mean an entity other than Virpax and its Affiliates, and MedPharm and its Affiliates.
1.73 “Third Party Acquirer” shall have the meaning provided in Section 12.5(a).
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1.74 “Valid Patent Claim” shall mean a claim of a pending patent application or an issued and unexpired patent included within the MedPharm Patent Rights, which claim has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction (which decision is not appealable or has not been appealed within the time allowed for appeal), and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.
1.75 “Virpax” shall have the meaning provided in the Preamble.
1.76 “Virpax Indemnitees” shall have the meaning provided in Section 10.2.
1.77 “Virpax Know-How” shall mean all Know-How Controlled (other than as a result of the licenses granted hereby) by Virpax or its Affiliates during the Term, including all Know-How developed or generated by or on behalf of Virpax or any of its Affiliates in the course of conducting research, development, manufacturing, regulatory or commercialization activities contemplated by this Agreement.
1.78 “Virpax Patent Rights” shall mean all Patent Rights Controlled (other than as a result of the licenses granted hereby) by Virpax or its Affiliates during the Term that claim or cover the composition of matter, manufacture or use of any Compound and/or Product. The Virpax Patent Rights shall include Virpax’s (and its Affiliates’) rights in Joint Patent Rights.
LICENSE GRANT
2.1 License Grant. Subject to the terms and conditions of this Agreement, MedPharm hereby grants to Virpax an exclusive (even as to MedPharm and its Affiliates), royalty-bearing license under the MedPharm Technology to develop, make, have made, use, sell, have sold, offer for sale, market, export, import and otherwise commercialize Compounds and Products in the Field in the Territory.
2.2 Sublicensing. Virpax shall have the right to grant sublicenses of the rights granted to it hereunder, but no sublicense shall include the right to grant sub-sub-licenses. Virpax shall provide MedPharm with a copy of any sublicense agreement entered into by Virpax or its Affiliate within thirty (30) days of its execution. Any sublicense entered into by Virpax shall be in writing and on arm’s length terms and shall include obligations on the Sub-licensee that are equivalent to the obligations on Virpax under this Agreement, and shall be dependent on the continued existence of, and consistent with, this Agreement. Virpax shall ensure that any sublicense agreement that it enters into confers reasonable audit rights to MedPharm which rights MedPharm shall be entitled to enforce directly against the Sub-licensee. No sub-license shall give the Sub-licensee the right to enforce any of the MedPharm Technology.
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2.3 Non-Compete. MedPharm hereby covenants not to practice, and not to permit or cause any of its Affiliates to develop, use, make, have made, sell, have sold, offer for sale, export, import or otherwise commercialize any Compound or Product, or competitor thereof (including any other nonsteroidal anti-inflammatory drugs (“NSAIDs”)), in the Territory during the Term. Without limiting the generality of the foregoing, MedPharm shall not grant any rights or licenses to MedPharm Technology or other proprietary technology Controlled by MedPharm to any Third Party for use with any Compound during the Term. This Section shall not apply in relation to any product containing a Compound the rights in which have reverted to MedPharm in accordance with Section 3.5.
DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION
3.1 Responsibility. MedPharm shall be responsible, [**] for the development of all formulations of Products using the MedPharm Technology pursuant to separate services agreements entered or to be entered into between the Parties. Virpax is not licensed to, and shall not, itself develop or contract with any Third Party to develop formulations for Products using the MedPharm Technology. Virpax (itself and/or with or through its Related Parties) shall be solely responsible, [**], for, and shall control all aspects of, worldwide development (including pre-clinical and clinical development), manufacture (subject to Section 3.6 below), registration and commercialization (including marketing, promoting, selling, distributing and determining pricing for) Products in the Territory. Without limiting the generality of the foregoing, Virpax (itself and/or with or through its Related Parties) shall be solely responsible for submitting all required regulatory filings in connection with obtaining and maintaining Marketing Approvals with respect to Products in the Field in the Territory, including all INDs and NDAs. All of such submissions and other regulatory filings relating to Products shall be submitted in the name of, and owned by, Virpax (or a Related Party, as applicable).
3.2 Diligence. Virpax (itself and/or with or through its Related Parties) shall use Commercially Reasonable Efforts to develop, seek Marketing Approval for, and commercialize Products throughout the Territory during the Term. Notwithstanding the preceding, Virpax shall not be obligated to undertake development activities specific to a country outside of the United States prior to obtaining the first Marketing Approval for a Product in the United States. For clarity, Virpax’s obligation under this Section with respect to a Product incorporating any specific Compound shall be subject to the terms governing the acceptable provision of a formulation of the MedSpray Technology incorporating such Compound by MedPharm to Virpax as provided in the Option Agreement.
3.3 Developmental Plan. Within ninety days after the Effective Date in relation to a Product containing Diclofenac, and within 90 days after the completion of the development of the formulation for any subsequent Product, Virpax will file an IND with respect to such Product. Virpax will then present to MedPharm a draft development plan for the development of that Product within a reasonable timeframe after submission of the IND and after the initial meeting with the FDA to discuss the development pathway, and Virpax will in good faith consult with and take into account any reasonable comments received from MedPharm in relation to that draft development plan. Virpax shall keep MedPharm reasonably informed of any discussions with the FDA with respect to a subject IND and the proposed development plan. Virpax will provide MedPharm with a copy of the final version of each development plan. Each development plan will contain details, locations and planned Initiation and completion dates of each clinical trial planned by Virpax or any Related Party, details of all regulatory submissions made and planned and planned dates for First Commercial Sale.
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3.4 Records. Virpax shall maintain, or cause to be maintained, complete and accurate records of all development work conducted by or on behalf of Virpax with respect to Products, including all results, data, inventions and developments made in the performance of such development work. All such records maintained shall be in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes.
3.5 Reports. On or before December 31st of each year during the Term following the first anniversary of the Effective Date, Virpax shall deliver to MedPharm a written progress report regarding, to the extent applicable, (i) the status of any Product in development, (ii) any Product-related regulatory submissions and approvals, (iii) any Product-related commercialization efforts in the Territory, and (iv) the status of any Product related patent applications in each country in the Territory.
3.6 Compliance with Applicable Laws. Virpax shall conduct, and shall cause its Related Parties to conduct, all development, regulatory, manufacturing and commercialization activities with respect to Products anywhere in the world in compliance with all Applicable Laws and, as applicable, GLP, GCP and/or GMP.
3.7 Initial Technology Transfer. Within thirty (30) days after the completion of the development of the formulation for the first Product, at no additional cost to Virpax, MedPharm shall transfer and or provide to Virpax copies of: (i) all preclinical and other data and documentation pertaining to the MedPharm Technology; (ii) all lab books, files, patent office correspondence and other documentation related to the MedPharm Technology reasonably necessary or useful (A) for the development, Manufacturing or commercialization of Products or (B) for Virpax to meet its obligations under this Agreement; and (iii) any and all other information and documentation reasonably necessary to successfully transition the MedPharm Technology to Licensee or its designee, which in each case MedPharm has the right to disclose to Virpax. In addition, for a period of sixty (60) days from the Effective Date and thereafter as Virpax shall reasonably request, at no additional cost to Virpax (save for payment of reasonable and documented travel and accommodation costs), MedPharm shall make available staff, consultants or other third party agents with knowledge of the MedPharm Technology to assist Virpax in the transition of the MedPharm Technology as reasonably requested by Virpax. MedPharm will update the information provided under this Section within thirty (30) days after completion of the formulation for any subsequent Product.
3.8 Manufacturing. If requested by MedPharm, Virpax will negotiate in good faith with MedPharm a manufacturing and supply agreement for the manufacture by MedPharm and supply to Virpax of Products for use in clinical trials by Virpax and any Related Party. Aside from the obligation to negotiate with MedPharm in good faith as provided herein, this Section 3.8 shall create no restriction on Virpax entering into a manufacturing and/or supply agreement for Products with any Third Party.
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PAYMENTS
4.1 Upfront Payment. Within 60 days following the Effective Date, Virpax shall make a payment of [**] to MedPharm. In the event the payment contemplated by the previous sentence is not made within [**], MedPharm shall have the right to terminate this Agreement by delivering written notice to Virpax, and upon delivery of such notice, neither party shall have any further obligation or liability to the other under this Agreement.
(a) Developmental Milestones. Within thirty (30) days after the first achievement of each of the milestone events set forth in the table below by Virpax or any Related Party in relation to a Product, Virpax shall provide MedPharm with written notice of such achievement and shall pay to MedPharm the corresponding one-time milestone payment set forth below (each a “Developmental Milestone”):
Milestone Event | Milestone Payment | |
First dosing of the first subject in a human clinical trial for a Product | [**] | |
First dosing of the first subject in a Pivotal Phase 3 Clinical Trial for a Product | [**] | |
First Marketing Approval of a Product in the United States | [**] | |
First Commercial Sale of a Product in the United States after receiving Marketing Approval | [**] | |
First Marketing Approval, whether by the EMA or the relevant national Regulatory Authority, of a Product in each country in the European Market for any Indication | [**] | |
First Commercial Sale of a Product in each of the first four (4) countries within the Other Markets in which a Product received Marketing Approval | [**] |
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(i) Each of the above milestone payments shall only be paid once, for the first achievement of the corresponding milestone event by each different Product (i.e. by each Product that contains a different Compound or combination of Compounds), but shall only be paid once in respect of each such Product regardless of the number of times such milestone event is achieved by that Product and the number of Indications for which such milestone event is achieved by that Product.
4.3 Royalties. Subject to Sections 4.5 below, Virpax shall pay a [**] royalty to MedPharm on Net Sales of all Products sold during the Royalty Term in the Territory by Virpax and Related Parties.
4.4 Royalty Term. Royalties under Section 4.3 shall be payable during the period of time commencing on the date of the First Commercial Sale of a Product and ending on a country-by-country basis with respect to each Product upon the later of:
(a) expiration of the last-to-expire Valid Patent Claim of the MedPharm Patent Rights Covering the manufacture, use or sale of such Product in such country; and
(b) expiration of any period of Regulatory Exclusivity for such Product in such country (along with Section 4.4(a) above, referred to herein as, the “Royalty Term”)
On a Product-by-Product and country-by-country basis, upon expiration of the Royalty Term for a Product in a country, Virpax’s license under Section 2.1 with respect to such Product in such country shall become fully-paid, irrevocable and perpetual.
4.5 Adjustment for Generic Competition. On a Product-by-Product and country-by-country basis, during any portion of the Royalty Term for a Product in a country one or more Generic Versions of such Product account for [**] or more of aggregate unit sales of such Product and such Generic Version(s) in such country in a calendar quarter, as determined by reference to applicable sales data obtained from IMS Health or from such other source for such sales data as may be agreed upon by the Parties (provided that such other source, if any, shall be generally recognized as a reliable source for pharmaceutical sales data among major pharmaceutical companies), then for the remainder of the Royalty Term for such Product in such country, the royalties payable by Virpax under Section 4.3 with respect to Net Sales of such Product in such country shall be reduced by [**].
PAYMENT; RECORDS; AUDITS
5.1 Payment; Reports. Royalties under Section 4.3 shall be calculated and reported for each calendar quarter during the Royalty Term and shall be paid within thirty (30) days after the end of the calendar quarter. Each payment of royalties shall be accompanied by a report of Net Sales of Products by Virpax and Related Parties in sufficient detail to permit confirmation of the accuracy of the payment made, including gross sales and Net Sales of Products on a Product-by-Product and country-by-country basis, the deductions from gross sales (by major category as set forth in the definition of Net Sales), details of any applicable reductions or adjustments made pursuant to Section 4.5, the royalty payable, and the exchange rates used.
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5.2 Exchange Rate; Manner and Place of Payment. All payment amounts in this Agreement are expressed in British Pounds, and all payments hereunder shall be payable in British Pounds. When conversion of payments from any foreign currency is required, such conversion shall be calculated using an exchange rate equal to the average of the interbank rates of exchange for such currency as reported at OANDA.com, or should such rates cease to be published by OANDA, a successor or replacement agreed upon by the parties, during the calendar quarter for which payment is due. All payments owed under this Agreement shall be made by wire transfer in immediately available funds to the bank and account designated in writing by MedPharm.
5.3 Income Tax Withholding. MedPharm will pay any and all taxes levied on account of any payments made to it under this Agreement. If Virpax is advised in writing by its attorneys or accountant that Virpax is required to withhold any portion of any payment made to MedPharm under this Agreement, Virpax shall (a) deduct such taxes from the payment made to MedPharm, (b) timely pay the taxes to the proper taxing authority, (c) send proof of payment to MedPharm and certify its receipt by the taxing authority within 30 days following such payment, (d) reasonably cooperate with MedPharm, if requested, to obtain available reductions, credits or refunds of such taxes and (e) provide MedPharm a copy of such written advisement or instructions at least thirty (30) days, or such shorter period as reasonably practicable given the timing of the subject advice or instructions received by Virpax, in advance of such withholding. Without limiting the generality of the foregoing, upon request by MedPharm, Virpax shall provide MedPharm such information in Virpax’s possession as may be reasonably necessary for MedPharm to obtain the benefit of any present or future treaty against double taxation which may apply to payments made to MedPharm under this Agreement.
5.4 Audits. Virpax shall keep (and shall cause its Affiliates and Sub-licensees to keep) complete and accurate records pertaining to the sale or other disposition of Products in sufficient detail to permit MedPharm to confirm the accuracy of all royalty payments due hereunder for at least seven (7) full calendar years following the end of the calendar year to which they pertain. MedPharm shall have the right, once annually, to cause an independent, certified public accountant reasonably acceptable to Virpax to audit such records solely to confirm Net Sales and royalties for a period covering not more than the preceding three (3) full calendar years. No calendar year shall be subject to audit under this section more than once. Such audits may be exercised during normal business hours upon reasonable prior written notice of not less than sixty (60) days to Virpax in the location where the records are maintained. The auditor will execute a confidentiality agreement in a form acceptable to Virpax with Virpax and will disclose to MedPharm only such information as is reasonably necessary to provide MedPharm with information regarding any actual or potential discrepancies between amounts reported and actually paid and amounts payable under this Agreement. The auditor will send a copy of the report to Virpax at the same time it is sent to MedPharm. The report sent to both Parties will include the methodology and calculations used to determine the results. Prompt adjustments shall be made by the Parties to reflect the results of such audit. MedPharm shall bear the full cost of such audit unless such audit discloses an underpayment by Virpax of more than five percent (5%) of the amount due for any calendar quarter (a “Material Underpayment”) under this Agreement, in which case, Virpax shall bear the full cost of such audit and shall promptly remit to MedPharm the amount of such Material Underpayment. If either (a) a Material Underpayment is found or (b) an independent auditor determines that there are insufficient records to support the calculation of the royalty payments due under this Agreement, then MedPharm shall have the right, at its expense, to audit Virpax quarterly for the two calendar years succeeding the applicable triggering event. If any subsequent audit contemplated by the previous sentence reveals a Material Underpayment, the cost of such subsequent audit shall be borne by Virpax. If such audit discloses an overpayment by Virpax, then Virpax will deduct the amount of such overpayment from amounts otherwise owed to MedPharm under this Agreement.
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CONFIDENTIALITY AND PUBLICATION
6.1 Confidential Information. Except to the extent expressly authorized by this Agreement, each Party (in such capacity, the “Receiving Party”) agrees that, during the Term and for seven (7) years thereafter, it shall keep confidential and shall not publish or otherwise disclose to any Third Party, and shall not use for any purpose other than as expressly provided for in this Agreement or any other written agreement between the Parties, any Confidential Information furnished or made available to it by or on behalf of the other Party (in such capacity, the “Disclosing Party”). The Receiving Party shall use at least the same standard of care as it uses to protect proprietary or confidential information of its own (but in no event less than reasonable care) to ensure that it, and its and its Affiliates’, employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information. The Receiving Party shall promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information. The MedPharm Technology, to the extent subject and directly related to Products under this Agreement, shall be deemed the Confidential Information of both Parties notwithstanding the fact that it was furnished by MedPharm to Virpax in the first instance.
6.2 Exceptions. Confidential Information shall not include any information which the Receiving Party can prove by competent evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available; (b) is known by the Receiving Party and/or any of its Affiliates at the time of receiving such information, as evidenced by its records; (c) is hereafter furnished to the Receiving Party and/or any of its Affiliates by a Third Party, as a matter of right and without restriction on disclosure; or (d) is independently discovered or developed by the Receiving Party and/or any of its Affiliates, without the use of Confidential Information of the Disclosing Party. Any combination of features or disclosures shall not be deemed to fall within the exclusions set forth in the preceding clauses (a) and (b) merely because individual features are published or available to the general public or in the rightful possession of the Receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the Receiving Party.
6.3 Authorized Disclosure. Notwithstanding the provisions of Section 6.1, the Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement, or if and to the extent such disclosure is reasonably necessary in the following instances:
(a) filing or prosecuting Patents as permitted by this Agreement;
(b) enforcing such Party’s rights under this Agreement (including registering the licenses granted hereunder with applicable authorities) and in performing its obligations under this Agreement.
(c) prosecuting or defending litigation as permitted by this Agreement;
(d) complying with applicable court orders, applicable laws, rules or regulations, or the listing rules of any exchange on which the Receiving Party’s securities are traded;
(e) disclosure to Affiliates, actual and potential licensees and sub-licensees, employees, consultants or agents of the Receiving Party who have a need to know such information in order for the Receiving Party to exercise its rights or fulfill its obligations under this Agreement, provided, in each case, that any such Affiliate, actual or potential licensee or sub-licensee, employee, consultant or agent agrees to be bound by terms of confidentiality and non-use comparable in scope to those set forth in this Article 6; and
(f) disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors or acquirers in confidential financing documents, provided, in each case, that any such Third Party agrees to be bound by reasonable obligations of confidentiality and non-use.
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Notwithstanding the foregoing, in the event the Receiving Party is required to make a disclosure of the Disclosing Party’s Confidential Information pursuant to Section 6.3(c) or 6.3(d), it will, except where impracticable, give reasonable advance notice to the Disclosing Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as the Receiving Party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the Receiving Party agrees to take all reasonable action to avoid disclosure of Confidential Information hereunder.
6.4 Publications. Virpax and its Affiliates shall have the right to publish the results of their development activities, including clinical trials, with respect to the Products in the Field. MedPharm shall have the right to review and comment on any material proposed for disclosure or publication by Virpax or its Affiliate, such as by oral presentation, manuscript or abstract that includes Confidential Information of MedPharm. Before any such material is submitted for publication or disclosure (other than oral presentation materials and abstracts, which are addressed below), Virpax shall deliver a complete copy to MedPharm at least 60 days prior to submitting the material to a publisher or initiating such other disclosure, and MedPharm shall review any such material and give its comments to Virpax within 15 days of the delivery of such material to MedPharm which comments shall be considered by Virpax in good faith. With respect to oral presentation materials and abstracts, Virpax shall deliver a complete copy to MedPharm at least 15 business days prior to the anticipated date of the presentation, and MedPharm shall make reasonable efforts to expedite review of such materials and abstracts, and shall return such items as soon as practicable to Virpax with appropriate comments, if any, but in no event later than 10 business days from the date of delivery to MedPharm which comments shall be considered by Virpax in good faith. Virpax shall comply, or cause its Affiliate to comply (as applicable), with MedPharm’s requests to delete references to MedPharm’s Confidential Information in any such material and, if applicable, agrees to delay any submission for publication or other public disclosure for a period of up to an additional 90 days for the purpose of preparing and filing appropriate patent applications. MedPharm shall not publish or otherwise disseminate, including, but not limited to, in articles, posters, oral presentations or other formats, any information relating to Compounds and/or Products without the prior written consent of Virpax.
(a) Press Releases. The Parties shall jointly issue a press release acceptable to each Party to be released at an agreed upon time. Except as required by the applicable securities or other laws or the listing rules of any stock exchange on which securities issued by a Party or its Affiliates are traded, neither Party shall make any other public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed; provided that each Party may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, respond to queries by any exchange on which such Party’s securities are traded, or issue press releases, so long as any such public statement, response, or press release is not inconsistent with prior public disclosures or public statements made in accordance with this Section 6.5 and which do not reveal non-public information about the other Party. In the event of a required public announcement, to the extent practicable under the circumstances, the Party making such announcement shall use reasonable efforts to provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text, unless the proposed text is substantially the same as that used in any prior public disclosure, press release or public statement made in accordance with this Section 6.5. Notwithstanding the foregoing, Virpax can make public statements or issue press releases about Products without consent from MedPharm.
(b) Filing of this Agreement. The Parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with any securities authority or with any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what information to disclose to any securities authority or stock exchange, as the case may be, and provided further that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies. Other than such obligation, neither Party (nor any of its Affiliates) will be obligated to consult with or obtain approval from the other Party with respect to any filings to any securities authority or stock exchange. MedPharm hereby consents to Virpax’s use of its name in any filing with a Regulatory Authority as well as any private placement memorandum or other investment document related to Virpax or its securities; provided that, MedPharm shall be afforded a reasonable opportunity to review any such filing of investment document and any comments provided by MedPharm to Virpax with respect to the use of its name in such filing or investment document shall be considered in good faith by Virpax.
6.6 Prior Confidential Disclosure Agreement. As of the Effective Date, the terms of this Article 6 shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including the Confidential Disclosure Agreement between MedPharm and Virpax dated October 12, 2016. Any information disclosed by a Party pursuant to any such prior agreement shall be deemed Confidential Information of such Party for purposes of this Agreement.
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REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
7.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that, as of the Effective Date: (a) it is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof; (b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action; and (c) this Agreement is legally binding upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.
7.2 MedPharm Representations and Warranties. MedPharm represents and warrants to Virpax that as of the Effective Date of this Agreement:
(a) Exhibit A attached hereto contains a true and complete list of the MedPharm Patent Rights existing on the Effective Date. The MedPharm Patent Rights listed in Exhibit A include all of the Patent Rights Controlled by MedPharm as of the Effective Date that Cover MedSpray Technology, Product(s) or the manufacture, use, sale, offer for sale or import of the foregoing;
(b) MedPharm (i) has the right to grant the licenses that it purports to grant in Section 2.1 (including, without limitation, that MedPharm has not entered into any undertaking that limits, nor is subjected to any constraints that limit, its rights or freedom to grant the licenses); and (ii) has not granted to any Third Party any license or other right with respect to a Product or MedPharm Technology that conflicts with the license and rights granted to Virpax herein;
(c) there are no agreements in effect as of the Effective Date between MedPharm and a Third Party under which rights with respect to the MedPharm Technology as it relates to Products are being licensed to MedPharm;
(d) no Third Party (including, but not limited to any governmental authority) has any rights in or to any of the MedPharm Technology as it relates to Products for any reason, including, but not limited to as a result of development work performed by such Third Party or funding provided by such Third Party;
(e) MedPharm is not prohibited from disclosing to Virpax any Know How currently possessed by MedPharm that would be necessary in the development, manufacture or commercialization of a Product;
(f) no reexamination, interference, invalidity, opposition, nullity or similar claim or proceeding is pending or, to MedPharm’s knowledge (having made no specific inquiry outside of the normal diligence performed in the ordinary course of MedPharm’s business), is threatened with respect to any MedPharm Patent Right;
(g) to MedPharm’s knowledge (having made no specific inquiry outside of the normal diligence performed in the ordinary course of MedPharm’s business), the manufacture (using any manufacturing process used by or on behalf of MedPharm on or before the Effective Date), use, sale, offer for sale or import of MedSpray Technology or any MedPharm Technology does not Infringe any issued patent, and MedPharm has not received written notice from any Third Party claiming that the manufacture, use, sale, offer for sale or import of MedSpray Technology or any Product Infringes or would Infringe the patent or other intellectual property rights of any Third Party; if MedPharm receives any such written notice during the term of this Agreement, MedPharm shall promptly provide such written notice to Virpax;
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(h) there are no claims, judgments or settlements against or owed by MedPharm (or any of its Affiliates) with respect to the MedPharm Technology, and MedPharm is not a party to any legal action, suit or proceeding relating to the MedPharm Technology, MedSpray Technology or any Product, nor has MedPharm received any written communication from any Third Party, including, without limitation, any Regulatory Authority or other government agency, threatening such action, suit or proceeding;
(i) all tangible or recorded information and data provided by or on behalf of MedPharm to Virpax related to MedPharm Technology or any Product on or before the Effective Date in contemplation of this Agreement was and is true, accurate and complete in all material respects, and MedPharm has not failed to disclose, or failed to cause to be disclosed, any such information or data related to MedPharm Technology or any Product in its possession and Control that would cause the information and data that has been disclosed to be misleading in any material respect;
(j) neither MedPharm nor any of its Affiliates has obtained, or filed for, any INDs, NDAs or Marketing Approvals for any Product, and, to the best of MedPharm’s knowledge (having made no specific inquiry outside of the normal diligence performed in the ordinary course of MedPharm’s business), no other Person has obtained, or filed for, any INDs, NDAs or Marketing Approvals for any Product in the Field in the Territory;
(k) at the time of delivery to Virpax, any reference samples delivered to Virpax will be free and clear of any liens or encumbrances;
(l) (i) all research and development (including non-clinical studies and clinical trials) conducted by or on behalf of MedPharm or any of its Affiliates related to the MedPharm Technology and/or Products prior to the Effective Date was conducted in compliance in all material respects with all Applicable Laws and, to the extent required by Applicable Law, GLP, GCP and/or GMP; and (ii) to MedPharm’s knowledge (having made no specific inquiry outside of the normal diligence performed in the ordinary course of MedPharm’s business), all research and development (including non-clinical studies and clinical trials) conducted by any Third Party related to MedPharm Technology and/or Products prior to the Effective Date was conducted in compliance in all material respects with all Applicable Laws and, to the extent required by Applicable Law, GLP, GCP and/or GMP;
(m) neither MedPharm nor any of its Affiliates is debarred or disqualified under the Act or comparable Applicable Laws outside of the United States;
(n) neither MedPharm nor any of its Affiliates has employed or otherwise used in any capacity, in connection with the development or manufacture of MedPharm Technology or Product, the services of any Person debarred or disqualified under United States law, including 21 U.S.C. §335a, or any foreign equivalent thereof;
(o) MedPharm and, to the best of its knowledge, its directors, officers, employees, and any agent, representative, subcontractor or other third party acting for or on such its behalf, has not, directly or indirectly, offered, paid, promised to pay, or authorized such offer, promise or payment, of anything of value, to any Person for the purposes of obtaining or retaining business through any improper advantage in connection with the development, commercialization or exploitation of a Product, or that would otherwise violate any Applicable Laws, rules and regulations concerning or relating to public or commercial bribery or corruption, and MedPharm’s books, accounts, records and invoices related to the Product are complete and accurate; and
(p) MedPharm has not violated the FCPA or Export Control Laws in connection with the development of MedPharm Technology.
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7.3 MedPharm Covenants. In addition to any covenants made by MedPharm elsewhere in this Agreement, MedPharm hereby covenants to Virpax that during the Term, MedPharm will (i) not grant any Third Party any license or other right with respect to any Product or MedPharm Technology in derogation of the license and rights granted to Virpax hereunder, and (ii) disclose any and all additional MedPharm Technology developed or Controlled by MedPharm after the Effective Date as it relates to Compounds or Products covered under this Agreement;
7.4 Virpax Representations and Warranties. Virpax represents and warrants to MedPharm that as of the Effective Date of this Agreement:
(a) neither Virpax nor any of its Affiliates is debarred or disqualified under the Act or comparable Applicable Laws outside the United States;
(b) Virpax and, to the best of its knowledge, its directors, officers, employees, and any agent, representative, subcontractor or other third party acting for or on such its behalf, has not, directly or indirectly, offered, paid, promised to pay, or authorized such offer, promise or payment, of anything of value, to any Person for the purposes of obtaining or retaining business through any improper advantage in connection with the development, commercialization or exploitation of a Product, or that would otherwise violate any Applicable Laws, rules and regulations concerning or relating to public or commercial bribery or corruption.
7.5 Mutual Covenants. In addition to any covenants made by a Party elsewhere in this Agreement, each Party hereby covenants to the other as follows:
(a) neither such Party nor any of its Affiliates will employ or use the services of any Person who is debarred or disqualified under United States law, including 21 U.S.C. §335a, or any foreign equivalent thereof, in connection with activities relating to any Product; and in the event that such Party becomes aware of the debarment or disqualification or threatened debarment or disqualification of any Person providing services to such Party or any of its Affiliates with respect to any activities relating to any Product, such Party will immediately notify the other Party in writing and such Party will cease, or cause its Affiliate to cease (as applicable), employing, contracting with, or retaining any such Person to perform any services relating to any Product;
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(b) neither such Party nor any of its Affiliates will, in connection with the exercise of its rights or performance of its obligations under this Agreement, directly or indirectly through Third Parties, pay, promise or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a public official or entity or other Person for purpose of obtaining or retaining business for or with, or directing business to, any Person, including such Party and its Affiliates, nor will such Party or any of its Affiliates directly or indirectly promise, offer or provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift or hospitality or other illegal or unethical benefit to a public official or entity or any other Person in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement; and
(c) neither such Party nor any of its Affiliates (or any of their respective employees and contractors), in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement, shall cause the other Party to be in violation of the FCPA or Export Control Laws.
7.6 Performance by Affiliates, Sub-licensees and Subcontractors. The Parties recognize that each Party may perform some or all of its obligations or exercise some or all of its rights under this Agreement through one or more Affiliates, subcontractors, or, in the case of Virpax, Sub-licensees; provided, in each case, that (a) none of the other Party’s rights hereunder are diminished or otherwise adversely affected as a result of such delegation or subcontracting, and (b) each such Affiliate, subcontractor or Sub-licensee undertakes in writing obligations of confidentiality and non-use regarding Confidential Information and ownership of Inventions which are substantially the same as those undertaken by the Parties pursuant to Article 6 and Section 8.1; and provided, further, that such Party shall at all times be fully responsible for the performance and payment of such Affiliate, subcontractor or Sub-licensee.
7.7 Limitation of Liability. EXCEPT FOR LIABILITY FOR BREACH OF ARTICLE 6 OR IN THE CASE OF FRAUD; DEATH OR PERSONAL INJURY CAUSED BY NEGLIGENCE; GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, OR ANY COMPENSATION FOR LOST PROFITS (WHETHER DIRECT OR INDIRECT) IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER AND THE MAXIMUM AGGREGATE LIABILITY OF EACH PARTY TO THE OTHER IN CONNECTION WITH THIS AGREEMENT OR ANY LICENCE GRANTED HEREUNDER SHALL BE LIMITED TO THE AMOUNT OF ANY MILESTONES AND ROYALTIES PAID OR PAYABLE BY VIRPAX IN THE TWO-YEAR PERIOD PRIOR TO ANY CLAIM; provided, however, that this Section 7.7 shall not be construed to limit either Party’s indemnification obligations under Article 10 or the right of MedPharm to recover compensation for non-payment or loss of milestone payments or royalties in the event of breach or wrongful termination by Virpax.
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INTELLECTUAL PROPERTY
8.1 Ownership. As between the Parties, MedPharm is and shall at all times be the sole and exclusive owner of all right, title and interest in and to the MedPharm Technology, other than Joint Inventions and Joint Patent Rights, and Virpax is and shall at all times be the sole and exclusive owner of all right, title and interest in and to the Virpax Technology, other than Joint Inventions and Joint Patent Rights. A Party shall have and retain all right, title and interest in any Invention made solely by one or more employees or agents of such Party and or its Affiliates or other persons acting under its authority. The Parties shall jointly own rights in any Invention made jointly by one or more employees or agents of each Party and/or such Party’s Affiliates or other persons acting under its authority (“Joint Inventions”) and Patent Rights therein (“Joint Patent Rights”). For clarity, Inventions developed exclusively by one Party and such Party’s Affiliates shall not be considered Joint Inventions. Subject to the rights and licenses granted under this Agreement, each Party shall have the right to practice and use, and grant licenses to practice and use, any Joint Inventions and Joint Patent Rights without the other Party’s consent and has no duty to account to the other Party for such practice, use or license, and each Party hereby waives any right it may have under the laws of any country to require any such consent or accounting; provided that this sentence shall have no impact on Virpax’s obligation to pay royalties or milestones under this Agreement or give Virpax any additional rights to MedPharm Technology licensed under this Agreement. Each Party shall be liable with respect to its own employees for compliance with any applicable legislation and its own policies concerning employee inventions, including payment of employee invention awards (if any).
8.2 Patent Prosecution and Maintenance.
(a) MedPharm Patent Rights. Subject to Section 8.2(b) and the last sentence of this Section 8.2(a), MedPharm shall control the preparation, filing, prosecution and maintenance of MedPharm Patent Rights at MedPharm’s sole expense and by counsel of its choice. MedPharm shall keep Virpax reasonably informed of progress with regard to the preparation, filing, prosecution and maintenance of such MedPharm Patent Rights and shall provide to MedPharm copies of all material patent office submissions within a reasonable amount of time following submission thereof by MedPharm. MedPharm shall use commercially reasonable efforts to ensure the maintenance of the MedPharm Patent Rights during the term of this Agreement. In the event that MedPharm desires to abandon or cease prosecution or maintenance of any MedPharm Patent Right (such abandonment or cessation to be based on commercially reasonable considerations) in any country or jurisdiction (such country or jurisdiction, the “Abandoned Territory”), MedPharm shall provide written notice to Virpax of such intention to abandon no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such MedPharm Patent Right in the relevant patent office. In such case, upon receipt of a written request by Virpax to assume responsibility for prosecution and maintenance of such, MedPharm Patent Right, MedPharm shall allow Virpax at its sole cost and expense and by counsel of its own choice, delivered no later than thirty (30) days after receipt of notice from Virpax to assume such responsibility; provided that, in the event the subject claim in the Abandoned Territory is the last Valid Claim in such territory, the Royalty Term will be deemed to have expired in such territory.
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(b) Joint Patent Rights. Virpax shall have the first right, but not the obligation, to prepare, file, prosecute and maintain all Joint Patent Rights, at Virpax’s sole expense and by counsel of its choice. Virpax shall keep MedPharm reasonably informed of progress with regard to the preparation, filing, prosecution and maintenance of the Joint Patent Rights, and shall provide to MedPharm copies of all material patent office submissions within a reasonable amount of time following submission thereof by Virpax. In the event that Virpax desires to abandon or cease prosecution or maintenance of any Joint Patent Right, Virpax shall provide written notice to MedPharm of such intention to abandon promptly after Virpax makes such determination, which notice shall be given no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such Joint Patent Right in the relevant patent office. In such case, MedPharm shall have the right, in its discretion, exercisable upon written notice to Virpax delivered no later than thirty (30) days after receipt of notice from Virpax, to assume responsibility for prosecution and maintenance of such Joint Patent Right, at its sole cost and expense and by counsel of its own choice, and if MedPharm exercises such right, then Virpax shall cease to have any rights to such Joint Patent Right; provided that such Joint Patent Right shall be deemed to be a MedPharm Patent Right and therefore subject to this Agreement.
(c) Virpax Patent Rights. Virpax shall have the sole right, but not the obligation, to control the preparation, filing, prosecution and maintenance of Virpax Patent Rights at Virpax’s sole expense and by counsel of its choice.
(d) Cooperation of the Parties. Each Party agrees to cooperate fully in the preparation, filing, prosecution and maintenance of Patent Rights under this Agreement and in the obtaining and maintenance of any patent term extensions, supplementary protection certificates and the like with respect to any Patent Right as well as in registering the licenses granted hereunder with the applicable authorities. Such cooperation includes, but is not limited to: (i) executing all papers and instruments, or requiring its employees or contractors to execute such papers and instruments, so as to effectuate the joint ownership of Joint Inventions and Joint Patent Rights set forth in Section 8.1, and to enable the other Party to apply for and to prosecute patent applications in any country in accordance with the foregoing provisions of this Section 8.2; and (ii) promptly informing the other Party of any matters coming to such Party’s attention that may affect the preparation, filing, prosecution or maintenance of any such patent applications.
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8.3 Enforcement and Defense of Patent Rights. Each Party shall notify the other Party in writing within 10 Business Days (except as expressly set forth below) of becoming aware of any alleged or threatened infringement by a Third Party of any of the MedPharm Patent Rights, Joint Patent Rights or Virpax Patent Rights (“Infringement”), including (x) any such alleged or threatened Infringement on account of a Third Party’s manufacture, use or sale of a Product in the Field, (y) any certification filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or similar provisions in other jurisdictions in connection with an ANDA (an Abbreviated New Drug Application in the United States or a comparable application for Marketing Approval under Applicable Law in any country other than the United States) or other NDA for a Product in the Field (a “Patent Certification”), and (z) any declaratory judgment action filed by a Third Party that is developing, manufacturing or commercializing a Product in the Field alleging the invalidity, unenforceability or non-infringement of any of the MedPharm Patent Rights, Joint Patent Rights or Virpax Patent Rights ((x)-(z), collectively, “Competitive Infringement”); provided, however, that each Party shall notify the other Party of any Patent Certification regarding any MedPharm Patent Right or Joint Patent Right that it receives, and such Party shall provide the other Party with a copy of such Patent Certification, within five (5) days of receipt.
(a) Competitive Infringement. Virpax shall have the first right, but not the obligation, to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of a MedPharm Patent Right or a Joint Patent Right, in each case that covers a Product (collectively, the “Relevant Patent Rights”), at Virpax’s own expense and by counsel of its own choice. If Virpax fails to bring any such action or proceeding with respect to Competitive Infringement of any Relevant Patent Right within ninety (90) days following the notice of alleged Competitive Infringement, MedPharm shall have the right to bring (or defend) and control any such action at its own expense and by counsel of its own choice, and Virpax shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.
(b) Other Infringement. The Parties shall mutually agree on a case-by-case basis (A) whether to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of any Patent Right that is not a Relevant Patent Right, (B) which Party would bring (or defend) and control such action, and (C) how the expenses of, and any recovery from, any such action would be allocated.
(c) Virpax Patent Rights. Except as provided in Section 8.4(a), Virpax shall have the sole right, but not the obligation, to bring (or defend) and control any action or proceeding with respect to infringement of any Virpax Patent Right at its own expense and by counsel of its own choice.
(d) Cooperation. In the event a Party brings (or defends) an Infringement action in accordance with this Section 8.3, or in the event a Party is entitled to bring (or defend) an infringement action in accordance with this Section 8.4 but lacks standing to do so, the other Party shall cooperate fully, including, if required to bring (or defend) such action, the furnishing of a power of attorney or being named as a party. Neither Party shall enter into any settlement or compromise of any action under this Section 8.3 which would in any manner alter, diminish, or be in derogation of the other Party’s rights under this Agreement without the prior written consent of such other Party, which shall not be unreasonably withheld.
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(e) Recovery. Except as otherwise agreed by the Parties in connection with a cost-sharing arrangement, any recovery realized by a Party as a result of any action or proceeding pursuant to this Section 8.4, whether by way of settlement or otherwise, shall be applied first to reimburse the documented out-of-pocket legal expenses of the Party that brought (or defended) and controlled such action or proceeding incurred in connection with such action or proceeding, and second to reimburse the documented out-of-pocket legal expenses of the other Party incurred in connection with such action or proceeding, and any remaining amounts shall be retained by the Party that brought (or defended) and controlled such action; provided, however, that:
(i) any recovery realized by Virpax as a result of any action brought (or defended) and controlled by Virpax pursuant to Section 8.3(a) or Section 8.3(b) (after reimbursement of the Parties’ documented out-of-pocket legal expenses relating to the action or proceeding) shall be allocated as follows:
(1) compensatory damages shall, if awarded, be treated as Net Sales of Products in the quarter in which such damages are received for purposes of Section 4.3; and
(2) non-compensatory damages shall be retained by Virpax; and
(ii) any recovery realized by MedPharm as a result of any action brought and controlled by MedPharm pursuant to Section 8.3(a) or Section 8.3(b) (after reimbursement of the Parties’ documented out-of-pocket legal expenses relating to the action or proceeding) shall be allocated as follows:
(1) compensatory damages shall be retained by MedPharm; and
(2) non-compensatory damages shall be retained by MedPharm.
(a) MedPharm Patent Rights. MedPharm shall have the right to determine the MedPharm Patent Rights for which it will apply for extension of patent term or a supplementary protection certificate in any country and/or region for any Product in the Field. MedPharm shall file for any such extension at MedPharm’s cost and expense. Virpax shall provide all reasonable assistance to MedPharm in connection with such filings, provided that MedPharm shall pay or reimburse any out-of-pocket costs incurred by Virpax in providing such assistance. In the event that MedPharm desires to not apply for a patent extension for any such MedPharm Patent Rights for which there is a basis to file for such extension, MedPharm shall provide written notice to Virpax of such intention to not file no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such MedPharm Patent Right in the relevant patent office. In such case, upon receipt of a written request by Virpax to assume responsibility for prosecution and maintenance of such MedPharm Patent Right, MedPharm shall allow Virpax at its sole cost and expense and by counsel of its own choice, delivered no later than 30 days after receipt of notice from MedPharm to assume such responsibility, and following the successful filing of any such extension, such country or region shall no longer be deemed to be included in the Territory of this Agreement.
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(b) Joint Patent Rights. Virpax shall have the right to determine the Joint Patent Rights for which it will apply for patent term extension or a supplementary protection certificate in any country and/or region for any Product in the Field, and Virpax shall file for any such extension at Virpax’s cost and expense. Each Party shall provide all reasonable assistance to the other Party in connection with such filings, provided that the Party filing for any such extension shall pay or reimburse any out-of-pocket costs incurred by the other Party in providing such assistance.
(c) Virpax Patent Rights. Virpax shall have the sole right to apply for extension of term or a supplementary protection certificate for any Virpax Patent Right in any country and/or region for any product, including, without limitation, any Product in the Field, at Virpax’s sole cost and expense.
8.5 Infringement of Third Party Rights. Each Party shall promptly notify the other in writing of any allegation by a Third Party that the activity of either Party pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party. Neither Party shall have the right to settle any patent infringement litigation under this Section 8.6 in a manner that diminishes the rights or interests of the other Party without the written consent of such other Party (which shall not be unreasonably withheld).
TERM AND TERMINATION
9.1 Term. The term of this Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with this Article 9, continue until the expiration of the last-to-expire of all royalty payment obligations of Virpax hereunder (the “Term”).
9.2 Termination for Material Breach.
(a) Each Party shall have the right to terminate this Agreement in its entirety upon written notice to the other Party if such other Party is in material breach of this Agreement and has not cured such breach within ninety (90) days after notice from the terminating Party indicating the nature of such breach, or if such other Party is dissolved or liquidated or takes any corporate action for such purpose; makes a general assignment for the benefit of creditors; or has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business. Any such termination shall become effective at the end of such ninety (90) day period unless the breaching Party has cured such breach prior to the end of such period. Any right to terminate under this Section 9.2(a) shall be stayed and the cure period tolled in the event that, during any cure period, the Party alleged to have been in material breach shall have initiated dispute resolution in accordance with Article 11 with respect to the alleged breach, which stay and tolling shall continue until such dispute has been resolved in accordance with Article 11 and any cure required by such dispute resolution procedures has not been timely effected.
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(b) For clarity, in the event of material breach of this Agreement by either Party that is not cured within the applicable notice period set forth in Section 9.2(a), the other Party, at its sole discretion, may either:
(i) terminate this Agreement in accordance with Section 9.2(a) (in addition to pursuing any remedy that may be available to that Party at law or in equity as a result of the other Party’s breach of this Agreement); or
(ii) elect (A) not to terminate this Agreement, (B) to keep the license granted under Section 2.1 in force, subject to all terms and conditions hereof, and (C) pursue any remedy that may be available to that Party at law or in equity as a result of the other Party’s breach of this Agreement, without prejudice to that Party’s right to terminate this Agreement at a later date pursuant to Section 9.2 (for that uncured material breach or any other uncured material breach of this Agreement by the other Party) or pursuant to Section 9.4.
9.3 Termination by MedPharm. MedPharm shall have the right to terminate this Agreement immediately upon written notice to Virpax if Virpax or its Affiliate or a Related Party:
(a) directly, or through assistance granted to a Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of term or the grant of a supplementary protection certificate with respect to, any MedPharm Patent Right. MedPharm shall have the right to require Virpax to terminate any sub-license if the Sub-licensee does any of the things listed in the previous sentence.
(b) acquires rights to, develops, makes, has made, sells or offers for sale or otherwise commercializes a Generic Version of a Product (except for an authorized generic launched in the face of reasonably anticipated third-party generic competition) that competes, or is likely to compete once developed, with a Product licensed under this Agreement
9.4 At-Will Termination by Virpax. Virpax shall have the right to terminate this Agreement on a country by country basis for any reason or for no reason at any time upon ninety (90) days’ prior written notice to MedPharm, provided Virpax’s termination shall not be deemed to cure any breach existing as of the date of such termination.
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9.5 Effect of Expiration or Termination.
(a) Expiration. Upon expiration (but not on earlier termination) of this Agreement, all licenses granted by MedPharm to Virpax that were in effect immediately prior to such expiration shall survive on a non-exclusive, fully-paid, royalty-free basis.
(b) Any Termination. Upon any termination of this Agreement prior to its expiration, the license (on a country by country basis in the event of partial termination by Virpax under Section 9.4) granted to Virpax pursuant to Section 2.1 shall automatically terminate and revert to MedPharm, and all other rights and obligations of the Parties under this Agreement shall terminate, except as expressly provided elsewhere in this Article 9.
9.6 Accrued Obligations; Survival. Neither expiration nor any termination of this Agreement shall relieve either Party of any obligation or liability accruing prior to such expiration or termination, nor shall expiration or any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement. In addition, the Parties’ rights and obligations under Sections 6.1, 6.2, 6.3, 6.6, 7.7, 8.1, 8.2(b), 8.2(c), 8.4(b), 9.5, 9.6, 9.7, 9.8, 9.9 and 9.10 and Articles 5, 10, 11 and 12 of this Agreement shall survive expiration or any termination of this Agreement.
9.7 Return of Confidential Information. Within thirty (30) days following the expiration or termination of this Agreement, except to the extent that a Party retains a license from the other Party as provided in this Article 9, each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s possession or control containing Confidential Information of the other Party; provided that such Party may keep one copy of such materials for archival purposes only subject to a continuing confidentiality obligations.
9.8 Damages; Relief. Termination of this Agreement shall not preclude either Party from claiming any other damages, compensation or relief that it may be entitled to hereunder.
9.9 Licence Back to MedPharm. Upon termination of this Agreement for any reason other than under Section 9.1, by Virpax under to Section 9.2 or a partial termination by Virpax under Section 9.4, and at MedPharm’s request, the Parties shall negotiate in good faith the terms of an agreement between them on reasonable commercial terms, taking into account, among other things, the fair market value of any Virpax Patent Rights or Virpax Know How, under which Virpax will:
(a) transfer to MedPharm exclusively all Regulatory Documentation;
(b) have any Regulatory Approvals and pricing or reimbursement approvals, and other permits and applications related to Products transferred into MedPharm’s name;
(c) grant to MedPharm an exclusive worldwide licence, with the right to grant sub-licences, under any Virpax Patent Rights and Virpax Know-How; and
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(d) grant to MedPharm the right to continue to use any product name that has been applied to any Product prior to termination of this Agreement.
9.10 If the Parties are unable to agree the terms of an agreement as described in Section 9.9 within ninety (90) days after MedPharm’s request to negotiate such an agreement, either Party may refer the terms for settlement by an independent expert who shall be appointed in accordance with the provisions of Exhibit C. At MedPharm’s request the Parties shall promptly execute an agreement on the terms agreed between them or settled by the expert.
INDEMNIFICATION
10.1 Indemnification by Virpax. Virpax hereby agrees to save, defend, indemnify and hold harmless MedPharm, its Affiliates, its and their respective officers, directors, agents, employees, successors and assigns (the “MedPharm Indemnitees”) from and against any and all losses, damages, liabilities, expenses and costs, including reasonable and documented legal expense and attorneys’ fees (“Losses”), to which any MedPharm Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party (each, a “Claim”) to the extent such Losses arise out of or relate to (a) the gross negligence or willful misconduct of any Virpax Indemnitee (defined below), (b) the breach by Virpax of any warranty, representation, covenant or agreement made by Virpax in this Agreement, or (c) the development, manufacture, use, sale, offer for sale or other disposition by or on behalf of Virpax or any of its Related Parties of any Product; except, (i) in each case, to the extent such Losses result from the gross negligence or willful misconduct of any MedPharm Indemnitee or the breach by MedPharm of any warranty, representation, covenant or agreement made by MedPharm in this Agreement and (ii) to the extent of any Claim for which MedPharm is obligated to indemnify Virpax under Section 10.2.
10.2 Indemnification by MedPharm. MedPharm hereby agrees to save, defend, indemnify and hold harmless Virpax, its Affiliates and their respective officers, directors, employees, consultants and agents (the “Virpax Indemnitees”) from and against any and all Losses to which any Virpax Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party to the extent such Losses arise out of or relate to (a) the gross negligence or willful misconduct of any MedPharm Indemnitee, (b) (A) actual patent infringement arising out of the exercise of rights under the MedPharm Patent Rights or (B) actual misappropriation of trade secrets arising out of the exercise of rights under the MedPharm Know-How and (c) the breach by MedPharm of any warranty, representation, covenant or agreement made by MedPharm in this Agreement; in each case except, (i), in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Virpax Indemnitee or the breach by Virpax of any warranty, representation, covenant or agreement made by Virpax in this Agreement and (ii) to the extent of any Claim for which Virpax is obligated to indemnify MedPharm under Section 10.1.
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10.3 Control of Defense. In the event a Party (the “Indemnified Party”) seeks indemnification under Section 10.1 or 10.2, it shall inform the other Party (the “Indemnifying Party”) of a claim as soon as reasonably practicable after it receives notice of the claim (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a claim as provided in this Section 10.3 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually damaged as a result of such failure to give notice), shall permit the Indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration) using counsel reasonably satisfactory to the Indemnified Party, and shall cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim. If the Indemnifying Party does not assume control of such defense within 15 days after receiving notice of the claim from the Indemnified Party, the Indemnified Party shall control such defense and, without limiting the Indemnifying Party’s indemnification obligations, the Indemnifying Party shall reimburse the Indemnified Party for all costs, including reasonable and documented attorney fees, incurred by the Indemnified Party in defending itself within thirty (30) days after receipt of any invoice therefor from the Indemnified Party. The Party not controlling such defense may participate therein at its own expense. The Party controlling such defense shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto. The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, delayed or conditioned. The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto, that imposes any liability or obligation on the Indemnified Party or that acknowledges fault by the Indemnified Party without the prior written consent of the Indemnified Party. If the Parties cannot agree as to the application of Section 10.1 or 10.2 to any claim, pending resolution of the dispute pursuant to Article 11, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Section 10.1 or 10.2, as applicable, upon resolution of the underlying claim.
10.4 Insurance. Each Party shall procure and maintain adequate levels of insurance that are consistent with industry standards for similarly situated companies, including comprehensive or commercial general liability insurance (including contractual liability and product liability). Such insurance shall include commercially reasonable levels of insurance as may be customary in light of status of activities being conducted. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 10 or otherwise. Each Party shall provide the other Party with written evidence of such insurance upon request. Each Party shall provide the other Party with written notice at least 30 days prior to the cancellation, non-renewal or material change in such insurance which materially adversely affects the rights of the other Party hereunder.
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DISPUTE RESOLUTION
11.1 Disputes. Subject to Section 11.3, any claim, dispute, or controversy as to the breach, enforcement, interpretation or validity of this Agreement (each, a “Dispute”) that cannot be resolved by the Parties within thirty (30) days that a Party is notified of such Dispute, will be referred to the Chief Executive Officer of MedPharm and the Chief Executive Officer of Virpax for attempted resolution, with each party exercising good faith in such attempt. In the event such executives are unable to resolve such Dispute within thirty (30) days of such Dispute being referred to them, then, upon the written request of either Party to the other Party, the Dispute shall be subject to arbitration in accordance with Section 11.2, except as expressly set forth in Section 11.3.
(a) Claims. Subject to Section 11.3 below, any Dispute that is not resolved under Section 11.1 within the applicable 30-day period shall be resolved by final and binding arbitration administered by JAMS (if the claim is brought by MedPharm) or the London Court of International Arbitration (“LCIA”) (if the claim is brought by Virpax) (the “Administrator”) in accordance with their respective then-effective International Arbitration Rules (the “Rules”), except to the extent any such Rule conflicts with the express provisions of this Section 11.2. (Capitalized terms used but not otherwise defined in this Agreement shall have the meanings provided in the Rules.) The Arbitration shall be conducted by one neutral arbitrator selected in accordance with the Rules, provided that such individual shall not be a current or former employee or director, or a current stockholder, of either Party or any of their respective Affiliates (or any licensee or sub-licensee of the rights granted to such Party under this Agreement). The arbitration and all associated discovery proceedings and communications shall be conducted in English, and the arbitration shall be held in New York, NY, USA if the claim is brought by MedPharm and in London, England if the claim is brought by Virpax.
(b) Discovery. Within 30 days after selection of the Arbitrator, the Arbitrator shall conduct the Preliminary Conference. In addressing any of the subjects within the scope of the Preliminary Conference, the Arbitrator shall take into account both the desirability of making discovery efficient and cost-effective and the needs of the Parties for an understanding of any legitimate issue raised in the Arbitration. In that regard, the Parties agree to the application of the E-Discovery procedures set forth in Rule 16.2(c) of the JAMS Expedited Procedures or the nearest equivalent procedure in the LCIA rules. Neither Party shall have the right to take deposition testimony.
(c) Hearing; Decision. The Hearing shall commence within 60 days after the discovery cutoff. The Arbitrator shall require that each Party submit concise written statements of position and shall permit the submission of rebuttal statements, subject to reasonable limitations on the length of such statements to be established by the Arbitrator. The Hearing shall be no longer than 5 business days in duration. The Arbitrator shall also permit the submission of expert reports. The Arbitrator shall render the Award within 30 days after the Arbitrator declares the Hearing closed, and the Award shall include a written statement describing the essential findings and conclusions on which the Award is based, including the calculation of any damages awarded. The Arbitrator’s authority to award special, incidental, consequential or punitive damages shall be subject to the limitation set forth in Section 7.7. The Award rendered by the Arbitrator shall be final, binding and non-appealable, and judgment may be entered upon it in any court of competent jurisdiction.
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(d) Costs. Each Party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal share of the fees and costs of the arbitrator; provided, however, the Arbitrator shall be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), and/or the fees and costs of the Administrator and the Arbitrator.
11.3 Court Actions. Nothing contained in this Agreement shall deny either Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding. In addition, either Party may bring an action in any court of competent jurisdiction to resolve disputes pertaining to the validity, construction, scope, enforceability, infringement or other violations of Patent Rights or other intellectual property rights, and no such claim shall be subject to arbitration pursuant to Section 11.2.
MISCELLANEOUS
12.1 Rights Upon Bankruptcy. All rights and licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United States Code and other similar laws in any jurisdiction outside the U.S. (collectively, the “Bankruptcy Laws”), licenses of rights to be “intellectual property” as defined under the Bankruptcy Laws. If a case is commenced during the Term by or against a Party under Bankruptcy Laws then, unless and until this Agreement is rejected as provided in such Bankruptcy Laws, such Party (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall perform all of the obligations provided in this Agreement to be performed by such Party. If a case is commenced during the Term by or against a Party under the Bankruptcy Laws, this Agreement is rejected as provided in the Bankruptcy Laws and the other Party elects to retain its rights hereunder as provided in the Bankruptcy Laws, then the Party subject to such case under the Bankruptcy Laws (in any capacity, including debtor-in-possession) and its successors and assigns (including a Title 11 trustee), shall provide to the other Party copies of all Information necessary for such other Party to prosecute, maintain and enjoy its rights under the terms of this Agreement promptly upon such other Party’s written request therefor. All rights, powers and remedies of the non-bankrupt Party as provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including, without limitation, the Bankruptcy Laws) in the event of the commencement of a case by or against a Party under the Bankruptcy Laws.
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12.2 Governing Law. This Agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of England and Wales, except as to any issue which depends upon the validity, scope or enforceability of any Patent, which issue shall be determined in accordance with the laws of the country in which such patent was issued or applied for.
12.3 Entire Agreement; Amendments. This Agreement (including the Exhibits and Schedules hereto) is both a final expression of the Parties’ agreement and a complete and exclusive statement with respect to all of its terms. This Agreement supersedes all prior and contemporaneous agreements and communications, whether oral, written or otherwise, concerning any and all matters contained herein. The Exhibits and Schedules to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of both Parties hereto.
12.4 Non-Waiver. The failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance. Any waiver by a Party of a particular provision or right shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time and shall be signed by such Party.
12.5 Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party (which consent shall not be unreasonably withheld); provided, however, that either Party may assign this Agreement and its rights and delegate its obligations hereunder without the other Party’s consent:
(a) in connection with the transfer or sale of all or substantially all of the business of such Party to which this Agreement relates to a Third Party (“Third Party Acquirer”), whether by merger, sale of stock, sale of assets or otherwise (each, a “Sale Transaction”); or
(b) to an Affiliate, provided that the assigning Party shall remain liable and responsible to the non-assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate.
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The rights and obligations of the Parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties, and the name of a Party appearing herein will be deemed to include the name of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this section. Any assignment not in accordance with this Agreement shall be void. In the event of an assignment and assumption of rights and obligations under this Agreement to a Third Party in connection with a Sale Transaction, the assigning Party shall be relieved of all obligations to the non-assigning Party assumed by the applicable Third Party.
12.6 Force Majeure. Each Party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such Party’s reasonable control, including but not limited to Acts of God, fire, flood, explosion, earthquake, or other natural forces, war, civil unrest, acts of terrorism, accident, destruction or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of raw materials, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances.
12.7 Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.
12.8 Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile or electronic mail (in each case, if promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to MedPharm, to: | Dr Andrew Muddle |
Chief Executive Officer | |
MedPharm Ltd | |
Unit 3 / Chancellor Court | |
50 Occam Road | |
Surrey Research Park | |
Guildford | |
GU2 7AB | |
United Kingdom |
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or to such other address(es) as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered, if personally delivered or sent by facsimile on a business day (or if delivered or sent on a non-business day, then on the next business day); (b) on the business day after dispatch, if sent by nationally-recognized overnight courier; or (c) on the third (3rd) business day following the date of mailing, if sent by mail.
12.9 Interpretation. The headings of clauses contained in this Agreement preceding the text of the sections, subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction. All references in this Agreement to the singular shall include the plural where applicable. The term “including” or “includes” as used in this Agreement means including, without limiting the generality of any description preceding such term, and the word “or” has the inclusive meaning represented by the phrase “and/or.” Unless otherwise specified, references in this Agreement to any section shall include all subsections and paragraphs in such section and references in this Agreement to any subsection shall include all paragraphs in such subsection. All references to days in this Agreement shall mean calendar days, unless otherwise specified. Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist. This Agreement has been prepared in the English language, and the English language shall control its interpretation. In addition, all notices required or permitted to be given hereunder, and all written, electronic, oral or other communications between the Parties regarding this Agreement shall be in the English language.
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Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
12.10 Relationship between the Parties. The Parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture or similar business relationship between the Parties. Neither Party is a legal representative of the other Party, and neither Party may assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other Party for any purpose whatsoever.
12.11 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.
12.12 No Third Party Rights. The provisions of this Agreement are for the exclusive benefit of the Parties, and no other person or entity shall have any right or claim against any Party by reason of these provisions or be entitled to enforce any of these provisions against any Party.
12.13 Further Assurances. Each Party agrees to do and perform all such further acts and things and will execute and deliver such other agreements, certificates, instruments and documents necessary or that the other Party may deem advisable in order to carry out the intent and accomplish the purposes of this Agreement and to evidence, perfect or otherwise confirm its rights hereunder.
12.14 Costs. Except as specifically provided in this Agreement, each Party shall be solely responsible for all costs, fees and other expenses incurred in connection with this Agreement.
12.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument. This Agreement may be executed by facsimile or PDF signatures, which signatures shall have the same force and effect as original signatures.
[Remainder of this page intentionally left blank.]
-36-
In Witness Whereof, the parties hereto have duly executed this License Agreement as of the Effective Date.
MedPharm Limited | ||
By: | ||
Name: | ||
Title: |
[Signature Page to MedPharm License Agreement]
Virpax Pharmaceuticals, LLC | ||
By: | /s/ Anthony Mack | |
Name: Anthony Mack | ||
Title: CEO |
[Signature Page to MedPharm License Agreement]
Exhibit A
MedSpray Patent Rights
M&C File | Title (Client Ref) | Country |
Application No
Grant/Reg No |
Application
Date |
Applicant | Status | ||||||
PN756956ZA | TOPICAL FORMULATIONS (MedSpray) | South Africa | 2008/3150 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
2008/03150 | ||||||||||||
PN756956US | TOPICAL FORMULATIONS (MedSpray) | United States of America | 12/067004 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
8349297 | ||||||||||||
PN756956RU | TOPICAL FORMULATIONS (MedSpray) | Russian Federation | 2008114352 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
2428970 | ||||||||||||
PN756956NZ | TOPICAL FILM-FORMING MONOPHASIC FORMULATIONS (MedSpray) | New Zealand | 567022 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
567022 | ||||||||||||
PN756956NO | TOPICAL FORMULATIONS (MedSpray) | Norway | 20081790 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
339113 | ||||||||||||
PN756956MX | TOPICAL FORMULATIONS (MedSpray) | Mexico | MX/a/2008/003623 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
314936 | ||||||||||||
PN756956KR | TOPICAL FORMULATIONS (MedSpray) | Republic of Korea | 10-2008-7008575 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1326207 | ||||||||||||
PN756956JP | TOPICAL FORMULATIONS (MedSpray) | Japan | 2008-530613 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
5677720 | ||||||||||||
PN756956IL | TOPICAL FILM-FORMING MONOPHASIC FORMULATIONS (MedSpray) | Israel | 190174 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
190174 | ||||||||||||
PN756956EP | TOPICAL FORMULATIONS (MedSpray) | European Patent Office | 6779420.6 | 14/09/2006 | MedPharm Limited | Gone national | ||||||
1931310 | ||||||||||||
PN756956CN | TOPICAL FORMULATIONS (MedSpray) | China | 200680042292.9 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
ZL200680042292.9 | ||||||||||||
PN756956CA | TOPICAL FILM-FORMING MONOPHASIC FORMULATIONS (MedSpray) | Canada | 2622624 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
2622624 | ||||||||||||
PN756956BR | TOPICAL FORMULATIONS (MedSpray) | Brazil | PI0616061-1 | 14/09/2006 | MedPharm Limited | Published | ||||||
PN756956AU | TOPICAL FORMULATIONS (MedSpray) | Australia | 2006290487 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
2006290487 | ||||||||||||
PN756956TRQ | TOPICAL FORMULATIONS (MedSpray) | Turkey | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956SKQ | TOPICAL FORMULATIONS (MedSpray) | Slovakia | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956SIQ | TOPICAL FORMULATIONS (MedSpray) | Slovenia | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956SEQ | TOPICAL FORMULATIONS (MedSpray) | Sweden | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956PTQ | TOPICAL FORMULATIONS (MedSpray) | Portugal | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956PLQ | TOPICAL FORMULATIONS (MedSpray) | Poland | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956NLQ | TOPICAL FORMULATIONS (MedSpray) | Netherlands | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956LVQ | TOPICAL FORMULATIONS (MedSpray) | Latvia | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956LUQ | TOPICAL FORMULATIONS (MedSpray) | Luxembourg | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956LTQ | TOPICAL FORMULATIONS (MedSpray) | Lithuania | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956ITQ | TOPICAL FORMULATIONS (MedSpray) | Italy | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956IEQ | TOPICAL FORMULATIONS (MedSpray) | Ireland | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956HUQ | TOPICAL FORMULATIONS (MedSpray) | Hungary | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956GRQ | TOPICAL FORMULATIONS (MedSpray) | Greece | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956GBQ | TOPICAL FORMULATIONS (MedSpray) | United Kingdom | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956FRQ | TOPICAL FORMULATIONS (MedSpray) | France | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956FIQ | TOPICAL FORMULATIONS (MedSpray) | Finland | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956ESQ | TOPICAL FORMULATIONS (MedSpray) | Spain | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956DKQ | TOPICAL FORMULATIONS (MedSpray) | Denmark | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956DEQ | TOPICAL FORMULATIONS (MedSpray) | Germany | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956CZQ | TOPICAL FORMULATIONS (MedSpray) | Czech Republic | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956CHQ | TOPICAL FORMULATIONS (MedSpray) | Switzerland | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956BEQ | TOPICAL FORMULATIONS (MedSpray) | Belgium | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 | ||||||||||||
PN756956ATQ | TOPICAL FORMULATIONS (MedSpray) | Austria | 6779420.6 | 14/09/2006 | MedPharm Limited | Granted/Registered | ||||||
1931310 |
Exhibit B
Compounds
● | diclofenac diethylammine |
● | ibuprofen |
● | indomethacin |
● | ketoprofen |
● | ketorolac |
● | naproxen |
Exhibit C
Expert Determination
1. The Party wishing to refer a matter to an independent expert pursuant to a provision of this Agreement shall give written notice to that effect to the other Party giving details of the matters it wishes to refer to the expert (“Referral Notice”).
2. The Parties shall agree the identity of a single independent, impartial expert to determine such terms. In the absence of such agreement within 14 days after receipt of the Referral Notice, either Party may apply to the President of the Law Society of England and Wales to appoint, as an independent expert, a person qualified by education, experience and training to determine the matter in dispute (the person appointed by or on behalf of the Parties being referred to herein as the “Expert”).
3. Within 14 days after the appointment of the Expert the Parties shall exchange, as appropriate their statements of case, or proposed terms together with any relevant explanation of the basis of those terms, (the “Submission”) and shall simultaneously send a copy of its Submission to the Expert.
4. Each of the Parties may, within 30 days of the date of exchange of their Submissions, serve a reply to the other Party’s Submissions. A copy of any such reply shall be simultaneously sent to the Expert.
5. The Expert shall make his decision on the matter in dispute on the basis of the Submissions and replies and supporting documentation only and there shall be no oral hearing. The Expert shall, to the extent reasonably possible issue his decision in writing with reasons within 30 days after the date of the last reply pursuant to paragraph 4 above or, in the absence of receipt of any replies, within 60 days after the date of exchange pursuant to paragraph 3 above.
6. In the absence of fraud, bias or manifest error, the determination of the Expert shall be final and binding upon the Parties. Both Parties agree to be bound by and, subject to any relevant provision in this Agreement, to implement the written decision of the Expert with no right of appeal.
7. Any person appointed to determine a dispute in accordance with this procedure shall act as an Expert and not as an arbitrator and the provisions of the Arbitration Acts (as amended from time to time) and the law relating to arbitrations shall not apply to such Expert or his determination or the procedure by which he reaches his determination.
8. Each Party shall bear their own costs in connection with the reference of a dispute to an Expert and the costs of the Expert (including the costs of any advisers engaged by him) will be paid by the parties to the dispute in equal proportions unless otherwise determined by the Expert.
Exhibit 10.8
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
AMENDMENT TO LICENSE AGREEMENT
This Amendment to License Agreement (this “Amendment”) is made effective as of September 2nd , 2017 (the “First Amendment Effective Date”) between Virpax Pharmaceuticals, Inc. (“Virpax”) and MedPharm Limited (“MedPharm”). Virpax and MedPharm are each sometimes referred to herein as a “Party” and, collectively, as the “Parties.”
WHEREAS, Virpax and MedPharm are parties to that certain Option Agreement, dated as April 11, 2017, (the “MedPharm Option Agreement”);
WHEREAS, Virpax and MedPharm are also parties to that certain license agreement, dated as of June 6, 2017 under which MedPharm granted Virpax a license to certain MedPharm intellectual property (the “MedPharm License Agreement”, and together, with the MedPharm Option Agreement, the “MedPharm Agreements”);
WHEREAS, the MedPharm License Agreement provides that MedPharm shall have right to terminate the MedPharm License Agreement if an upfront payment equal to [**] is not made within 90 days of June 6, 2017;
WHEREAS, in consideration for the benefits to be gained by MedPharm under the MedPharm Agreements in connection with the continued development of products by Virpax, and in order to induce Virpax to continue the development plan it has initiated with respect to certain products under the MedPharm License Agreement, MedPharm has agreed to the amendment set forth below;
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. | Amendments. |
a. | The defined term “First Amendment Effective Date”, which shall be defined as it is in this Amendment, shall be inserted into the end of Section 1 of the MedPharm License Agreement forming a new section number 1.79. |
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
b. | Section 4.1 of the MedPharm License Agreement is hereby deleted in its entirety and replaced with the following: |
Upfront Payment. Within 60 days following the First Amendment Effective Date, Virpax shall make a payment of [**] to MedPharm and will execute Appendix B of the Option Agreement. In the event the payment contemplated by the previous sentence and the execution of Appendix B of the Option Agreement is not made within 90 days of the First Amendment Effective Date, MedPharm shall have the right to terminate this Agreement by delivering written notice to Virpax, and upon delivery of such notice, neither party shall have any further obligation or liability to the other under this Agreement.
2. | Waiver. MedPharm hereby waives any and all defaults under the MedPharm Agreements in connection with a failure to make the upfront payment within the sixty day period reflected in Section 4.1 of the MedPharm License Agreement. |
3. | No Other Amendment. Except as specifically set forth herein, the MedPharm Agreements shall remain in full force and effect. |
2
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
In Witness Whereof, the parties hereto have duly executed this Amendment as of the Effective Date.
VIRPAX PHARMACEUTICALS, INC. | ||
By: | /s/ Anthony Mack | |
Name: | Anthony Mack | |
Title: | President and CEO | |
MEDPHARM LIMITED | ||
By: | /s/ Andrew Muddle | |
Name: | Andrew Muddle | |
Title: | CEO | |
[signature page to MedPharm Amendment]
3
Exhibit 10.9
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
SECOND AMENDMENT TO LICENSE AGREEMENT
This Second Amendment to License Agreement (this “Amendment”) is made effective as of October 9, 2017 (the “Second Amendment Effective Date”) between Virpax Pharmaceuticals, Inc. (“Virpax”) and MedPharm Limited (“MedPharm”). Virpax and MedPharm are each sometimes referred to herein as a “Party” and, collectively, as the “Parties.”
WHEREAS, Virpax and MedPharm are parties to that certain Option Agreement, dated as April 11, 2017, (the “MedPharm Option Agreement”);
WHEREAS, Virpax and MedPharm are also parties to that certain license agreement, dated as of June 6, 2017 under which MedPharm granted Virpax a license to certain MedPharm intellectual property (as amended, the “MedPharm License Agreement”, and together, with the MedPharm Option Agreement, the “MedPharm Agreements”);
WHEREAS, in consideration for the benefits to be gained by MedPharm under the MedPharm Agreements in connection with the continued development of products by Virpax, and in order to induce Virpax to continue the development plan it has initiated with respect to certain products under the MedPharm License Agreement, MedPharm has agreed to the amendment set forth below;
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. | Amendments. |
a. | Section 4.1 of the MedPharm License Agreement is hereby deleted in its entirety and replaced with the following: |
Intentionally Omitted.
b. | Section 4.2 of the License Agreement is hereby amended to increase the Developmental Milestone payment payable in connection with the first dosing of a human subject in a clinical trial from [**] to: |
[**].
2. | Waiver. MedPharm hereby waives any and all defaults under the MedPharm Agreements in connection with a failure to make the upfront payment within the sixty day period reflected in the former Section 4.1 of the MedPharm License Agreement. |
3. | No Other Amendment. Except as specifically set forth herein, the MedPharm Agreements shall remain in full force and effect. |
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
In Witness Whereof, the parties hereto have duly executed this Amendment as of the Second Amendment Effective Date.
VIRPAX PHARMACEUTICALS, INC. | ||
By: | /s/ Anthony Mack | |
Name: | Anthony Mack | |
Title: | President and CEO | |
MEDPHARM LIMITED | ||
By: | /s/ Andrew Muddle | |
Name: | Andrew Muddle | |
Title: | CEO |
[signature page to MedPharm Amendment]
Exhibit 10.10
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
RESEARCH AND OPTION AGREEMENT
This Research and Option Agreement (this “Agreement”) is entered into effective as of the 11th day of April 2017 (the “Effective Date”) by and between Virpax Pharmaceuticals, LLC, a Delaware limited liability company having a place of business at 101 Lindewood Drive, Suite 225 Malvern, PA 19355 (“Virpax”), and MedPharm Limited, a company incorporated in England with company number 3783386 and a registered office at Unit 3, Chancellor Court, 50 Occam Road, Surrey Research Park, Guildford, GU2 7AB, UK, (“MedPharm”) (collectively MedPharm and Virpax are referred to as the “Parties” and each of MedPharm and Virpax, a “Party”).
WHEREAS, Virpax is engaged in the research, development and distribution of over-the-counter and prescription pharmaceutical products;
WHEREAS, MedPharm is engaged in the formulation, development, performance testing and manufacture of topical and transdermal medicines for application to the skin, eyes, nail, wounds, airways and mucous membranes;
WHEREAS, MedPharm owns intellectual property, including as covered by patent application PCT/GB2006/003408 entitled “TOPICAL FILM-FORMING MONOPHASIC FORMULATIONS”, as well as know-how covering its spray formulation technology and the formulation of active pharmaceutical ingredients within spray formulation technology, necessary or useful to the development and commercialization of products in the Field (the “MedSpray Technology”);
WHEREAS, the MedSpray Technology includes know-how and confidential information relating to pre-clinical development of the initial products described herein (the “MedSpray Information”); and
WHEREAS, subject to the terms and conditions of this Agreement, MedPharm wishes to grant Virpax an Option (as defined below) to obtain an exclusive, worldwide, royalty-bearing license to use the MedSpray Technology for Licensed Product(s) (as defined below);
WHEREAS, the Parties wish to form a relationship to develop and commercialize prescription and over-the-counter pharmaceutical products based on the MedSpray Technology
WHEREAS, subject to the terms and conditions of this Agreement, MedPharm will conduct certain exclusive research and development of a proprietary formulation incorporating the MedSpray Technology and containing Virpax Molecules or other active pharmaceutical ingredients identified by VIRPAX (each, a “Project” and collectively, the “Projects”).
NOW, THEREFORE, in consideration of the mutual promises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
1. | DEFINITIONS |
The following definitions will control the construction of each of the following items wherever they appear in this Agreement.
1.1 “Act” means the United States Federal Food, Drug, and Cosmetic Act, as amended to date and as may be further amended from time to time during the Term, and the regulations promulgated with respect thereto.
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.2 “Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person will be regarded as in control of another Person if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever. For purposes of this Agreement, MP Pharma Services Inc., shall be deemed an Affiliate of MedPharm for so long as it meets the foregoing definition.
1.3 “Applicable Law” means all laws, rules, regulations and guidelines within the Territory (including, but not limited to, the Act and all regulations promulgated thereunder), as existing as of the Effective Date and as may be amended from time to time thereafter, that apply to the import, export, research and development, manufacture, marketing, distribution and/or sale of the Licensed Product(s) in the Territory or the performance of either Party’s obligations under this Agreement, in each case to the extent applicable and relevant to such Party.
1.4 “Background Technology” means, individually or collectively, the Virpax Background Technology and/or the MedPharm Background Technology used in connection with the carrying out of the activities pursuant to a Project Addendum.
1.5 “Confidential Information” means any proprietary, nonpublic information related to the business, technology, products, processes or customers of a Party disclosed by such Party (“Disclosing Party”) to the other Party (“Receiving Party”). Confidential Information may include, without limitation, any and all nonpublic information, know how, data, designs, plans, specifications, structures, documents, trade secrets, ideas, concepts, products, processes, prototypes, formulas, works in progress, systems, technologies, manufacturing or marketing techniques, business or financial information and other proprietary and nonpublic information of the Disclosing Party. Confidential Information may be written, recorded or otherwise fixed in a tangible medium, electronically communicated, or orally or visually communicated, furnished, provided or disclosed by a Disclosing Party, or acquired by a Receiving Party, directly or indirectly, from the Disclosing Party. The Confidential Information of MedPharm includes, without limitation, all non-public information that is included in the Licensed Intellectual Property.
1.6 “Control” means, with respect to an item included in the Licensed Intellectual Property, the right (whether by ownership, license or otherwise) to grant a license, sublicense or other right to or under such item, as provided for in this Agreement, without violating the terms of any agreement or other binding arrangement with any Third Party and without any obligation to pay royalties or other amounts to any Third Party.
1.7 “Data” means the information, data or results arising from activities under this Agreement, including, but not limited to, from the performance of any Project (but excluding any Inventions).
1.8 “Definitive License Agreement” means, with respect to any Virpax Molecule, a license agreement setting forth the terms and conditions upon which Virpax will license the Licensed Intellectual Property from MedPharm, which shall include, but not be limited to, the terms set forth on Appendix C.
1.9 “Derivatives” means substances created which constitute an unmodified functional subunit or product expressed by the Virpax Materials or MedPharm Materials, as applicable.
1.10 “Evaluation Materials” means the combination of Virpax Materials and Company Materials as described in the applicable Project Addendum; provided, however, that each Party shall retain rights to their own individual respective right to any Virpax Materials and/or Company Materials incorporated therein. For the avoidance of doubt, the definition of “Evaluation Materials” refers to tangible property only and does not include any intellectual property rights.
2
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.11 “Fees” means the fees specified in the Project Addendum as varied in accordance with any variation to the Project Addendum agreed in writing between the parties.
1.12 “Field” means all uses in humans (including, but not limited to, prophylactic and therapeutic treatment as well as diagnosis of human diseases) of Virpax Molecules in MedSpray Technology that is part of an ongoing Project as agreed between the Parties in the relevant Project Addendum.
1.13 “Indirect Taxes” means value-added taxes, sales taxes, or other similar consumption taxes.
1.14 “Initial Virpax Molecules” means [**].
1.15 “Invention” shall mean any invention or discovery, whether patentable or not, that is conceived or first reduced to practice in the course of performance of this Agreement.
1.16 “Licensed Intellectual Property” means the Licensed Patent Rights and the Licensed Know-how.
1.17 “Licensed Know-how” means: (i) any technical, scientific and other data, information and know-how (including, but not limited to, any biological, chemical, toxicological, physical, analytical, safety, manufacturing and quality control data and information) that is Controlled by MedPharm during the Term that relates to (A) the MedSpray Technology, (B) any MedPharm Invention, (C) the MedSpray Information and/or (D) the development, manufacture or commercialization of the Licensed Product(s) and (ii) any and all intellectual property rights with respect to any of the foregoing (other than the Licensed Patent Rights).
1.18 “Licensed Patent Rights” means any Patents that are Controlled by MedPharm during the Term that are necessary or useful to develop, manufacture or commercialize the Licensed Product(s) including, for example, Patents directed to the MedSpray Technology and/or any MedPharm Invention. A list of the Licensed Patent Rights that exist as of the Effective Date is attached to this Agreement as Appendix A.
1.19 “Licensed Product(s)” means any product, kit or other technology containing a Virpax Molecule, incorporating or using, or that constitutes, is based upon or derived from, in whole or part, any Licensed Intellectual Property or any improvement, extension, modification, derivative thereof, in the Field.
1.20 “MedPharm Background Technology” means: (i) the MedPharm Materials; (ii) the pre-existing intellectual property rights of MedPharm with respect to the MedPharm Materials, and with respect to the technology or other materials being used by MedPharm in connection with the performance of this Agreement, as well as any modifications or improvements made by MedPharm to any of the foregoing; and (iii) any and all Progeny and Derivatives thereof.
1.21 “MedPharm Materials” means compound(s), biologic(s) and other substances, that are Controlled by MedPharm and provided to Virpax pursuant to this Agreement.
1.22 “Option Period” means, with respect to a Project, the period that begins on the date Virpax requests the initiation of a Project and the date that is forty-five (45) days from the date the subject Project is completed; provided that if an Option is exercised, the Option Period will be deemed to extend until the termination of the Negotiation Period.
3
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.23 “Pass-through Expenses” means all third party expenses incurred by MedPharm in the direct performance of a Project including the acquisition of consumables, raw materials, equipment or replacement parts required for the performance of the Project. Approved Pass-through Expenses will be subject to a 15 (fifteen) percent increase to such expenses to cover MedPharm requisition costs.
1.24 “Patent” shall mean patents, utility models, inventors certificates and any other indicia of ownership of an invention granted by any governmental authority, reexaminations, reissues, extensions and any other post-issuance counterparts to any of the foregoing, and applications for any of the foregoing, including provisionals, divisionals, substitutions and continuations (in whole or part).
1.25 “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint venture, non-profit organization, pool, syndicate, sole proprietorship, unincorporated organization, university, governmental authority or any other form of entity not specifically listed herein.
1.26 “Progeny” means unmodified descendants from the Virpax Materials or MedPharm Materials, as applicable.
1.27 “Project Addendum” or, collectively, “Project Addenda” means any addendum belonging to this Agreement and forming an integral part thereof that sets forth the details of each Project agreed between the Parties;
1.28 “Quotation” or “Proposal” means a written quotation or quotations provided by MedPharm in relation to a Project requested by Virpax.
1.29 “Regulatory Authority” means any governmental authority, including without limitation the FDA, that has responsibility for granting any licenses or approvals or granting pricing and/or reimbursement approvals necessary for the marketing and sale of the Licensed Product(s) in any country.
1.30 “Report” means the final documentation relating to the results of all work carried out under the Project including, a formal report to be prepared by MedPharm setting out the results of the Project.
1.31 “Representatives” means, with respect to a Party, such Party’s Affiliates, employees, contractors, counsel, advisors or other agents.
1.32 “Territory” means worldwide.
1.33 “Third Party” mean any Person other than Virpax, MedPharm or any of their respective Affiliates.
1.34 “Virpax Background Technology” means: (i) the Virpax Materials; (ii) the pre-existing intellectual property rights of Virpax with respect to the Virpax Materials, and with respect to the technology or other materials being used by Virpax in connection with the performance of this Agreement, as well as any modifications or improvements made by Virpax to any of the foregoing and (iii) any and all Progeny and Derivatives thereof.
4
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.35 “Virpax Materials” means molecule(s), compound(s), antibody(ies) biologic(s) and other substances that are Controlled by Virpax.
1.36 “Virpax Molecules” means the active pharmaceutical ingredients set forth on Appendix D and any other active pharmaceutical ingredient identified to MedPharm by Virpax as the subject of a Project in writing during the Term.
2. | PROJECTS |
2.1 Generally. MedPharm shall provide a Quotation for each Project requested in writing by Virpax during the Term. MedPharm shall be under no obligation to commence a Project until any relevant Quotation has been accepted by Virpax. Virpax shall have no obligation to accept any Quotation. Virpax shall have no obligation with to MedPharm with respect to a Project or a Quotation until a Project Addendum is executed in respect of such Project and/or Quotation. Following acceptance of Quotation and the agreement and completion of the relevant Project Addendum, MedPharm shall commence the Project on the terms and conditions of this Agreement. MedPharm shall be responsible for procuring all materials required to complete each Project, excluding active pharmaceutical ingredients, which shall be billed to Virpax as Pass-through Expenses as set forth on the applicable Project Addendum. All Evaluation Materials will be owned by Virpax.
2.2 Virpax Molecules. From the date on which a particular Virpax Molecule is selected by Virpax to be the subject of a Project by the request for a Quotation for such Virpax Molecule, MedPharm: (i) will work exclusively with Virpax with respect to the research and development of any product in the Field that incorporates the Licensed Intellectual Property and the subject Virpax Molecule and (ii) will not enter into any research collaboration, development, license agreement or any other arrangement with any Person, with respect to any such product in the Field that incorporates the Licensed Intellectual Property and the subject Virpax Molecule until the expiration of the Option Period. Exclusivity with respect to the Initial Virpax Molecules will begin on the Effective Date.
2.3 Initial Projects. Beginning on the Effective Date, MedPharm and Virpax shall negotiate the terms of a Definitive License Agreement with respect to the Virpax Molecule [**] (to be combined with Licensed Intellectual Property) in good faith with a goal, but not an obligation, to have an executed Definitive Licence Agreement in place within forty-five (45) days of the Effective Date. The Definitive License Agreement for [**] will include the terms in Appendix C and such other terms not inconsistent therewith agreed upon between the Parties. Virpax shall not be responsible for any Fees or Pass-Through Expenses in connection with the formulation of [**], which was completed prior to the Effective Date. The Definitive License Agreement for [**] will serve as a template for any future Definitive License Agreements entered into between MedPharm and Virpax in connection with this Agreement. MedPharm shall, upon Virpax’s request, provide a Quotation for a Project involving [**] within thirty (30) days of the Effective Date of this Agreement.
2.4 Completion of Projects. Completion of Projects shall occur when MedPharm provides a Report in respect of such Project to Virpax and Virpax accepts such Report.
2.5 Information Exchange.
2.5.1 The Parties shall conduct regular information exchanges in a manner to be agreed between them to enable ongoing review of the progress of Projects. The Project Addendum shall nominate a key point of contact for each Party for such information exchange.
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
2.5.2 On the Effective Date, MedPharm will make available to Virpax, at no cost, full access and disclosure of all technical information and technical and regulatory documentation directly related to the Licensed Intellectual Property, and if applicable, any data related to any potential Licensed Product (such as preclinical and clinical documents and reports and consumer research), generated by or on behalf of MedPharm and which is Controlled by MedPharm prior to the Effective Date; provided, however, that this disclosure obligation shall not require that MedPharm breach any confidentiality agreement with any Third Party.
2.5.3 On the Effective Date and thereafter throughout the Term, MedPharm will, upon Virpax’s request, supply all data relating to the Licensed Intellectual Property to Virpax to aid in its due diligence, subject to existing confidentiality agreements with Third Parties.
2.5.4 For the duration of any Project undertaken with respect to a Virpax Molecule and until the expiration of the Option Period, or if applicable, the Negotiation Period, MedPharm shall not (and shall not permit its Representatives to) disclose any Confidential Information in the Field to any other Person, or license, sell, promote for sale, or offer or enter into any negotiations or agreements with other Persons relating to the Licensed Intellectual Property in the Field.
2.6 Project Addendum. In the event that Virpax accepts a Quotation in writing, the Parties shall work together in good faith to agree the terms of any Project Addendum. A template Project Addendum is set out in Appendix B. On signature by the Parties, the relevant Project Addendum will become a part of this Agreement and together with the terms set out in this Agreement will become the entire agreement for the Project concerned. To the extent any terms set forth in a Project Addendum shall conflict with the terms set forth in this Agreement, the terms of this Agreement will take precedence unless the Project Addendum expressly states that a conflicting term is intended to modify a specific term in this Agreement.
3. | OPTION |
3.1 Option Grant to Virpax. MedPharm hereby grants to Virpax an option, exercisable during the Option Period, to obtain an exclusive (even as to MedPharm), sub-licensable (through multiple tiers), royalty-bearing, irrevocable license throughout the Territory, under the Licensed Intellectual Property, to research, develop, make, have made, market, use, import, export, commercialize, offer for sale and sell a Licensed Product(s) in the Field, subject to the terms of a Definitive License Agreement (the “Option”). In order to exercise the Option with respect to a Virpax Molecule, Virpax will provide MedPharm with written notice of such exercise before the end of the Option Period identifying the written notice to MedPharm that it is exercising the Option (the “Exercise Notice”) during the Option Period. The Option will terminate at the end of the Option Period. If agreed to by both Parties in each of their sole discretions, the Parties may mutually agree to extend the Option Period. Such extension, if any, will be in writing signed by both Parties and expressed as an amendment to this Agreement.
3.2 Definitive License Agreement. In the event that Virpax exercises the Option with respect to a Virpax Molecule, the Parties will promptly negotiate in good faith and enter into a Definitive License Agreement containing the agreed terms and related definitions set out in Appendix C and such other reasonable and customary terms that are mutually acceptable to the Parties (and not inconsistent with the terms set forth on Appendix C) for the licensing of the Licensed Intellectual Property to Virpax for Licensed Product(s) corresponding to the Virpax Molecule set forth in the Exercise Notice (the “Definitive License Agreement”). If the Parties fail to execute a Definitive License Agreement within ninety (90) days (the “Negotiation Period”) after the date of the Exercise Notice, then, notwithstanding anything to the contrary, the Option with respect to such Virpax Molecule will be deemed to have expired without having been exercised, neither Party will have any obligation to enter into a Definitive License Agreement and, subject to Section 3.3, MedPharm will be free to use or license the MedSpray Technology for the subject Virpax Molecule or otherwise, without restriction. If agreed to by both Parties in each of their sole discretions, the Parties may mutually agree to extend the Negotiation Period. Such extension, if any, will be signed by both Parties in writing and expressed as an amendment to this Agreement. During the Negotiation Period, MedPharm will exclusively negotiate a license agreement or other commercial arrangement with respect to the Licensed Intellectual Property in connection with the subject Virpax Molecule with Virpax. The milestone, royalty and sublicensee payments set forth in Appendix C are subject to Virpax’s due diligence review and its determination, in its sole discretion, of the strength of the intellectual property position represented by the Licensed Intellectual Property. The Exercise Fee set forth on Appendix C shall only be payable in connection with the execution of the first Definitive License Agreement entered into in connection with this Agreement.
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excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
3.3 Right of First Refusal. Notwithstanding anything to the contrary in this Agreement, Virpax shall have a right of first refusal with respect to any license or other commercial arrangement of involving any of the Licensed Intellectual Property in combination with any Virpax Molecule (the “ROFR Option”). In the event that MedPharm reaches an agreement with respect to a license or other commercial arrangement that involves a Virpax Molecule in combination with the MedSpray Technology with any Person (i) prior to the start of a Project with respect to such Virpax Molecule or (ii) after the expiration of the Option with respect to such Virpax Molecule, MedPharm shall provide prompt written notice (along with any relevant additional reports or data reasonably requested by Virpax) to Virpax. Virpax shall then have ten (10) business days to determine if it will exercise the ROFR Option and match the financial terms of the relevant license agreement or other commercial arrangement that is the subject of the ROFR Option. Virpax may exercise the ROFR Option by delivering written notice to MedPharm. Upon exercise of the ROFR Option, the Parties shall negotiate a Definitive License Agreement (or other commercial arrangement, as the case may be) in good faith in accordance with the procedure set forth in Section 3.2 of this Agreement, with such changes as are necessary to reflect the agreed upon terms.
3.4 Manufacturing. Provided that MedPharm is able to offer competitive pricing and quality as third-party manufacturers, MedPharm shall have the first right to enter into a manufacturing agreement with Virpax with respect to any Licensed Product on terms to be negotiated in good faith as set forth below. For a period of sixty (60) days from the execution of a Definitive License Agreement with respect to a Licensed Product (the “Manufacturing Negotiation Period”), Virpax and MedPharm shall negotiate the terms of a manufacturing agreement with respect to the subject Licensed Product. In the event that MedPharm and Virpax are unable to reach agreement on manufacturing terms within the Manufacturing Negotiation Period, Virpax shall have the option to enter into a manufacturing agreement with any third-party manufacturer it chooses on terms no less favorable to Virpax, in Virpax’s reasonable opinion, than the final terms offered to Virpax from MedPharm during the Manufacturing Negotiation Period. For clarity, Virpax shall have the option to solicit bids from third-party manufacturers at any time, including during the Manufacturing Negotiation Period. In the event that Virpax reaches an agreement with a third-party manufacturer with respect to a Licensed Product, MedPharm shall use commercially reasonable efforts to effect a technology transfer to the third-party manufacturer. The technology transfer shall include the provision of staff as reasonably requested by Virpax and the grant of any licenses to intellectual property Controlled by MedPharm that are reasonably necessary or useful for the manufacturing and supply of Licensed Products. MedPharm shall be eligible to be compensated for any of its staff assigned to provide in factory support at its then standard daily rates. Any provision of documentation to a third-party manufacturer shall be done at no cost to Virpax.
4. | FINANCIAL TERMS |
4.1 Form of Payment. In consideration for the performance of Projects, Virpax shall pay MedPharm the Fees as set out in the Project Addendum. Customer shall also reimburse MedPharm for all Pass-through Expenses; to the extent such Pass-through expenses are approved in writing by Virpax prior to incurrence.
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Certain identified information has been
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likely cause competitive harm if publicly disclosed.
4.2 Payment Schedule. The Fees shall be payable as set forth in the Project Addendum. Unless stated otherwise in the relevant Project Addendum, the Fees shall be payable as 50% on commencement of work and 50% of Fees on completion of work. All undisputed Fees shall be paid within thirty (30) days of receipt of a VAT Invoice by email, from MedPharm by BACS/ electronic banking. Pass-Through Expenses approved by Virpax shall be reimbursed by Virpax on a monthly basis or other basis agreed between the Parties in any Project Addendum. MedPharm shall invoice Virpax for approved Pass-through Expenses within thirty (30) days of incurrence. Virpax shall reimburse MedPharm for approved Pass-through Expenses within thirty (30) days of the receipt of an invoice. Non-payment of undisputed Fees will be considered a breach of this Agreement and will entitle MedPharm to terminate if not cured within five (5) business days. Virpax shall not be required to pay any Fees in connection with the [**] formulation work that MedPharm has completed.
4.3 Disputed Fees. Both Parties agree to negotiate in good faith to resolve any reasonably disputed Fees within seven (7) days of receipt of notice by MedPharm of such dispute (“Fee Distpute Resolution Period”). If a dispute remains unresolved at the end of the Fee Distpute Resolution Period, MedPharm reserves the right to suspend all Projects until a resolution is mutally agreed by the Parties and all outstanding Fees are paid.
4.4 Late Payments. Interest will accrue on payments that are not disputed in good faith or paid when due from the date such payments are due at the prime rate of interest, as published in The Wall Street Journal (Eastern United States Edition) (or if such rate exceeds the maximum rate permitted by Applicable Law, the such lesser rate as is the maximum rate allowed pursuant to Applicable Law).
4.5 Taxes.
4.5.1 General. Except as set forth in Section 4.5.2, MedPharm alone shall be responsible for any and all taxes levied on account of, or measured in whole or in part by reference to, any amounts payable by Virpax to MedPharm pursuant to this Agreement (“Payments”) they receive. Virpax shall deduct or withhold from the Payments any taxes that it is required by Applicable Law to deduct or withhold. Notwithstanding the foregoing, if MedPharm is entitled under any applicable tax treaty to a reduction of rate of, or the elimination of, applicable withholding tax, it may deliver to Virpax or the appropriate governmental authority (with the assistance of Virpax to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve Virpax of its obligation to withhold tax, and Virpax shall apply the reduced rate of withholding, or dispense with withholding, as the case may be, provided that Virpax has received evidence of MedPharm’s delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least fifteen (15) days prior to the time that the Payments are due. If, in accordance with the foregoing, Virpax withholds any amount, it shall pay to MedPharm the balance when due, make timely payment to the proper taxing authority of the withheld amount, and send to MedPharm proof of such payment as soon as reasonably practicable.
4.5.2 Indirect Taxes. All Payments are exclusive of Indirect Taxes. If any Indirect Taxes are chargeable in respect of any Payments, Virpax shall pay such Indirect Taxes at the applicable rate in respect of any such Payments following the receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by MedPharm in respect of those Payments, such Indirect Taxes to be payable on the due date of the payment of the Payments to which such Indirect Taxes relate
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Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
5. | MEDPHARM OBLIGATIONS |
5.1 Projects. MedPharm shall use commercially reasonable efforts in performing each Project, and/or to deliver any required deliverables (including the Report) to Virpax as the case may be, in accordance with the Project Addendum in all material respects.
5.2 Due Dates. MedPharm shall use commercially reasonable efforts to meet any performance or delivery dates specified in the Project Addendum and shall notify Virpax as soon as reasonably possible of any delay.
5.3 Compliance with Laws. MedPharm shall conduct Projects responsibly and professionally adhering at all times to the relevant regulatory and industry standards and in compliance with any policies, guidelines and practices agreed between the Parties and all Applicable Laws.
5.4 Sub-Contracting. MedPharm may carry out Projects itself and/or through its Affiliates and the Virpax hereby also consents to the MedPharm’s engaging a Sub-Contractor to the extent stated in the relevant Project Addendum to carry out the Project, in full or in part, it being understood that MedPharm shall remain, in any case, fully liable to Virpax in respect of any of its obligations under this Agreement. MedPharm shall be entitled to change the Sub-Contractor subject to approval from Virpax, such approval not to be unreasonably refused or delayed.
6. | VIRPAX OBLIGATIONS |
6.1 Virpax agrees to:
6.1.1 supply to MedPharm such quantities of active pharmaceutical ingredient(s) as is required under the applicable Project Addendum; and
6.1.2 supply to MedPharm with such technical, scientific and other information concerning the active pharmaceutical ingredient(s) and the Project as MedPharm shall reasonably require from time to time in order to complete the Project; and
6.1.3 liaise with MedPharm during the course of the Project and to deal promptly with any requests for information or further instructions in connection with the Project.
6.2 MedPharm shall not be responsible for any delay or failure in any Project to the extent caused directly by Virpax’s failure to comply with Section 6.1 above. Any timescales for performance by MedPharm of any Project shall be automatically extended to compensate for any delay by Virpax.
6.3 If Virpax fails to comply with its obligations under Section 6.1 or it is late in complying with such obligations, then without limiting MedPharm’s other rights or remedies:
6.3.1 Virpax shall reimburse MedPharm for any costs or losses sustained or incurred by MedPharm, arising directly from Virpax’s failure or delay; and
6.3.2 MedPharm may raise additional charges to reflect staff allocation to the Project during any period of delay resulting from Virpax’s failure or delay (based on its standard daily rate of £700 per day per MedPharm staff member) for the duration of any delay or until staff can be reasonably reallocated,
and such reimbursement and charges shall be paid by Virpax against MedPharm’s invoice. For clarity, both Parties agree that the wording in this Section 6.3 does not apply to the general delays which may occur from time to time during research and development activities but, instead, applies to acute delays to the Project which arise as a direct result of Virpax’s failure or delay in complying with its obligations under Section 6.1.
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
7. | TERM AND TERMINATION |
7.1 Term. This Agreement will become effective on the Effective Date and will remain in effect for ten (10) years from the Effective Date, unless terminated earlier pursuant to Section 7.2 (the “Term”). Expiry of Agreement shall not affect any Projects in progress at date of expiry and the terms of this Agreement shall survive such expiry until completion of such Projects; provided that, unless a Party gives at least one-hundred eighty (180) days’ notice to the other that it intends to terminate this Agreement upon the expiration of the Term (or any Renewal Term), this Agreement shall automatically renew for additional one-year periods (each, a “Renewal Term”)
7.2 Termination.
7.2.1 This Agreement, or any Project under this Agreement, may be terminated upon thirty (30) days prior written notice by either Party if the other Party materially breaches any of the terms, conditions or provisions of this Agreement and fails to remedy the breach within such thirty (30) day period.
7.2.2 This Agreement, or any Project under this Agreement, may be terminated upon ninety (90) days prior written notice by Virpax for no cause.
7.2.3 This Agreement, or any Project under this Agreement, may be terminated immediately by either Party, should the other Party cease trading or shall pass a resolution for winding-up (or a court shall make an order to that effect) or become or be declared insolvent or have a receiver appointed over the whole or any part of its undertaking.
7.3 Effect of Expiration or Termination. In the event of any expiration or termination of this Agreement:
7.3.1 By either Party pursuant to Section 7.2.1:
MedPharm will deliver to Virpax an invoice with the final accounting of any Fees for work actually performed and together in each case with any approved Pass-through Expenses to the extent not yet paid for but to which MedPharm has incurred a binding obligation to pay, and Virpax will pay such invoice in full within thirty (30) days of receipt;
7.3.2 By Virpax pursuant to Section 7.2.2:
MedPharm will deliver to Virpax an invoice amounting to 100% of the Fees for, in relation to a Project split into parts, all parts initiated at the time of termination, together in each case with any approved Pass-through Expenses to the extent not yet paid for but to which MedPharm has incurred a binding obligation to pay, and Virpax will pay such invoice in full within thirty (30) days of receipt;
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
7.3.3 any Definitive License Agreement that has been executed in connection with this Agreement will not be affected; and
7.3.4 Each Party will either destroy or return (as applicable and at the other’s discretion) all MedPharm Materials and all Virpax Materials in their possession or control at the effective date of termination, to the applicable Party. Notwithstanding the foregoing, each Party may retain one (1) copy of any such Confidential Information in its files for archival purposes as is reasonably necessary for legal, regulatory, insurance or as a means of determining any continuing obligations under this Agreement (including the Project Addenda), subject to the ongoing obligation to maintain the confidentiality of such information.
7.4 Survival. The following provisions shall survive any expiration or termination of this Agreement: Section 3.2 (“Definitive License Agreement”), Section 3.3 (“Right of First Refusal”), Section 3.4 (“Manufacturing”), Section 7.3 (“Effect of Expiration or Termination”), this Section 7.4 (“Survival”), Section 8 (“Intellectual Property”), Section 9 (“Confidentiality”), Section 11 (“Representations and Warranties; Disclaimer”), Section 12 (“Indemnification”), Section 13 (“Liability”) and Section 14 (“Miscellaneous Provisions”).
8. | INTELLECTUAL PROPERTY. |
8.1 Background Technology. The Parties have developed and/or in-licensed their respective Background Technology and Confidential Information over a substantial period of time at substantial expense, and the Background Technology and Confidential Information of each Party are of great importance to such Party’s enterprise. Virpax acknowledges that, as between the Parties, MedPharm is and will at all times remain the owner or licensee of the MedPharm Background Technology and MedPharm’s Confidential Information. MedPharm acknowledges that, as between the Parties, Virpax is and will at all times remain the owner or licensee of the Virpax Background Technology and Virpax’s Confidential Information. Without limiting the foregoing, Virpax will at all times retain ownership of the Virpax Materials, and MedPharm will at all times retain ownership of the MedPharm Materials.
8.2 Inventions. Inventorship of Inventions, whether patentable or not, shall be determined in accordance with United States patent laws. An inventing Party shall promptly disclose to the other Party in writing any Invention conceived or reduced to practice pursuant to the activities conducted under this Agreement or Work Plan. As between the Parties, ownership of Inventions shall be determined such that:
(i) | Virpax shall solely own all right, title and interest: in and to any and all Inventions that materially incorporate Virpax Background Technology and that do not incorporate MedPharm Backround Technology, and any Patents thereon, whether conceived solely by MedPharm Representatives, solely by Virpax Representatives or jointly by one or more Virpax Representative(s) together with one or more MedPharm Representative(s) (“Virpax Inventions”); and |
(ii) | MedPharm shall solely own all right, title and interest in and to any and all Inventions that materially incorporate MedPharm Background Technology and that are not Virpax Inventions, and Patents thereon, whether conceived solely by MedPharm Representatives, solely by Virpax Representatives or jointly by one or more Virpax Representative(s) together with one or more MedPharm Representative(s) (“MedPharm Inventions”) |
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likely cause competitive harm if publicly disclosed.
To the extent any rights with respect to the Virpax Inventions in any of the MedPharm Representatives, MedPharm hereby assigns (and shall cause each of the other MedPharm Representatives to assign) to Virpax all right, title and interest (including intellectual property rights) with respect to such Virpax Inventions. To the extent any rights with respect to the MedPharm Inventions in any of the Virpax Representatives, Virpax hereby assigns (and shall cause each of the other Virpax Representatives to assign) to MedPharm all right, title and interest (including intellectual property rights) with respect to such MedPharm Inventions.
8.2.1 Other Ownership Rights. In the event a Party’s Background Technology or Confidential Information is used by the other Party outside the scope of this Agreement and an invention is conceived or reduced to practice as a result of the misuse of such Background Technology or Confidential Information (“Other Invention”), such other Party shall own all right, title and interest in such Other Invention. The Party that conceived or reduced to practice the Other Invention shall promptly disclose and hereby assigns (and shall cause each of the other Virpax Representatives or MedPharm Representatives (as applicable) to assign) the Other Invention to such other Party.
8.2.2 Each Party is solely responsible for making any payments that it is required under Applicable Law or pursuant to any contract to any inventor employed or previously employed by such Party or any of its Affiliates.
8.3 Prosecution, Maintenance and Enforcement of Patents for Inventions. Except as provided in the Definitive License Agreement (subject to Virpax’s exercise of the Option and execution of the Definitive License Agreement), as between the Parties, the sole owner of any Invention shall have the sole right to prepare, file, prosecute, maintain, enforce and defend all U.S. and foreign Patents, registrations and other forms of intellectual property in such Invention.
8.4 Ownership and Use of Data. Subject to the terms and conditions of this Agreement, Virpax shall own the Data and the Data shall be considered the Confidential Information of Virpax. Subject to the terms of this Agreement, Virpax grants to MedPharm a perpetual, royalty-free right to use and make copies of the Data solely for the performance of this Agreement and for MedPharm’s internal research purposes only; provided that, MedPharm shall have the option to require that Virpax assign to MedPharm its right, title and interest to any Data or know-how that relates to a Project for which Virpax declines to exercise the Option or for which a Definitive License Agreement is not reached within ten (10) days of expiration of the relevant Option. In exchange for such assignment, upon MedPharm’s entry into any research, development, commercialization or licensing arrangement with another Person that utilizes the Data, the subject know-how or any other intellectual property generated during the performance of a Project in any way, Virpax shall be entitled to, at its option, either (a) a negotiated royalty payment on sales of any commercialized product, in proportion to fees paid on the relevant project or (b) shall be reimbursed all of the Fees and Pass-through expenses paid in connection with the subject Product.
8.5 No Implied License. Except for the rights expressly granted in this Section 8, the Option granted in Section 3.2 and the ROFR Option granted in Section 3.3, neither Party grants any rights, by implication, estoppel or otherwise, to any of its respective Inventions or other technology or intellectual property under this Agreement.
8.6 Cooperation. MedPharm shall cooperate with Virpax in obtaining, at MedPharm’s sole cost and expense; any patent protection as may be available for any intellectual property developed from the performance of a Project and shall execute all documents reasonably necessary for purposes of procuring such patent protection. MedPharm shall keep Virpax informed of any patent applications it files covering such intellectual property and of the progress of such patent applications.
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9. | CONFIDENTIALITY |
9.1 Data, Evaluation Materials. Notwithstanding that any Data or Evaluation Material(s) is/are first disclosed by MedPharm to Virpax pursuant to this Agreement, all Data or Evaluation Materials shall be deemed the Confidential Information of Virpax for which Virpax is the Disclosing Party and MedPharm is the Receiving Party for purposes of this Section 9 (provided, however, that nothing in this Section 9 shall preclude MedPharm from exercising the rights granted to it under Section 8.4).
9.2 Restrictions on Use and Disclosure. During the Term and for a period of five (5) years thereafter, each Party shall maintain the Disclosing Party’s Confidential Information in strict secrecy and confidence, and shall not disclose any of the Disclosing Party’s Confidential Information to a third party, other than the Receiving Party’s Affiliates, nor use such Confidential Information for any purpose other than as necessary in connection with this Agreement, without the express written consent of the Disclosing Party. Each Receiving Party agrees to use the same degree of care to prevent any unauthorized access, disclosure or publication of the Confidential Information of the Disclosing Party as the Receiving Party uses to protect its own Confidential Information of like nature but in no event less than a reasonable degree of care. Such care shall include appropriate technical, physical and procedural controls to protect such information against destruction, loss, unauthorized disclosure to third parties or unauthorized access by employees or agents of Receiving Party or third parties, whether by accident or otherwise.
9.3 Disclosures to Representatives and Affiliates. The Receiving Party shall only disclose the Confidential Information of the Disclosing Party to those employees or agents of the Receiving Party or its Affiliates who have a specific need to use such Confidential Information in connection with this Agreement. All Affiliates, employees or agents to whom the Receiving Party shall disclose any Confidential Information shall be advised of the existence and scope of this Agreement and shall be subject to legally binding nondisclosure restrictions that are at least as restrictive as the terms of this Section 9.
9.4 Not Confidential Information. Notwithstanding anything to the contrary in this Agreement, Confidential Information does not include, and Receiving Party has no obligation under this Section 8 with respect to, any information that:
(i) | is lawfully and properly known by the Receiving Party at the time of its receipt, and not through a prior disclosure by the Disclosing Party, such prior knowledge being evidenced by written documentation of the same; |
(ii) | is at the time of disclosure or thereafter becomes published or otherwise part of the public domain without breach of this Agreement by the Receiving Party; |
(iii) | is subsequently disclosed to the Receiving Party by a third party who is not under an obligation to the Disclosing Party to maintain the confidentiality of the information; or |
(iv) | is developed by the Receiving Party independently of any Confidential Information of the other Party, such independent development being evidenced by written documentation of the same. |
The foregoing exceptions (i) and (iv) shall not apply to MedPharm as Receiving Party with respect to any Evaluation Material first disclosed by MedPharm or any Data.
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9.5 Partial Disclosures; Combinations. Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of a Receiving Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of such Party. Further, any combination of individual elements of Confidential Information shall be considered Confidential Information and shall not be considered in the public domain or in the possession of a Receiving Party merely because one or more individual elements of such combination are in the public domain or in the possession of such Party; rather such combination shall only be considered in the public domain or in the possession of a Receiving Party if the combination of each of the individual elements of the combination is in the public domain or in the possession of the Receiving Party.
9.6 Disclosure Required by Court Order. In the event that the Receiving Party or any of its employees, agents or representatives is required by order of a court or other dispute resolution authority to disclose any of the Confidential Information, the Receiving Party shall promptly inform the Disclosing Party of such requirement in writing so that the Disclosing Party may seek a protective order or other appropriate remedy or, in its sole discretion, waive compliance with the terms of this Agreement. The Receiving Party shall fully cooperate with Disclosing Party in connection with the Disclosing Party’s efforts to obtain any such order or other remedy. In the event that no such protective order or other remedy is obtained, or the Disclosing Party waives compliance with the terms of this Agreement, then, notwithstanding Section 9.2, the Receiving Party may: (i) furnish only that portion of the Confidential Information which the Receiving Party is advised by counsel is legally required; and (ii) exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to the Confidential Information so disclosed.
9.7 Other Permitted Disclosures. Notwithstanding Section 9.2: (i) a Receiving Party may disclose Confidential Information of the other Party as required by any Applicable Law to the limited extent such Receiving Party’s counsel advises that disclosure is required for compliance therewith and (ii) a Receiving Party may with the agreement of the other, disclose the existence and terms of this Agreement and the Confidential Information of the Disclosing Party to its attorneys and advisors and to potential acquirers in connection with a potential investment, consolidation, acquisition, merger or similar transaction and to existing and potential investors or lenders of the Receiving Party, as a part of their due diligence investigations, and/or to potential licensees and/or to potential collaborators and/or to permitted assignees, in each case under a written agreement to keep the terms of this Agreement confidential and to use the Confidential Information solely for the purpose permitted pursuant to this Section.
9.8 Ownership; Return/Destruction. All Confidential Information delivered to the Receiving Party by the Disclosing Party under this Agreement is and remains the sole and exclusive property of the Disclosing Party. Except in the case where Virpax has exercised the Option, upon any expiration or termination of this Agreement, the Receiving Party shall, at its own cost and expense, promptly:
(i) | return to the Disclosing Party all such materials (in the medium provided by Disclosing Party); |
(ii) | destroy all copies of the foregoing or any portion thereof, in whatever form or medium stored; and |
(iii) | either destroy or redact all Confidential Information of the Disclosing Party from all documents, samples, summaries, extracts, records or other materials that contain any of the Confidential Information of the Disclosing Party, in whatever form or medium stored. |
The Receiving Party may retain one copy of the foregoing materials identified by sections (ii) and (iii) in secured storage for record-keeping purposes.
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identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
10. | COMPLIANCE WITH APPLICABLE LAWS |
10.1 Compliance with Applicable Laws. Each Party agrees that it will comply with all Applicable Laws in carrying out its responsibilities under this Agreement. Without limiting the foregoing, in carrying out its responsibilities under this Agreement, each Party agrees that neither it, nor any of its officers, employees, directors or agents shall, directly or indirectly offer, promise, pay or give, or authorize any offer, promise, payment or gift of, money or anything else of value either as an improper inducement to make, or as an improper reward for making, any decision favorable to the interests of the either Party in violation of the US Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010 and any other Applicable Laws for the prevention of fraud, corruption, racketeering, money laundering and/or terrorism (“Anti-Corruption Laws”). This includes providing improper benefits of any kind to government officials and other healthcare professionals and organizations, patients, suppliers, charities and patient groups, whether companies or individuals, to obtain or retain business or secure any improper advantage for either Party in violation of the Anti-Corruption Laws
11. | REPRESENTATIONS AND WARRANTIES; DISCLAIMER |
11.1 Mutual Representations and Warranties. Each Party makes the following representations and warranties to the other Party as of the Effective Date:
11.1.1 | Organization. Such Party (i) is a company duly organized, validly existing and in good standing under the laws of the jurisdiction where such company was formed or incorporated, and (ii) has all necessary company power and authority to own its properties and to conduct its business, as currently conducted. |
11.1.2 | Authorization. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are within the company power of such Party, have been duly authorized by all necessary company proceedings of such Party, and this Agreement has been duly executed and delivered by such Party. |
11.1.3 | No Conflict. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not: (i) conflict with or result in a breach of any provision of such Party’s organizational documents; (ii) result in a material breach of any material agreement to which such Party is bound; (iii) result in a violation of any order to which such Party is subject; (iv) require such Party to obtain any material approval or consent from any governmental authority or other Third Party other than those consents and approvals which have been obtained prior to the date hereof; or (v) violate any Applicable Law applicable to such Party in any material respect. |
11.1.4 | Enforceability. This Agreement constitutes the valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject to bankruptcy, reorganization, insolvency and other similar laws affecting the enforcement of creditors’ rights in general and to general principles of equity (regardless of whether considered in a proceeding in equity or an action at law). |
15
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
11.2 Representations of MedPharm. MedPharm makes the following representations and warranties to Virpax as of the Effective Date:
11.2.1 | Right to Grant Licenses and Option. MedPharm has the right to grant Virpax the licenses contemplated by this Agreement and the other rights granted by MedPharm under this Agreement (including the Option and the ROFR Option granted by MedPharm). |
11.2.2 | No Knowledge of Infringement. To MedPharm’s knowledge, the exploitation of the Licensed Intellectual Property in the Field will not infringe any patent or other intellectual property right of any Third Party. |
11.2.3 | No Debarment. MedPharm has not, and its personnel involved in any manner with activities under this Agreement have been debarred pursuant to the Act or excluded from any health care program sponsored by the United States Federal Government (“Federal Health Care Program”), including, but not limited to, Medicare or Medicaid, and it will notify Virpax immediately if it or any such personnel is debarred under the Act or excluded under a Federal Health Care Program. |
11.2.4 | Diligence. MedPharm (a) will use reasonable care, diligence and skill in carrying out the Project; and (b) will ensure that its performance of the Project will be performed by qualified and trained employees of MedPharm its Affiliates or Sub-contractors to a standard of quality which it is reasonable for the Virpax to expect in all the circumstances and on terms which enable ownership of intellectual property rights in accordance with this Agreement. |
11.2.5 | Approvals and Licenses. MedPharm has all applicable governmental and other approvals necessary under Applicable Law for it to carry out each Project, supply the deliverables required under this Agreement and perform its other obligations under this Agreement. |
11.3 Disclaimer. EXCEPT AS SET FORTH IN THIS SECTION 11 NEITHER PARTY MAKES, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY AND ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND ARISING FROM OR RELATING TO THIS AGREEMENT OR SUCH PARTY’S PERFORMANCE HEREUNDER, THE MEDSPRAY TECHNOLOGY, THE LICENSED INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT AND ANY REPRESENTATIONS OR WARRANTIES ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE.
12. | INDEMNIFICATION |
12.1 Mutual Indemnity. Each Party (the “Indemnitor”) will defend, indemnify and hold harmless the other Party and its Affiliates and its and their respective officers, members, managers, employees and agents (collectively, the “Indemnified Parties”) from and against any and all claims, actions, lawsuits and investigations brought by a third party (“Third Party Claims”) and will pay any settlements, awards, fines and reasonable attorney’s fees and expenses and court costs associated with such Third Party Claims (collectively, “Losses”), in each case to the extent arising from or relating to: (i) the breach of this Agreement by Indemnitor or (ii) the gross negligence or willful misconduct of Indemnitor or its employees or contractors in the performance of its obligations under this Agreement.
16
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
12.2 Indemnity Procedures. A Party seeking indemnification for a Third Party Claim under Section 12.1 will give the Indemnitor written notice of the Third Party Claim promptly (and in any event within fifteen (15) calendar days after the service of the citation or summons); provided, however, that the failure to give timely notice hereunder will not affect rights to indemnification hereunder, except to the extent that Indemnitor demonstrates actual damage caused by such failure. Indemnitor may elect to direct the defense or settlement of any such Third Party Claim by giving written notice to the Party seeking indemnity, which election will be effective immediately upon receipt by the Party seeking indemnity of such written notice of election. The Indemnitor will have the right to employ counsel reasonably acceptable to the Party seeking indemnity to defend any such Third Party Claim, or to compromise, settle or otherwise dispose of the same, if the Indemnitor deems it advisable to do so, all at the expense of the Indemnitor; provided, however, that the Indemnitor will not settle, or consent to any entry of judgment in, any such Third Party Claim without obtaining either: (i) an unconditional release of the Party seeking indemnity (and all of its other Indemnified Parties) from all liability with respect to all claims underlying such Third Party Claim or (ii) the prior, written consent of the Party seeking indemnity. The Parties will fully cooperate with each other in any such Third Party Claim and will make available to each other any books or records useful for the defense of any such Third Party Claim.
13. | LIABILITY |
13.1 Liability Exclusion. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS OR THE LIKE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR SUCH PARTY’S PERFORMANCE HEREUNDER, THE MEDSPRAY TECHNOLOGY, THE LICENSED INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE CAUSE OF ACTION (WHETHER IN CONTRACT, TORT, BREACH OF WARRANTY OR OTHERWISE), AND NOTWITHSTANDING ANY FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
13.2 Limitation on Damages. EACH PARTY’S MAXIMUM CUMULATIVE LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR SUCH PARTY’S PERFORMANCE HEREUNDER, THE MEDSPRAY TECHNOLOGY, THE LICENSED INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT, REGARDLESS OF THE CAUSE OF ACTION (WHETHER IN CONTRACT, TORT, BREACH OF WARRANTY OR OTHERWISE), WILL NOT EXCEED THE AGGREGATE AMOUNTS PAYABLE TO MEDPHARM BY VIRPAX UNDER THIS AGREEMENT.
13.3 Exceptions. Notwithstanding anything to the contrary, the exclusions and limitations of liability set forth in Section 12.2 and Section 12.3 will not apply: (i) to the extent that acts or omissions of a Party constitute fraud, willful misconduct, or the misappropriation of the other Party’s intellectual property rights, (ii) the Parties’ respective indemnity obligations under Section 12 with respect to Third Party Claims or (iii) a Party’s payment obligations under this Agreement.
14. | MISCELLANEOUS PROVISIONS |
14.1 Publicity. MedPharm may not publish any articles or make any presentations relating to the Project or referring to data, information or materials generated as part of the Project, in whole or in part, without the prior written consent of Virpax. Virpax will not unreasonably withhold such consent. Virpax may be permitted to publish or otherwise disseminate for academic purposes or any other purpose the results of any research work carried out in connection with this Agreement. Identification of MedPharm as the originator of the results will not be made without the prior written consent of MedPharm. MedPharm will not unreasonably withhold such consent. If MedPharm believes that the disclosure of patentable material is contained in the proposed publication or other dissemination MedPharm may request Virpax to delay submission for publication or other dissemination for a period of up to six months to permit the preparation and filing by MedPharm of any necessary patent applications, and customer shall delay submission for such period.
17
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
14.2 Relationship of the Parties. The Parties are and will be independent contractors and neither Party has any right, power or authority to act or create any obligation on behalf of the other Party. Nothing in this Agreement shall be construed as creating a partnership between or joint venture by the Parties, for tax purposes or otherwise.
14.3 Costs. Except as specifically provided for in this Agreement or in any Project Addendum, each Party shall be responsible for the payment of its own costs and expenses.
14.4 Notices. All notices, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally, or two (2) business days after being sent by nationally-recognized overnight courier (e.g., Federal Express or DHL) to each Party at its respective address set forth below (or at such other address as any Party hereto shall hereafter specify by notice in writing to the other Parties hereto).
If to MedPharm:
Dr Andrew Muddle
Chief Executive Officer
MedPharm Ltd
Unit 3 / Chancellor Court
50 Occam Road
Surrey Research Park
Guildford
GU2 7YN
United Kingdom
Ph: +44 (0)1483 457580
Fax: +44 (0)1483 501488
If to Virpax:
Virpax Pharmaceuticals, LLC
101 Lindenwood Drive Suite 225
Melvern PA 19355
Ph: 484-875-3195
Attn: Anthony Mack
With a copy to:
Lowenstein Sandler LLP
65 Livingston Avenue
Roseland, New Jersey 07068
Facsimile: (973) 597-2400
Attn: Michael J. Lerner
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identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
14.5 Unenforceable Provisions. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect, and, if legally permitted, such offending provision shall be replaced with an enforceable provision that as nearly as possible effects the Parties’ intent.
14.6 Waiver and Amendment. No amendment or modification of any provision hereof will be effective unless in writing and signed by both Parties. No failure or delay by either Party in exercising any right, power, or remedy hereunder will operate as a waiver of any such right, power or remedy nor create an expectation of non-enforcement of that or any other provision or right. No waiver of any provision hereof will be effective unless in a signed writing by the person charged with making such waiver.
14.7 Assignment. Neither Party may transfer or assign this Agreement or assign any rights hereunder or delegate any duties hereunder without the other Party’s prior, written consent, such consent not to be unreasonably withheld. Notwithstanding the foregoing: (A) MedPharm may subcontract its obligations under this Agreement as provided in Section 5.4 and (B) either Party may transfer or assign this Agreement, without any requirement to obtain the other Party’s consent: (i) to any of its Affiliates or (ii) in connection with any merger, consolidation, sale of all or substantially all assets, sale of equity interests or other change of control transaction involving such Party or such Party’s line of business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the Parties and their respective successors and permitted assigns.
14.8 Governing Law. This Agreement, and any disputes directly or indirectly arising from or relating to this Agreement, will be construed and controlled by the laws of England and Wales (without reference to the choice of law rules thereof).
14.9 Forum. Each Party hereby irrevocably consents and submits to exclusive jurisdiction and venue in the state and courts located in London, England with respect to any disputes directly or indirectly arising from or relating to this Agreement. Each Party hereby waives all defenses of lack of personal jurisdiction and forum non-conveniens with respect to such courts.
14.10 Entire Agreement. This Agreement (including the Appendices attached hereto and any Project Addendum executed in connection herewith) constitutes the final, complete and exclusive agreement of the Parties concerning the subject matter hereof, and supersedes all previous agreements, communications, representations and understandings, either oral or written, between the Parties relating to the subject matter hereof. No terms and conditions contained in any Purchase Order, order acknowledgment, invoice, bill of lading, acceptance or other preprinted form issued by either Party, which are inconsistent with or in addition to the terms and conditions of this Agreement, shall be effective.
14.11 Headings. The headings of the several 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.
14.12 Counterparts. This Agreement may be executed in two or more counterparts (which may be exchanged by facsimile or via email .pdf copies), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(signature page follows)
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identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives.
MEDPHARM LIMITED | VIRPAX PHARMACEUTICALS, LLC | |||
By: | /s/ Andrew Muddle | By: | /s/ Anthony Mack | |
Name: | Andrew Muddle | Name: | Anthony Mack | |
Title: | CEO | Title: | CEO |
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identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix A
Certain Licensed Patent Rights
A-1
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix B
Form of Project Addendum
The Project
Please refer to Proposal Number [INSERT NUMBER] dated [INSERT DATE] and entitled [INSERT TITLE] for details of the Project
Part II
The Programme
Study start date: [INSERT DATE]
Agreed work: [Part 1 (pre-formulation studies and formulation development)]
To be agreed: [INSERT DETAILS]
Outstanding parts to be agreed by mutual agreement between the Parties and by amending and issuing a revised version of this Schedule Two.
Payment Terms
[To be discussed]
Approved Pass-through Expenses:
Approved Sub-Contractor: [if any]
Virpax Representative:
MedPharm Representative:
B-1
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix C
Certain Terms of the Definitive License Agreement
1. Certain Terms for the Definitive License Agreement:
Development and Commercialization
VIRPAX shall be responsible (at its own expense) for, and shall control all aspects of the development, registration, manufacture and commercialization of any Licensed Product in the Territory. VIRPAX will use commercially reasonable efforts (to be defined in the Agreement, but in any event, to be determined on a product-by-product and a market-by-market basis based on similarly situated pharmaceutical and/or over-the-counter manufacturers) to develop, obtain regulatory approvals for and, thereafter, commercialize each Licensed Product.
The Territory and Field shall be defined as each is defined in the Research and Option Agreement.
Royalties*
● | Royalties shall be [**] of Net Sales |
● | Exercise Fee of [**] payable upon execution of the first Definitive License Agreement executed in connection with the Research and Option Agreement |
● | Upon starting Phase II [**] |
● | Upon starting Phase III [**] |
● | Upon approval of a Licensed Product in each of the 5 major markets in the EU (i.e., France, Italy, Germany, Spain and the UK) at [**] per country payable on approval country by country |
● | FDA approval of a dossier: [**] |
● | Launch of the first Licensed Product, in the Field, in the USA: [**] |
● | Launch of first Product, in the Field, in the first [**] territories outside USA and the European Union (i.e. Asia; Africa, Arabic, South America and Australia) at [**] per Territory payable on Territory by Territory basis. |
* In connection with [**] alone and aerosol technology will be rewarded at [**] of the royalty and milestone payments defined above.
Royalty Term
The Royalty Term and any obligation to make milestone payments will expire on a country-by-country basis upon the last to expire valid claim in each relevant country.
C-1
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Net Sales Definition
Net Sales shall mean, with respect to any Product, the gross amount invoiced with respect thereto (whether by the Buyer, any Affiliate of the Buyer, any co-marketer, collaborator, joint venturer or other partner with the Buyer or any of its Affiliates) in the Territory, less, to the extent deducted from or on such invoice consistent with GAAP, the following items:
(a) normal and customary trade, cash and/or quantity discounts allowed and taken, and wholesaler and inventory management fees paid, with respect to sales of such product or products;
(b) amounts paid, repaid or credited by reason of defects, rejection, recalls, returns and allowances with respect to such product or products;
(c) any applicable sales, use or value-added taxes;
(d) bad debt deductions and uncollectible amounts actually written off;
(e) charges, chargebacks, rebates, discounts and amounts under Rebate Programs paid or accrued on sale or dispensing of the such product;
(f) royalties payable to any Third Party with respect to sales of such products;
(g) all transportation charges, including freight, postage and insurance related directly to such product, in each case to the extent included in the invoice price to a buyer; and
all other deductions allowed by GAAP, as consistently applied by Buyer and its Affiliates (or their licensees or sublicensees, as applicable) in determining net product sales.
Milestone Payments
Milestone payments shall be payable only once for each Licensed Product, in respect of the first achievement of such Milestone.
Sub-License fees
Virpax may sublicense its rights under the License provided that the sub-licence contains provisions similar to those in the Definitive License Agreement, confers reasonable audit rights on MedPharm and MedPharm is provided with a copy of the sublicense. Any sublicense shall include terms that make the sublicense dependent on the continued existence of, and consistent with, the Definitive Licence Agreement.
Infringement and Maintenance
Each party shall inform the other party promptly if it becomes aware of any infringement or potential infringement of any IP used in the Products.
Customary provisions regarding relevant IP maintenance.
Customary provisions relating to infringement of any IP used in the Products or of third party rights.
Governing Law
Delaware
C-2
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix D
Virxpax Molecules
[**]
D-1
Exhibit 10.11
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
AMENDMENT TO RESEARCH AND OPTION AGREEMENT
This Amendment to Research and Option Agreement (this “Amendment”) is made effective as of May 30, 2018 (the “First Amendment Effective Date”) between Virpax Pharmaceuticals, Inc. (“Virpax”) and MedPharm Limited (“MedPharm”). Virpax and MedPharm are each sometimes referred to herein as a “Party” and, collectively, as the “Parties.”
WHEREAS, Virpax and MedPharm are parties to that certain Research and Option Agreement, dated as April 11, 2017, (the “MedPharm Option Agreement”);
WHEREAS, in consideration for the benefits to be gained by MedPharm under the MedPharm Option Agreement in connection with the continued development of products by Virpax, MedPharm has agreed to the amendment set forth below;
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. | Amendments. |
a. | Appendix D of the MedPharm Option Agreement is hereby deleted in its entirety and replaced by the attached Appendix D. |
2. | No Other Amendment. Except as specifically set forth herein, the MedPharm Option Agreement shall remain in full force and effect. |
[signature page follows]
Certain
identified information has been excluded because it is both not material and would
likely
cause competitive harm if publicly disclosed.
In Witness Whereof, the parties hereto have duly executed this Amendment as of the First Amendment Effective Date.
VIRPAX PHARMACEUTICALS, INC. | ||
By: | /s/ Anthony Mack | |
Name: | Anthony Mack | |
Title: | CEO | |
MEDPHARM LIMITED | ||
By: | /s/ Andrew Muddle | |
Name: | Andrew Muddle | |
Title: | CEO |
[signature page to MedPharm R&O Amendment]
Certain
identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix D
[**]
In addition, the parties acknowledge that a license has previously been executed for [**].
Exhibit 10.12
Certain identified information has been excluded because
it is both not material and would
likely cause competitive harm if publicly disclosed.
LICENSE AND SUBLICENSE AGREEMENT
by and between
LIPOCURERX, LTD.
and
VIRPAX PHARMACEUTICALS, INC.
March 19, 2018
Certain identified
information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
TABLE OF CONTENTS
-i-
Certain identified
information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
-ii-
Certain identified
information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
-iii-
LICENSE AND SUBLICENSE AGREEMENT
This License AND Sub-License Agreement (“Agreement”), effective as of March 19, 2018 (the “Effective Date”), is made by and between LipocureRX, Ltd., a company organized and existing under the laws of Israel (“Lipocure”), and Virpax Pharmaceuticals, Inc., a Delaware corporation (“Virpax”).
Recitals
Whereas, Lipocure Controls (as defined below) certain intellectual property, including as covered by patent application s set forth on Exhibit A, as well as know-how covering the Licensed Compound (as defined below), necessary or useful to the development and commercialization of products in the Field (the “Licensed Compound Patent Rights”);
Whereas, certain of the Licensed Compound Rights are licensed by Lipocure pursuant to, in accordance and subject to the terms and conditions of the License Agreement entered into by and between Lipocure and Yissum Research Development Company of the Hebrew University of Jerusalem (“Yissum”) dated October 31, 2013 (the “Yissum License Agreement ”);
Whereas, Virpax has been formed to engage in the discovery, development, marketing and sale of pharmaceutical products; and
Whereas, Virpax desires to obtain, and Lipocure is willing to grant to Virpax, a sole and exclusive license and sub-license to the Licensed Compound to discover, develop, make, have made, use, sell, have sold, offer for sale, market, export, import and otherwise commercialize Licensed Products in the Field, on the terms and subject to the conditions set forth herein.
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms shall have the respective meanings set forth below:
1.1 “Accounting Standards” shall mean (a) U.S. generally accepted accounting principles or (b) international financial reporting standards; in either case, consistently applied throughout the organization of a Party (or a Related Party, as applicable).
1.2 “Act” shall mean, as applicable, the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§301 et seq., and/or the Public Health Service Act, 42 U.S.C. §§262 et seq., as such may be amended from time to time.
1.3 “Administrator” shall have the meaning provided in Section 11.2.
1.4 “Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. A Person shall be deemed to control another Person if such Person possesses the power to direct or cause the direction of the management, business and policies of such Person, whether through the ownership of fifty percent (50%) or more of the issued share capital (on as converted basis), the voting rights, or the right to elect or appoint directors of such Person, by contract or otherwise.
1.5 “Agreement” shall mean this Sub-License Agreement, including all Schedules and Exhibits hereto, as it may be amended, supplemented or modified from time to time in accordance with its terms.
1.6 “Applicable Laws” shall mean the applicable laws and regulations of any jurisdiction, which are applicable to any of the Parties or their respective Affiliates in carrying out activities hereunder or to which any of the Parties or their respective Affiliates in carrying out the activities hereunder is subject, and shall include all statutes, enactments, acts of legislature, laws, ordinances, rules, regulations, notifications, guidelines, policies, directions, directives and orders of any statutory authority, tribunal, board, or court or any central or state government or local authority or other governmental entity in such jurisdictions.
1.7 “Bankruptcy Laws” shall have the meaning provided in Section 12.1.
1.8 “Claim” shall have the meaning provided in Section 10.1.
1.9 “CMO” shall have the meaning provided in Section 3.8(b).
-2-
1.10 “Commercially Reasonable Efforts” shall mean, with respect to the efforts to be expended by a Party with respect to any objective, the level of reasonable, diligent, good faith efforts that biopharmaceutical companies (or manufacturers of over-the-counter medicines, as the case may be) typically devote to products owned by them that are at a similar stage in their development or product life and are of similar market potential taking into account efficacy, safety, approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval, the profitability of the product, and other relevant factors. As used in this Section 1.10 “biopharmaceutical companies” shall mean companies in the biopharmaceutical industry of a size and stage of development similar to that of such Party, including having human pharmaceutical product candidates or products in a similar stage of development to the Licensed Products. Commercially Reasonable Efforts shall be determined on a market-by-market and Licensed Product-by-Licensed Product basis, and it is anticipated that the level of effort will be different for different markets, and will change over time, reflecting changes in the status of the Licensed Product and the market(s) involved.
1.11 “Commercial Milestone” shall have the meaning provided in Section 4.2(b).
1.12 “Competitive Infringement” shall have the meaning provided in Section 8.3.
1.13 “Confidential Information” shall mean any and all Information, whether communicated in writing or orally or by any other method, which is provided by or on behalf of one Party to the other Party in connection with this Agreement or pursuant to that certain Confidential Disclosure Agreement between Lipocure and Virpax dated March 27, 2017.
1.14 “Control”, “Controls” or “Controlled by” shall mean, with respect to any Patent Rights, Information, Know How or other intellectual property rights, the possession by Person of the ability (whether by ownership, license or other right, other than pursuant to a license granted under this Agreement) to grant access to, or a license or sublicense of, such Patent Rights, Know-How, Information or other intellectual property rights without violating the terms of any agreement or other arrangement with any other Person.
1.15 “Cover” means (a) with respect to Know-How, such Know-How was used in making, having made, using, selling, offering to sell, importing, having sold, exporting or making improvements to the Licensed Product, and (b) with respect to a Patent Right, a Valid Patent Claim would (absent a license thereunder or ownership thereof) be Infringed by making, having made, using, selling, offering to sell, importing, having sold, exporting or making improvements to the Licensed Product including research and development. Cognates of the word “Cover” shall have correlative meanings.
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1.16 “Developmental Milestone” shall have the meaning provided in Section 4.2(a).
1.17 “Disclosing Party” shall have the meaning provided in Section 6.1.
1.18 “Dispute” shall have the meaning provided in Section 11.1.
1.19 “Early Stage Clinical” shall mean related to a Phase 1 Clinical Trial or a Phase 2 Clinical Trial.
1.20 “Early Stage Supply” shall have the meaning provided in Section 3.8.
1.21 “Effective Date” shall have the meaning provided in the Preamble.
1.22 “Export Control Laws” shall mean all applicable U.S. laws and regulations relating to (a) sanctions and embargoes imposed by the Office of Foreign Assets Control of the U.S. Department of Treasury or (b) the export or re- export of commodities, technologies, or services, including the Export Administration Act of 1979, 24 U.S.C. §§2401-2420, the International Emergency Economic Powers Act, 50 U.S.C. §§1701-1706, the Trading with the Enemy Act, 50 U.S.C. §§1 et. seq., the Arms Export Control Act, 22 U.S.C. §§2778 and 2779, and the International Boycott Provisions of Section 999 of the U.S. Internal Revenue Code of 1986 (as amended).
1.23 “FCPA” shall mean the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1, et. seq.) as amended.
1.24 “FDA” shall mean the U.S. Food and Drug Administration and any successor entity thereto.
1.25 “Field” shall mean any and all uses (including all diagnostic, therapeutic and preventative uses) in humans or animals.
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1.26 “First Commercial Sale” shall mean, with respect to a given Licensed Product in a given country, the first commercial sale or disposition for value of such Licensed Product by Virpax or a Related Party to a Third Party (other than a Related Party) for end use or consumption of such Licensed Product in such country, excluding, however, transfers or dispositions of Licensed Product, without consideration: (i) in connection with patient assistance programs; (ii) for charitable or promotional purposes; (iii) for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient”, “compassionate use” or other limited access programs; or (iv) for use in any tests or studies reasonably necessary to comply with Applicable Law, regulation or request by a Regulatory Authority. For clarity, First Commercial Sale shall be determined on a Licensed Product-by- Licensed Product and country-by-country basis.
1.27 “Generic Version” shall mean, with respect to a Licensed Product, on a country-by-country basis, a pharmaceutical product that: (a) is sold in a given country by a Third Party, other than a Related Party, a licensee or sub-licensee of a Related Party, or any other Person in a chain of distribution originating from Virpax, a Related Party or any of their respective licensees or sub-licensees; (b) contains the same Licensed Compound as such Licensed Product in the same dosage form as such Licensed Product; and (c) has been approved for marketing by the relevant Regulatory Authority in such country and which may be substituted for the Licensed Product with or without any action by the physician or health care practitioner.
1.28 “GCP” shall mean the then current “good clinical practices” as such term is defined from time to time by the FDA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
1.29 “GLP” shall mean the then current “good laboratory practices” as such term is defined from time to time by the FDA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
1.30 “GMP” shall mean the then current “good manufacturing practices” as such term is defined from time to time by the FDA or other Regulatory Authority of competent jurisdiction pursuant to its regulations, guidelines or otherwise, as applicable.
1.31 “ICC” shall mean International Chamber of Commerce.
1.32 “IND” shall mean an investigational new drug application, clinical study application, clinical trial exemption, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority, including any such application filed with the FDA pursuant to 21 CFR Part 312.
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1.33 “Indemnified Party” shall have the meaning provided in Section 10.3.
1.34 “Indemnifying Party” shall have the meaning provided in Section 10.3
1.35 “Indication” shall mean a separate and distinct disease or medical condition in humans: (a) which a Licensed Product is intended to treat or prevent, as evidenced by the protocol for a clinical trial of such Licensed Product or by the proposed Licensed Product labeling in an NDA filed with a Regulatory Authority for such Licensed Product; or (b) which is contained in a Licensed Product’s labeling approved by a Regulatory Authority as part of the Marketing Approval for such Licensed Product.
1.36 “Information” shall mean any and all proprietary data, information, materials and know-how (whether patentable or not) that are not in the public domain, including, (a) ideas, discoveries, inventions, improvements, technology or trade secrets, (b) pharmaceutical, chemical and biological materials, products, components or compositions, (c) methods, procedures, formulas, processes, tests, assays, techniques, regulatory requirements and strategies, (d) biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical, safety, manufacturing and quality control data and information related thereto, (e) technical and non-technical data and other information related to the foregoing, and (f) drawings, plans, designs, diagrams, sketches, specifications or other documents containing or relating to such information or materials.
1.37 “Infringe” or “Infringement” means any infringement as determined by Applicable Law, including, without limitation, direct infringement, contributory infringement or any inducement to infringe.
1.38 “Initiates” or “Initiation” shall mean, with respect to a human clinical trial, the administration of the first dose to the first patient/subject in such trial.
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1.39 “Invention” shall mean any invention, whether or not patentable, made in the course and as a result of the conduct of the activities contemplated by this Agreement.
1.40 “Joint Invention” shall have the meaning provided in Section 8.1.
1.41 “Joint Patent Rights” shall have the meaning provided in Section 8.1.
1.42 “Know-How” shall mean any and all Information related to the Licensed Compound and/or a Licensed Product, or any formulation, product improvement and/or Indication thereof, or necessary or useful for the development, manufacture, commercialization or use of any of the foregoing.
1.43 “Licensed Compound” shall mean bupivacaine liposome, in injectable gel or suspension.
1.44 “Licensed Compound Patent Rights” shall have the meaning set forth in the recitals.
1.45 “Licensed Product” shall mean any pharmaceutical composition or preparation (in any and all dosage forms) in final form, including any combination product, containing a Licensed Compound.
1.46 “Lipocure” shall have the meaning provided in the Preamble.
1.47 “Lipocure Indemnitees” shall have the meaning provided in Section 10.1.
1.48 “Lipocure Know-How” shall mean all Know-How Controlled by Lipocure or any of its Affiliates as of the Effective Date, or that is developed or Controlled by Lipocure after the Effective Date, related to the Licensed Compound or otherwise necessary or useful for the research, development, manufacture and/or commercialization of any Licensed Product.
1.49 “Lipocure Patent Rights” shall mean any and all Patent Rights Controlled by Lipocure or any of its Affiliates as of the Effective Date, or at any time during the Term, that claim or Cover the composition, manufacture, use, sale, offer for sale and/or import of the Licensed Compound or any Licensed Product in the Field, including, but not be limited to: (i) the Licensed Compound Patent Rights; (ii) Lipocure’s interest in any Joint Patent Rights; and (iii) those in-licensed by Lipocure under any agreement with a Third Party that constitute Licensed Compound Patent Rights. The foregoing shall include any modifications to the Lipocure Patent Rights that Cover the Licensed Compound, made or reduced to practice by Lipocure during the Term.
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1.50 “Lipocure Technology” shall mean Lipocure Patent Rights and Lipocure Know-How.
1.51 “Losses” shall have the meaning provided in Section 10.1.
1.52 “Marketing Approval” shall mean all approvals from the relevant Regulatory Authority in a given country necessary to market and sell a pharmaceutical product in such country, including pricing and/or reimbursement approvals if required for marketing or sale of such product in such country.
1.53 “Material Underpayment” shall have the meaning provided in Section 5.4.
1.54 “Milestone Payments” shall have the meaning provided in Section 4.2(b).
1.55 “NDA” shall mean: (a) in the United States, a New Drug Application (as more fully defined in 21 CFR 314.5, et seq.) filed with the FDA, or any successor application thereto; or (b) in any other country or group of countries, the equivalent application or submission for approval to market a pharmaceutical product filed with the governing Regulatory Authority in such country or group of countries.
1.56 “Net Sales” shall mean, with respect to any Licensed Product, without duplication, (i) the gross amount invoiced with respect thereto, whether by Virpax, any Affiliate of Virpax, any co-marketer, collaborator, joint venturer or other partner with Virpax or any of its Affiliates (collectively, the “Selling Parties”) in the Territory and (ii) the fair market value of non-monetary consideration received in connection with the Licensed Product, less the following to the extent allowed, paid or accrued with respect to such sales consistent with relevant Accounting Standards:
(a) Actual and customary trade, cash and/or quantity discounts allowed and taken, and wholesaler and inventory management fees paid, with respect to sales of such Licensed Product or Licensed Products that are negotiated with respect to the Licensed Product(s) on a stand-alone basis and without regard to any other product or business of Virpax, its Affiliates or any other Selling Party;
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(b) amounts paid, repaid or credited by reason of defects, rejection, recalls, returns and allowances with respect to such Licensed Product or Licensed Products;
(c) any applicable sales, use or value-added taxes;
(d) bad debt deductions and uncollectible amounts actually written off;
(e) charges, chargebacks, rebates, administrative fees (paid to third parties that are directly calculated with respect to sales of Licensed Products, such as administrative fees paid to wholesalers, PBMs or GPOs), discounts and amounts under rebate programs paid or accrued on sale or dispensing of the such Licensed Product;
(f) royalties payable to any Third Party (“TP Royalties”) with respect to sales of such Licensed Products, provided that in no event shall the royalties payable to Lipocure under this Agreement in any year be reduced by more than forty percent (40%) of the amounts otherwise due (i.e. excluding the reduction of the TP Royalties from Net Sales);
(g) all transportation charges, including freight, postage and insurance related directly to such Licensed Product, in each case to the extent included in the invoice price to a buyer; and
For clarification:
(a) The sale of Licensed Product by a Selling Party to another Selling Party for resale by such entity to a Third Party (other than a Related Party) shall not be deemed a sale for purposes of this definition of “Net Sales,” provided that the subsequent resale is included in the computation of Net Sales.
(b) In the event of sales or deductions not made at “arms’ length” but that are made for subsequent distribution to a Third Party, then for the purpose of calculation of Royalties, Net Sales shall be calculated in accordance with arms’ length process for sale of Licensed Products to end users and arm’s length deductions, to be determined by the current market conditions, or in absence of such conditions, according to the assessment of an independent appraiser to be selected by the Parties.
(a) transfers or dispositions of Licensed Product, without consideration: (A) in connection with patient assistance programs; (B) for charitable or promotional purposes; (C) for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient”, “compassionate use” or other limited access programs; or (D) for use in any tests or studies reasonably necessary to comply with Applicable Law, regulation or request by a Regulatory Authority, shall not, in each case of (A) through (D), be deemed sales of such Licensed Product for purposes of this definition of “Net Sales.”
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(b) With respect to each item set forth above that is deducted in computing Net Sales: (A) to the extent that such item is reimbursed from Third Parties, such item shall not be deducted in computing Net Sales; and (B) such item shall not be deducted more than once in computing Net Sales (i.e., no “double counting” of deductions).
1.57 “Party” shall mean Virpax and Lipocure, individually, and “Parties” shall mean Virpax and Lipocure, collectively.
1.58 “Patent Certification” shall have the meaning provided in Section 8.3.
1.59 “Patent Rights” shall mean (i) patents and patent applications (which for the purposes of this Agreement shall be deemed to include certificates of invention and applications for certificates of invention); (ii) any and all divisionals, continuations, continuations-in-part, reissues, renewals, substitutions, registrations, re-examinations, revalidations, patent term extensions, supplementary protection certificates and the like of any such patents and patent applications; and (iii) any and all foreign equivalents of the foregoing.
1.60 “Person” means any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.
1.61 “Phase 1 Clinical Trial” shall mean a human clinical trial, the principal purpose of which is a determination of safety, as described in 21 C.F.R. 312.21(a) or its successor regulation, including any equivalent clinical trial conducted in any country other than the United States.
1.62 “Phase 2 Clinical Trial” shall mean a human clinical trial of Licensed Product, the principal purpose of which is a determination of safety and an assessment of its efficacy in the target patient population and to determine the common short-term side effects and risks associated with the drug, as further described in 21 C.F.R. § 312.21(b) or its successor regulation, including any equivalent clinical trial conducted in any country other than the United States.
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1.63 “Phase 3 Clinical Trial” shall mean a human clinical trial of a Licensed Product designed to: (i) establish that such Licensed Product is safe and efficacious for its intended use; (ii) define warnings, precautions and adverse reactions that are associated with the Licensed Product in the dosage range to be prescribed; and (iii) support regulatory approval of such Licensed Product that would satisfy the requirements of 21 CFR 312.21(c) or its non-US equivalents.
1.64 “Regulatory Authority” shall mean any country, federal, regional, supranational, state or local regulatory agency, department, bureau or other governmental or regulatory authority having the administrative authority to regulate the development or marketing of pharmaceutical products in any country or other jurisdiction.
1.65 “Receiving Party” shall have the meaning provided in Section 6.1.
1.66 “Regulatory Documentation” shall mean all regulatory applications, registrations, licenses, authorizations and approvals (including all INDs, NDAs, sNDAs, ANDAs, sANDAs, NADAs and ANADAs, CNADAs, and their supplements, and Marketing Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority), and all reports and documentation in connection with clinical studies and tests (including study reports and study protocols, and copies of all interim study analyses), and all data contained in any of the foregoing, including all INDs, NDAs, advertising and promotion documents, manufacturing data, drug master files, clinical data, adverse event files and complaint files, in each case related to Lipocure Technology, the Licensed Compound or a Licensed Product.
1.67 “Regulatory Plan” shall have the meaning provided in Section 3.2.
1.68 “Related Party” shall mean each of Virpax’s Affiliates and its and their respective Sub-licensees hereunder.
1.69 “Relevant Patent Rights” shall have the meaning provided in Section 8.3(a).
1.70 “Royalty Qualifying Product” shall mean a Licensed Product covered by a Valid Patent Claim.
1.71 “Royalty Term” shall have the meaning provided in Section 4.4.
1.72 “Rules” shall have the meaning provided in Section 11.2.
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1.73 “Sale Transaction” shall have the meaning provided in Section 12.5(a).
1.74 “Sub-licensee” shall mean a Third Party sub-licensee under the license granted by Lipocure to Virpax pursuant to Section 2.1, whether such Third Party’s sublicense was granted to it directly by Virpax or its Affiliate or indirectly through one or more tiers of sublicense.
1.75 “Term” shall have the meaning provided in Section 9.1.
1.76 “Territory” shall mean the entire world.
1.77 “Third Party” shall mean an entity other than Virpax and its Affiliates, and Lipocure and its Affiliates.
1.78 “Third Party Acquirer” shall have the meaning provided in Section 12.5(a).
1.79 “Valid Patent Claim” shall mean a claim of an issued and unexpired patent included within the Lipocure Patent Rights, which claim has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction (which decision is not appealable or has not been appealed within the time allowed for appeal), and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.
1.80 “Virpax” shall have the meaning provided in the Preamble.
1.81 “Virpax Indemnitees” shall have the meaning provided in Section 10.2.
1.82 “Virpax Know-How” shall mean all Know-How Controlled (other than as a result of the licenses granted hereby) by Virpax or its Affiliates during the Term, including all Know-How developed or generated by or on behalf of Virpax or any of its Affiliates in the course of conducting research, development, manufacturing, regulatory or commercialization activities which are not contemplated by this Agreement.
1.83 “Virpax Patent Rights” shall mean all Patent Rights Controlled (other than as a result of the licenses granted hereby) by Virpax or its Affiliates.
1.84 “Virpax Specifications” shall mean the specifications for Licensed Product, as agreed between the parties after the date hereof and incorporated on Exhibit B after the Effective Date.
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LICENSE AND SUB-LICENSE GRANT
2.1 License and Sub-License Grant. Subject to the terms and conditions of this Agreement, Lipocure hereby grants to Virpax an sole and exclusive (even as to Lipocure and its Affiliates), royalty-bearing license, including the right to sublicense through multiple tiers of sublicense, under the terms and conditions set forth in section 2.3 below, as well as the right to modify and amend, under the Lipocure Technology to discover, develop, manufacture, have manufactured, use, sell, offer for sale, market, export, import and otherwise commercialize Licensed Compounds and Licensed Products in the Field in the Territory, which grant includes a sub-license under the Yissum License Agreement, to the extent the rights licensed by Lipocure thereunder are necessary or useful to the development, manufacture or commercialization of a Licensed Product in the Territory in the Field.
2.2 Yissum License. Notwithstanding the provision of Section 2.1 above, Virpax acknowledges that Yissum, on behalf of the Hebrew University of Jerusalem (“University”), shall retain the rights to make, use and practice the Lipocure Technology for the University’s own internal research and educational purposes in accordance with the Yissum License.
(a) | Virpax shall be entitled to grant a Sublicense (including granting its consent to a sub-sublicense by a Sublicensee) only after delivering to Lipocure and Yissum written notice, which shall include the identity of the Sublicensee and all material terms and conditions of the Sublicense, including without limitation, all documentation relating to the Sublicense, details regarding any other business connection which it now has or is in the process of forming with the Sublicensee (“Sublicense Notice”). In the event that such Sublicense Notice is given before Marketing Approval, then Lipocure shall have the right to review and consent to the grant of such sub-license, such consent not to be unreasonably delayed, conditioned or withheld. |
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(b) | If Virpax is unable or unwilling to serve or develop a potential market or market territory for which there is another party willing to be a sublicensee, Virpax will, at Lipocure’s request, negotiate in good faith a sublicense with such party. |
(c) | The Parties further acknowledge and agree that upon termination of the License Agreement for any reason other than Lipocure’s breach, Lipocure shall enter into any non-breached sublicense agreements in effect between Virpax and Sublicensees at the time of such termination, provided that such sublicense agreements were entered into in accordance with this section 2.3 under the terms and conditions set forth in those sublicense agreements. |
(d) | Virpax shall ensure that any Sublicense shall include terms that bind the Sublicensee to observe the relevant terms of this Agreement, including, without limitation, terms which require compliance with the terms of the Yissum License. Virpax shall require the Sublicensee to provide reports with sales broken down by application or Indication. In the event of a breach by Sublicensee, Virpax undertakes to take all reasonable steps to enforce such terms upon the Sublicensee, including, if necessary, the termination of the Sublicense. In all cases, Virpax shall immediately notify Lipocure of any breach of the terms of a Sublicense, and shall copy Lipocure on all correspondence with regard such breach. |
(e) | Any act or omission of the Sublicensee which is not remedied by Virpax or the Sublicensee within the timeframe required under this Agreement and which would have constituted a breach of this Agreement by Virpax had it been an act or omission of Virpax, and which Virpax has not made reasonable efforts to cure in the time frame provided by this Agreement, including termination of the Sublicense, shall constitute a breach of this Agreement by Virpax. |
2.4 Non-Compete. Except as expressly required under this Agreement, Lipocure hereby covenants not to practice, and not to permit or cause any of its Affiliates to develop, use, make, have made, sell, have sold, offer for sale, export, import or otherwise commercialize any Licensed Compound or Licensed Product, or competitor thereof, in the Territory during the Term. Without limiting the generality of the foregoing, Lipocure shall not grant any rights or licenses to Lipocure Technology or its improvements or other proprietary technology Controlled by Lipocure to any Third Party for use with any Licensed Compound during the Term for any products that can be substituted for the Licensed Compound or the Licensed Products in the Territory.
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Lipocure undertakes not to, directly or through a third party, develop, distribute, market or otherwise sale a product based on levobupivacaine and ropivacaine for Indications as to which Virpax has obtained regulatory approval in any market or which is in active development by Virpax or any Sublicencee.
2.5 Acquisition of Alternative Product. In the event that Virpax obtains any alternative product to the Licensed Product, as a result of a merger with, or acquisition of or by, any third party, then Virpax shall, within One-Hundred and Fifty (150) days after the closing of such merger or acquisition, either: (A) enter into a binding written agreement whereby Virpax grants an economic benefit to Lipocure in exchange for any erosion of the market for the Licensed Product, it being understood that neither Party shall be obligated to enter into such an agreement; provided that if the Parties fail to enter into such agreement within One-Hundred and fifty (150) days after delivery of such written election, then Virpax shall comply with the terms of subsection (B) or (C); (B) enter into a binding written agreement to sell, transfer, assign or divest all of Virpax’s rights in and to such alternative product to a third party and consummate such sale, transfer, assignment or divestiture of said rights not later than one (1) year following the acquisition of such Alternative Product; or (C) terminate any development and/or commercialization of such Alternative Product within one (1) year following the acquisition of the Alternative Product (unless and to the extent required to continue commercialization of such Alternative Product by a governmental authority, in which case the Parties shall enter into a mutually acceptable agreement of the type contemplated by the foregoing clause (A)). For purposes of this Section 2.9, an “alternative product” shall be limited to a product containing the Licensed Compound in a substitutable formulation.
DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION
3.1 Responsibility. Within ninety (90) days of the Effective Date, Virpax and Lipocure shall prepare a development plan (the “Development Plan”), including applicable milestones and a budget, reasonably acceptable to each Party. Lipocure shall be responsible for implementing the Development Plan in accordance with its terms, this Agreement and Applicable Laws. Virpax shall be responsible for making payments in accordance with the budget agreed upon in the Development Plan. No amendment of the Development Plan or the budget shall be permitted without the consent of each party. Lipocure shall ensure that its employees and agents tasked with implementing the Development Plan are well-trained and have the skills and experience necessary to successfully implement the Development Plan in accordance with its terms, this Agreement and all Applicable Laws. In the event that Lipocure breaches its obligations under this section, by written notice to Lipocure, Virpax shall have the option to take on responsibility for the for those portions of the Development Plan which are reasonably likely to be adversely affected by such breach through itself or a third party. Lipocure shall provide Virpax reasonable access to all books, records and materials developed in connection with the Development Plan and, if requested in connection with a transfer of the responsibility for the Development Plan, will provide reasonable assistance to transfer such books, records and materials to Virpax or its third party designee.
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3.2 Regulatory Approvals. In collaboration with Lipocure, Virpax shall determine all regulatory plans and strategies for Licensed Products in the Field (the “Regulatory Plan”), which shall be mutually agreed by the Parties and shall, at a minimum, include events that, if achieved, would trigger the Developmental Milestone payments described in this Agreement. Virpax, at its expense, will have the exclusive right to submit to, and prosecute before, the Regulatory Authorities with respect to any matter related to the Licensed Products, including without limitation all Regulatory Documentation. All of such Regulatory Documentation, submissions and other regulatory filings relating to Licensed Products, including any related data (including, but not limited to clinical data) shall be submitted in the name of and owned by Virpax (or a Related Party, as applicable), and any approvals granted thereby shall be owned by Virpax. No other Person shall have any rights thereto unless granted by Virpax in writing.
3.3 Diligence. Virpax (itself and/or with or through its Related Parties) shall use Commercially Reasonable Efforts to develop, meet the Development Milestones, seek Marketing Approval for, and commercialize a Licensed Product containing the Licensed Compound throughout the Territory during the Term according to the timetable, which will be, with respect to development, included in the Development Plan developed in conjunction with and approved by Lipocure, and with respect to marketing, the marketing plan (which will include, without limitation any planned compassionate use or patient assistance programs contemplated by Virpax) developed by Virpax, with input from Lipocure which shall not be unreasonably disregarded by Virpax, promptly after it is prepared. Notwithstanding the preceding, Virpax shall not be obligated to undertake development activities specific to a country outside of the United States prior to obtaining the first Marketing Approval for a Licensed Product in the United States.
In the event that Virpax shall not initiate a clinical trial for the Licensed Product within three (3) years as of the Effective Date, unless such delays are due to the requirements of a regulatory authority or the breach of its obligations under this agreement by Lipocure or unless Yissum has agreed in writing to such delay, Lipocure shall notify Virpax in writing of Virpax’s failure to meet its obligations of diligence and shall allow Virpax one hundred and eighty days (180) to cure its failure of diligence. Virpax’s failure to cure within such one hundred and eighty days (180) say period to Yissum’s reasonable satisfaction shall be a material breach of this Agreement.
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3.4 Records. Virpax shall maintain, or cause to be maintained, complete and accurate records of all development work conducted by or on behalf of Virpax with respect to Licensed Products, including all results, data, inventions and developments made in the performance of such development work. All such records maintained shall be in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes. While Lipocure is responsible for the Development Plan, this Section 3.4 shall apply to Lipocure, mutatis mutandis.
3.5 Reports. Once every six months during the Term following the first anniversary of the Effective Date while Lipocure is responsible for the Development Plan, Lipocure shall deliver to Virpax a written progress report regarding, to the extent applicable, (i) the status of any Licensed Product in development, and (ii) the status of any Licensed Product related patent applications in each country in the Territory at least 30 days prior to the date upon which it is required to deliver such report under the Yissum License. Virpax shall have the right to provide comments on such reports, which shall not be unreasonably disregarded, prior to the submission of the subject report to Yissum. After the date upon which Lipocure is no longer required to submit reports under this 3.5, Virpax shall provide reports once every 6 months covering the information required under (i) and (ii) of this section and in addition, will include information regarding (A) any Licensed Product-related regulatory submissions and approvals and (B) any Licensed Product-related commercialization efforts in the Territory.
3.6 Compliance with Applicable Laws. Virpax shall conduct, and shall cause its Related Parties to conduct, all development, regulatory, manufacturing and commercialization activities with respect to Licensed Products anywhere in the world in compliance with all Applicable Laws and, as applicable, GLP, GCP and/or GMP. While Lipocure is in charge of the Development Plan, this Section 3.6 shall apply to Lipocure, mutatis mutandis.
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3.7 Initial Technology Transfer. Subject to the completion of the Development Plan or upon Lipocure’s breach of this Agreement, Lipocure shall Within five (30) business days after Virpax’s reasonable request (the “Transfer Date”) at no additional cost to Virpax, transfer and or provide to Virpax copies of: (i) all preclinical and other data and documentation pertaining to the Lipocure Technology (including, but not limited to the original formulation of the Licensed Compound without stabilizing gel and the new formulation with stabilizing gel); (ii) all lab books, files, patent office correspondence and other documentation related to the Lipocure Technology reasonably necessary or useful (A) for the development, Manufacturing or commercialization of Licensed Products or (B) for Virpax to meet its obligations under this Agreement; and (iii) any and all other information and documentation reasonably necessary to successfully transition the Lipocure Technology to Licensee or its designee. In addition, for a period of sixty (60) days from the Transfer Date and thereafter as Virpax shall reasonably request, at no additional cost to Virpax (other than costs and expenses associated with Virpax personnel, consultants, overhead, travel and lodging expenses etc.), Lipocure shall make available staff, consultants or other third party agents with knowledge of the Lipocure Technology to assist Virpax in the transition of the Lipocure Technology as reasonably requested by Virpax.
(a) | Early Stage Clinical and Non-Clinical Supply. Virpax shall purchase, and Lipocure shall supply, all of Virpax’s needs for Licensed Compound and Licensed Product in connection with pre-clinical and Early Stage Clinical activity in accordance with the amounts agreed to in connection with the Regulatory Plan at Lipocure’s direct cost, with no mark-up (the “Early Stage Supply”). The Early Stage Supply shall be manufactured in accordance with the Virpax Specifications and all Applicable Laws, including applicable cGMPs. In addition, Lipocure shall be responsible for all Licensed Product characterization, release testing (development and, to the extent requested by Virpax, commercial) and stability testing (development and, to the extent requested by Virpax, commercial), which shall be billed to Virpax at Lipocure’s direct cost, with no mark-up. Each shipment of Early Stage Supply shall be sampled and analyzed by Lipocure prior to shipment to determine if the shipment meets the Virpax Specifications for the Early Stage Supply. Lipocure shall deliver to Virpax with each such shipment of Early Stage Supply a certificate of analysis stating that the Early Stage Supply meets the Virpax Specifications and, to the extent applicable, has been manufactured in accordance with applicable cGMPs and other documentations to support importation of Licensed Compound and Licensed Product and to comply with the regulations of human and/or animal trials in the Territory. Lipocure shall, as requested by Virpax in writing, promptly replace, at Lipocure’s expense, any Early Stage Supply delivered hereunder (including but not limited to any shipping and transportation costs) that is rejected in good faith as unsatisfactory by Virpax within sixty (60) calendar days of delivery (a) for failure to meet the Virpax Specifications at the time of delivery, or (b) because Lipocure failed to manufacture and handle such Early Stage Supply in accordance with Applicable Laws (including, to the extent applicable, cGMPs). All Early Stage Supply shall be delivered EXW (Incoterms 2010) Lipocure’s manufacturing facility. Delivery shall occur, and title and risk of loss of such quantities of the Early Stage Supply shall pass to Virpax, upon delivery of such material to such common carrier. Lipocure shall replace, at its expense, any failed or rejected batch of Licensed Product or Licensed Compound, as the case may be. |
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(b) | Other Supply and Registration Lots. Upon request by Virpax, Lipocure shall participate in (i) the selection, management and transfer of the formulation and manufacturing process for each Licensed Product to a contract manufacturing organization selected by Virpax (the “CMO”) and (ii) the management of the CMO’s production of non-clinical supply, clinical supply and registration lots in accordance with the Regulatory Plan, all Applicable Laws and the Virpax Specifications, each to the extent requested by and with oversight from, Virpax. |
(c) | Commercial Supply. Virpax shall assume complete control of the management of the CMO and of the production of commercial supply of Licensed Product upon the date agreed by the parties in good faith. |
(d) | Tech Transfer Freedom to Operate. As additional inducement for Virpax to enter into this Agreement, (i) Lipocure shall provide, at additional cost to Virpax, upon Virpax’s request, full cooperation and assistance in connection with a technology transfer to Lipocure and its designated CMO and (ii) Lipocure shall grant, and hereby does grant, all such “freedom to operate” licenses to Virpax and its designated CMO’s as may be necessary to utilize any additional intellectual property Controlled by Lipocure as a result of the activities undertaken under this Section 3.8. |
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PAYMENTS
4.1 Upfront Payment. Within 30 business days following the Effective Date, Virpax shall make a payment of [**] to Lipocure in immediately available funds.
(a) | Developmental Milestones. Within 30 business days of the achievement of each of the milestone events set forth in the table below (each a “Developmental Milestone”) by Virpax or any Related Party, Virpax shall provide Lipocure with written notice of such achievement and shall pay to Lipocure the corresponding one-time milestone payment set forth next to the applicable milestone in the table below: |
Milestone Event |
Milestone Payment |
|
Upon the development of a formulation for the Licensed Product that meets Virpax Specifications | [**] | |
Upon of the acceptance of an IND by the FDA | [**] | |
Upon acceptance of supply of Licensed Product by Virpax for the Phase I Clinical Trial in accordance with Section 3.8(a) above | [**] | |
Upon the earlier to occur of acceptance of Phase III Clinical
Trial clinical supplies, or the acceptance of registration lots in accordance with Section 3.8(b) above |
[**] | |
Upon the acceptance of an NDA for a Licensed Product by the FDA | [**] | |
Upon FDA Approval of a Licensed Product by the FDA | [**] |
(b) | Commercial Milestones. Within thirty (30) business days of the end of the first calendar year in which $[**] or more in annual Net Sales of Licensed Products is achieved by Virpax or any Related Party, Virpax shall provide Lipocure with written notice of such achievement and shall pay to Lipocure a one-time milestone payment of $[**] (a “Commercial Milestone”, and together with the Developmental Milestones, the “Milestone Payments”). The Commercial Milestone will be paid only once, for the first calendar year in which the corresponding Commercial Milestone event is achieved. |
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(c) | Limitations on Milestone Payments. Each of the above Milestone Payments shall only be paid once, for the first achievement of the corresponding milestone event by any Licensed Product (regardless of the number of times such milestone event is achieved by a Licensed Product, the number of Indications for which such milestone event is achieved by a Licensed Product, or the number of Licensed Products that achieve such milestone event, and regardless of whether any such milestone event is achieved by the same Licensed Product that achieved any other milestone event or by a different Licensed Product). |
4.3 Royalties. Subject to Sections 4.5 below, Virpax shall pay a royalty to Lipocure based upon aggregate annual Net Sales of all Royalty Qualifying Products in the Territory by Virpax and Related Parties in each calendar year of the Royalty Term at the applicable rate(s) set forth below:
Annual Net Sales Increments | Royalty Rate | |
That portion of annual Net Sales of Royalty Qualifying Products by Virpax and Related Parties that is less than or equal to $250 million. | [**] | |
That portion of annual Net Sales of Royalty Qualifying Products by Virpax and Related Parties that is greater than $250 million and less than or equal to $500 million | [**] | |
That portion of annual Net Sales of Royalty Qualifying Products by Virpax and Related Parties that is greater than $500 million | [**] |
4.4 Royalty Term. Royalties under Section 4.3 shall be payable during the period of time commencing on the date of the First Commercial Sale of a Licensed Product and ending on a country-by-country basis with respect to each Licensed Product upon the expiration of the last-to-expire Valid Patent Claim of the Lipocure Patent Rights Covering the manufacture, use or sale of such Licensed Product in such country (the “Royalty Term”). On a Licensed Product-by-Licensed Product and country-by-country basis, upon expiration of the Royalty Term for a Licensed Product in a country, Virpax’s license under Section 2.1 with respect to such Licensed Product in such country shall become irrevocable and perpetual and the Royalty rate payable by Virpax for sales of such product shall be equal to [**] of the Royalty Rate payable under Section 4.3.
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4.5 Adjustment to Royalty Rate. On a Licensed Product-by-Licensed Product and country-by-country basis, the royalty rate payable for sales of a Royalty Qualifying Product under Section 4.3 for any particular country will be reduced by [**] upon either of (i) the legal sale of a Generic Version of the Royalty Qualifying Product in such country, or (ii) if the Royalty Qualifying Product has or would infringe a valid patent claim held by a Third-Party in that country provided that, in no event shall the total reduction of the royalty rate under this Section 4.5 exceed [**] percent ([**]%).
4.6 Non-Royalty Qualifying Products. Virpax shall pay a royalty to Lipocure based upon aggregate annual Net Sales of all Licensed Products that are not Royalty Qualifying Products in the Territory by Virpax and Related Parties in each calendar year of the Royalty Term at a rate equal to [**] percent ([**]%) of the rate that would be payable on such Net Sales if the subject Licensed Products sold were Royalty Qualifying Products.
PAYMENT; RECORDS; AUDITS
5.1 Payment; Reports. Royalties under Section 4.3 shall be calculated and reported for each calendar quarter during the Royalty Term and shall be paid within sixty (60) days after the end of the calendar quarter. Each payment of royalties shall be accompanied by a report of Net Sales of Licensed Products by Virpax and Related Parties in sufficient detail to permit confirmation of the accuracy of the payment made, including gross sales and Net Sales of Licensed Products on a Licensed Product-by- Licensed Product and country-by-country basis, the deductions from gross sales (by major category as set forth in the definition of Net Sales), details of any applicable reductions or adjustments made pursuant to Sections 4.5 or 4.6, the royalty payable, and the exchange rates used.
5.2 Exchange Rate; Manner and Place of Payment. All payment amounts in this Agreement are expressed in United States Dollars, and all payments hereunder shall be payable in United States Dollars. When conversion of payments from any foreign currency is required, such conversion shall be calculated using an exchange rate equal to the average of the interbank rates of exchange for such currency as reported at OANDA.com, or should such rates cease to be published by O ANDA, a successor or replacement agreed upon by the parties, during the calendar quart er for which payment is due. All payments owed under this Agreement shall be made by wire transfer in immediately available funds to the bank and account designated in writing by Lipocure.
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5.3 Income Tax Withholding. Lipocure will pay any and all taxes levied on account of any payments made to it under this Agreement. If Virpax is advised in writing by its attorneys or accountant that Virpax is required to withhold any portion of any payment made to Lipocure under this Agreement, Virpax shall (a) deduct such taxes from the payment made to Lipocure, (b) timely pay the taxes to the proper taxing authority, (c) send proof of payment to Lipocure and certify its receipt by the taxing authority within 30 days following such payment, (d) reasonably cooperate with Lipocure, if requested, to obtain available reductions, credits or refunds of such taxes and (e) provide Lipocure a copy of such written advisement or instructions at least thirty (30) days, or such shorter period as reasonably practicable given the timing of the subject advice or instructions received by Virpax, in advance of such withholding. Without limiting the generality of the foregoing, upon request by Lipocure, Virpax shall provide Lipocure such information in Virpax’s possession as may be reasonably necessary for Lipocure to obtain the benefit of any present or future treaty against double taxation which may apply to payments made to Lipocure under this Agreement.
5.4 Audits. Virpax shall keep (and shall cause its Affiliates and Sub-licensees to keep) complete and accurate records. Including full and correct books of account in accordance with Accounting Principles, pertaining to the sale or other disposition of Licensed Products in sufficient detail to permit Lipocure to confirm the accuracy of all royalty payments and any other consideration due hereunder for at least seven (7) full calendar years following the end of the calendar year to which they pertain. Lipocure shall have the right, once annually, to cause not more than two (2) independent, certified public accountants, or such other professional as appropriate, reasonably acceptable to Virpax to audit such records solely to confirm Net Sales and royalties for a period covering not more than the preceding seven (7) full calendar years. No calendar year shall be subject to audit under this section more than once. Such audits may be exercised during normal business hours upon reasonable prior written notice of not less than fifteen (15) business days to Virpax in the location where the records are maintained. The auditor will execute a confidentiality agreement in a form reasonable acceptable to Virpax with Virpax and will disclose to Lipocure only such information as is reasonably necessary to provide Lipocure with information regarding any actual or potential discrepancies between amounts reported and actually paid and amounts payable under this Agreement. The auditor will send a copy of the report to Virpax at the same time it is sent to Lipocure. The report sent to both Parties will include the methodology and calculations used to determine the results. Prompt adjustments shall be made by the Parties to reflect the results of such audit. Lipocure shall bear the full cost of such audit unless such audit discloses an underpayment by Virpax of more than five percent (5%) of the amount due for any calendar quarter (a “Material Underpayment”) under this Agreement, in which case, Virpax shall bear the full cost of such audit and shall promptly remit to Lipocure the amount of such Material Underpayment. If either (a) a Material Underpayment is found or (b) an independent auditor determines that there are insufficient records to support the calculation of the royalty payments due under this Agreement, then Lipocure shall have the right, at Virpax’s expense, to audit Virpax quarterly for the two calendar years succeeding the applicable triggering event. If such audit discloses an overpayment by Virpax, then Virpax will deduct the amount of such overpayment from amounts otherwise owed to Lipocure under this Agreement. Any underpayment shall bear interest from the due date of payment until the actual date of payment at the annual rate of five percent (5%) compounded annually.
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CONFIDENTIALITY AND PUBLICATION
6.1 Confidential Information. Except to the extent expressly authorized by this Agreement, each Party (in such capacity, the “Receiving Party”) agrees that, during the Term and for seven (7) years thereafter, it shall keep confidential and shall not publish or otherwise disclose to any Third Party, and shall not use for any purpose other than as expressly provided for in this Agreement or any other written agreement between the Parties, any Confidential Information furnished or made available to it by or on behalf of the other Party (in such capacity, the “Disclosing Party”). The Receiving Party shall use at least the same standard of care as it uses to protect proprietary or confidential information of its own (but in no event less than reasonable care) to ensure that it, and its and its Affiliates’, employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information. The Receiving Party shall promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information. The Lipocure Technology, to the extent subject and directly related to the licenses to Virpax under this Agreement, shall be deemed the Confidential Information of Virpax notwithstanding the fact that it was furnished by Lipocure to Virpax in the first instance.
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6.2 Exceptions. Confidential Information shall not include any information which the Receiving Party can prove by competent evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available; (b) is known by the Receiving Party and/or any of its Affiliates at the time of receiving such information, as evidenced by its records; (c) is hereafter furnished to the Receiving Party and/or any of its Affiliates by a Third Party, as a matter of right and without restriction on disclosure; or (d) is independently discovered or developed by the Receiving Party and/or any of its Affiliates, without the use of Confidential Information of the Disclosing Party. Any combination of features or disclosures shall not be deemed to fall within the exclusions set forth in the preceding clauses (a) and (b) merely because individual features are published or available to the general public or in the rightful possession of the Receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the Receiving Party.
6.3 Authorized Disclosure. Notwithstanding the provisions of Section 6.1, the Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement, or if and to the extent such disclosure is reasonably necessary in the following instances:
(a) | filing or prosecuting Patents as permitted by this Agreement; | |
(b) | enforcing such Party’s rights under this Agreement (including registering the licenses granted hereunder with applicable authorities) and in performing its obligations under this Agreement. |
(c) | prosecuting or defending litigation as permitted by this Agreement; | |
(d) | complying with applicable court orders, applicable laws, rules or regulations, or the listing rules of any exchange on which the Receiving Party’s securities are traded; |
(e) | disclosure to Affiliates, actual and potential licensees and sub-licensees, employees, consultants or agents of the Receiving Party who have a need to know such information in order for the Receiving Party to exercise its rights or fulfill its obligations under this Agreement, provided, in each case, that any such Affiliate, actual or potential licensee or sub-licensee, employee, consultant or agent agrees to be bound by terms of confidentiality an d non-use comparable in scope to those set forth in this Article 6; and |
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(f) | disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors or acquirers in confidential financing documents, provided, in each case, that any such Third Party agrees to be bound by reasonable obligations of confidentiality and non-use. |
Notwithstanding the foregoing, in the event the Receiving Party is required to make a disclosure of the Disclosing Party’s Confidential Information pursuant to Section 6.3(c) or 6.3(d), it will, except where impracticable, give reasonable advance notice to the Disclosing Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as the Receiving Party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the Receiving Party agrees to take all reasonable action to avoid disclosure of Confidential Information hereunder.
6.4 Publications. The Parties, and their Affiliates shall have the right to publish in writing in scientific journals or orally at scientific conventions the results of their development activities, including clinical trials, with respect to the Licensed Products in the Field. Each Party shall have the right to review and comment on any material proposed for disclosure or publication by the other, its Affiliates, such as by oral presentation, manuscript or abstract that includes Confidential Information of a Party or other material information related to a Licensed Product. Before any such material is submitted for publication or disclosure (other than oral presentation materials and abstracts, which are addressed below), the publishing party shall deliver (or cause to be delivered) a complete copy to the other Party at least 30 days prior to submitting the material to a publisher or initiating such other disclosure, and the non- publishing party shall review any such material and give its comments to the publishing party within 10 days of the delivery of such material to non-publishing party which comments shall not be unreasonably rejected. Each Party shall comply, and cause its Affiliate to comply (as applicable), with the non-publishing party’s requests to delete references to the non-publishing Party’s Confidential Information or any other information that could reasonably have a negative effect on the development of commercialization of a Licensed Product in any such material and, if applicable, agrees to delay any submission for publication or other public disclosure for a period of up to an additional 60 days for the purpose of preparing and filing appropriate patent applications. Lipocure shall not publish or otherwise disseminate, including, but not limited to, in articles, posters, oral presentations or other formats, any information relating to Licensed Compounds and/or Licensed Products without the prior written consent of Virpax. The Parties recognize that Yissum retains comparable rights of publication pursuant to the terms of the Yissum License and Lipocure undertakes to facilitate coordination among the Parties and Yissum so as to assure, as near as may be, a consistent approach to notification of, and the provision and good faith consideration of comments with respect to, proposed publications among the Parties and Yissum so as to give effect to the intention of this Section and comparable provisions of the Yissum License.
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(a) | Press Releases. The Parties shall jointly issue a press release acceptable to each Party to be released at an agreed upon time. Except as required by the applicable securities or other laws or the listing rules of any stock exchange on which securities issued by a Party or its Affiliates are traded, neither Party shall make any other public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed; provided that each Party may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, respond to queries by any exchange on which such Party’s securities are traded, or issue press releases, so long as any such public statement, response, or press release is not inconsistent with prior public disclosures or public statements made in accordance with this Section 6.4 and which do not reveal non-public information about the other Party. In the event of a required public announcement, to the extent practicable under the circumstances, the Party making such announcement shall use reasonable efforts to provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text, unless the proposed text is substantially the same as that used in any prior public disclosure, press release or public statement made in accordance with this Section 6.4. Notwithstanding the foregoing, Virpax can make public statements or issue press releases about Licensed Products without consent from Lipocure. |
(b) | Filing of this Agreement. The Parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with any securities authority or with any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what information to disclose to any securities authority or stock exchange, as the case may be, and provided further that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with a ny other governing bodies. Other than such obligation, neither Party (nor any of its Affiliates) will be obligated to consult with or obtain approval from the other Party with respect to any filings to any securities authority or stock exchange. Lipocure hereby consents to Virpax’s use of its name in any filing with a Regulatory Authority as well as any private placement memorandum or other investment document related to Virpax or its securities; provided that, Lipocure shall be afforded a reasonable opportunity to review any such filing of investment document and any comments provided by Lipocure to Virpax with respect to the use of its name in such filing or investment document shall be considered in good faith by Virpax. |
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6.6 Prior Confidential Disclosure Agreement. As of the Effective Date, the terms of this Article 6 shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including the Confidential Disclosure Agreement between Lipocure and Virpax dated March 27, 2017. Any information disclosed by a Party pursuant to any such prior agreement shall be deemed Confidential Information of such Party for purposes of this Agreement.
REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS
7.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that, as of the Effective Date: (a) it is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof; (b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action; and (c) this Agreement is legally binding upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.
7.2 Lipocure Representations and Warranties. Lipocure represents and warrants to Virpax that as of the Effective Date of this Agreement:
(a) | Exhibit A attached hereto contains a true and complete list of the Lipocure Patent Rights existing on the Effective Date. The Lipocure Patent Rights listed in Exhibit A include all of the Patent Rights Controlled by Lipocure as of the Effective Date that cover the Licensed Compound, the Licensed Product(s) or the manufacture, use, sale, offer for sale or import of the foregoing; |
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(b) | Lipocure (i) has the right to grant the licenses that it purports to grant in Section 2.1 (including, without limitation, except as specified in Schedule 7.2, Lipocure has not entered into any undertaking that limits, nor is subjected to any constraints that limit, its rights or freedom to grant the licenses); and (ii) has not granted to any Third Party any license or other right with respect to the Licensed Compound, a Licensed Product or Lipocure Technology that conflicts with the license and rights granted to Virpax herein; |
(c) | Except as specified in Schedule 7.2, there are no agreements in effect as of the Effective Date between Lipocure and a Third Party under which rights with respect to the Lipocure Technology are being licensed to Lipocure; |
(d) | Except as specified in Schedule 7.2, no Third Party (including, but not limited to any governmental authority) has any rights in or to the Licensed Compound, a Licensed Product or any Lipocure Technology for any reason, including, but not limited to as a result of development work performed by such Third Party or funding provided by such Third Party; |
(e) | the issued and unexpired claims included in the Lipocure Patent Rights existing as of the Effective Date are valid and enforceable; |
(f) | no reexamination, interference, invalidity, opposition, nullity or similar claim or proceeding is pending or, to Lipocure’s knowledge, threatened with respect to any Lipocure Patent Right; |
(g) | to Lipocure’s knowledge, the manufacture (using any manufacturing process used by or on behalf of Lipocure on or before the Effective Date), use, sale, offer for sale or import of the Licensed Compound or any Lipocure Technology does not Infringe any issued patent, and Lipocure has not received written notice from any Third Party claiming that the manufacture, use, sale, offer for sale or import of the Licensed Compound or any Licensed Product Infringes or would Infringe the patent or other intellectual property rights of any Third Party; if Lipocure receives any such written notice during the term of this Agreement, Lipocure shall promptly provide such written notice to Virpax; |
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(h) | there are no claims, judgments or settlements against or owed by Lipocure (or any of its Affiliates) with respect to the Lipocure Technology, and Lipocure is not a party to any legal action, suit or proceeding relating to the Lipocure Technology, the Licensed Compound or any Licensed Product, nor has Lipocure received any written communication from any Third Party, including, without limitation, any Regulatory Authority or other government agency, threatening such action, suit or proceeding; |
(i) | all tangible or recorded information and data provided by or on behalf of Lipocure to Virpax related to the Licensed Compound, the Lipocure Technology or any Licensed Product on or before the Effective Date in contemplation of this Agreement was and is true, accurate and complete in all material respects, and Lipocure has not knowingly failed to disclose, or failed to cause to be disclosed, any such information or data related to the Licensed Compound, the Lipocure Technology or any Licensed Product in its possession and Control that would cause the information and data that has been disclosed to be misleading in any material respect; |
(j) | neither Lipocure nor any of its Affiliates has obtained, or filed for, any INDs, NDAs or Marketing Approvals for any Licensed Product, and, to the best of Lipocure’s knowledge, no other Person has obtained, or filed for, any INDs, NDAs or Marketing Approvals for any Licensed Product in the Field in the Territory; |
(k) | at the time of delivery to Virpax, any reference samples delivered to Virpax will be free and clear of any liens or encumbrances; |
(l) | (i) all research and development (including non-clinical studies and clinical trials) conducted by or on behalf of Lipocure or any of its Affiliates related to the Licensed Compound, the Lipocure Technology and/or Licensed Products prior to the Effective Date was conducted in compliance in all material respects with all Applicable Laws and, as applicable, GLP, GCP and/or GMP; and (ii) to Lipocure’s knowledge, all research and development (including non-clinical studies and clinical trials) conducted related to the Licensed Compound, the Lipocure Technology and/or Licensed Products prior to the Effective Date was conducted in compliance in all material respects with all Applicable Laws and, as applicable, GLP, GCP and/or GMP; |
(m) | neither Lipocure nor any of its Affiliates is debarred or disqualified under the Act or comparable Applicable Laws outside of the United States; |
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(n) | neither Lipocure nor any of its Affiliates has employed or, to its knowledge, otherwise used in any capacity, in connection with the development or manufacture of the Licensed Compound, the Lipocure Technology or any Licensed Product, the services of any Person debarred or disqualified under United States law, including 21 U.S.C. §335a, or any foreign equivalent thereof; |
(o) | Lipocure and, to the best of its knowledge, its directors, officers, employees, and any agent, representative, subcontractor or other third party acting for or on such its behalf, has not, directly or indirectly, offered, paid, promised to pay, or authorized such offer, promise or payment, of anything of value, to any Person for the purposes of obtaining or retaining business through any improper advantage in connection with the development, commercialization or exploitation of a Licensed Product, or that would otherwise violate any applicable Laws, rules and regulations concerning or relating to public or commercial bribery or corruption, and Lipocure’s books, accounts, records and invoices related to the Licensed Product are complete and accurate; and |
(p) | Lipocure has not violated the FCPA or Export Control Laws in connection with the development of Lipocure Technology. |
(q) | The Yissum License Agreement is valid, binding and in full force and effect and is enforceable by Lipocure in accordance with its terms. (i) Lipocure has performed all obligations required to be performed by it to date under the Yissum License Agreement and is not in breach of or in default under the Yissum License Agreement, and no event has occurred which with the passage of time or giving of notice or both would constitute such a breach or default; (ii) There is no existing breach or default of the Yissum License Agreement by Yissum; (iii) No event has occurred which with the passage of time or giving notice of or both would constitute such a breach or default by Yissum; (iv) Lipocure has not received any written notice of breach under the Yissum License Agreement, whether or not cured or disputed. Lipocure’s rights under the under the Yissum License Agreement with respect to the development, manufacture or commercialization of the Licensed Product in the Field for the Territory are exclusive. Lipocure has provided to Virpax a complete and accurate copy of the Yissum License Agreement as of the Effective Date. Lipocure has not furnished to Yissum any notice of termination under the Yissum License Agreement. Virpax acknowledges that it is familiar with the terms and conditions of the Yissum License Agreement. Lipocure acknowledges that it is responsible for continued compliance with the terms of the Yissum License during the term hereof and for as long as Virpax retains rights to develop, manufacture or commercialize Licensed Products hereunder. |
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(a) | No Additional Licenses. In addition to any covenants made by Lipocure elsewhere in this Agreement, Lipocure hereby covenants to Virpax that during the Term, Lipocure will (i) not grant any Third Party any license or other right with respect to the Licensed Compound, any Licensed Product or the Lipocure Technology in derogation of the license and rights granted to Virpax hereunder, and (ii) disclose any and all additional Lipocure Technology developed or Controlled by Lipocure after the Effective Date. |
(b) | Yissum License. Lipocure will not at any time take any action that it knows or should know will result in a breach of the Yissum License Agreement and will comply with the terms and provisions of the Yissum License Agreement in all material respects. Lipocure will not at any time terminate the Yissum License Agreement without the prior written consent of Virpax. Lipocure will not agree to any amendment, waiver of rights, or modification of the Yissum License Agreement that would reasonably be expected to have any negative effect or other adverse impact on any financial or reporting obligation of Lipocure or on the rights granted to Virpax under this Agreement or the obligations imposed on Virpax under this Agreement, without the prior written consent of Virpax. |
7.4 Virpax Representations and Warranties. Virpax represents and warrants to Lipocure that as of the Effective Date of this Agreement neither Virpax nor any of its Affiliates is debarred or disqualified under the Act or comparable Applicable Laws outside the United States.
7.5 Mutual Covenants. In addition to any covenants made by a Party elsewhere in this Agreement, each Party hereby covenants to the other as follows:
(a) | neither such Party nor any of its Affiliates will employ or use the services of any Person who is debarred or disqualified under United States law, including 21 U.S.C. §335a, or any foreign equivalent thereof, in connection with activities relating to any Licensed Product; and in the event that such Party becomes aware of the debarment or disqualification or threatened debarment or disqualification of any Person providing services to such Party or any of its Affiliates with respect to any activities relating to any Licensed Product, such Party will immediately notify the other Party in writing and such Party will cease, or cause its Affiliate to cease (as applicable), employing, contracting with, or retaining any such Person to perform any services relating to any Licensed Product; |
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(b) | neither such Party nor any of its Affiliates will, in connection with the exercise of its rights or performance of its obligations under this Agreement, directly or indirectly through Third Parties, pay, promise or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a public official or entity or other Person for purpose of obtaining or retaining business for or with, or directing business to, any Person, including such Party and its Affiliates, nor will such Party or any of its Affiliates directly or indirectly promise, offer or provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift or hospitality or other illegal or unethical benefit to a public official or entity or any other Person in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement; and |
(c) | neither such Party nor any of its Affiliates (or any of their respective employees and contractors), in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement, shall cause the other Party to be in violation of the FCPA or Export Control Laws. |
7.6 Performance by Affiliates, Sub-licensees and Subcontractors. The Parties recognize that each Party may perform some or all of its obligations or exercise some or all of its rights under this Agreement through one or more Affiliates, subcontractors, or, in the case of Virpax Sub-licensees; provided, in each case, that (a) none of the other Party’s rights hereunder are diminished or otherwise adversely affected as a result of such delegation or subcontracting, and (b) each such Affiliate, subcontractor or Sub-licensee undertakes in writing obligations of confidentiality and non-use regarding Confidential Information and ownership of Inventions which are substantially the same as those undertaken by the Parties pursuant to Article 6 and Section 8.1; and provided, further, that such Party shall at all times be fully responsible for the performance and payment of such Affiliate, subcontractor or Sub-licensee.
7.7 Limitation of Liability. EXCEPT FOR LIABILITY FOR BREACH OF ARTICLE 6 OR IN THE CASE OF FRAUD, GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER; provided, however, that this Section 7.7 shall not be construed to limit either Party’s indemnification obligations under Article 10.
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INTELLECTUAL PROPERTY
8.1 Ownership. As between the Parties, Lipocure is and shall at all times be the sole and exclusive owner of all right, title and interest in and to the Lipocure Technology, other than Joint Inventions and Joint Patent Rights, and Virpax is and shall at all times be the sole and exclusive owner of all right, title and interest in and to the Virpax Technology, other than Joint Inventions and Joint Patent Rights. A Party shall have and retain all right, title and interest in any Invention made solely by one or more employees or agents of such Party and or its Affiliates or other persons acting under its authority. The Parties shall jointly own rights in any Invention made jointly by one or more employees or agents of each Party and/or such Party’s Affiliates or other persons acting under its authority (“Joint Inventions”), and Patent Rights therein (“Joint Patent Rights”). For clarity, Inventions developed exclusively by one Party and such Party’s Affiliates shall not be considered Joint Inventions. Subject to the rights and licenses granted under this Agreement, each Party shall have the right to practice and use, and grant licenses to practice and use, any Joint Inventions without the other Party’s consent and has no duty to account to the other Party for such practice, use or license, and each Party hereby waives any right it may have under the laws of any country to require any such consent or accounting. Each Party shall be liable with respect to its own employees for compliance with any applicable legislation and its own policies concerning employee inventions, including payment of employee invention awards (if any).
8.2 Patent Prosecution and Maintenance.
(a) | Lipocure Patent Rights. Virpax shall have the first right, but not the obligation, to control the preparation, filing, prosecution and maintenance of Lipocure Patent Rights at Virpax’s sole expense and by counsel of its choice. Virpax shall keep Lipocure and Yissum reasonably informed of progress with regard to the preparation, filing, prosecution and maintenance of such Lipocure Patent Rights and shall provide to Lipocure and Yissum copies of all material patent office submissions at least thirty (30) days prior to submission and shall incorporate any reasonable comments made by Lipocure with respect to submission prior to the relevant submission date. In the event that Virpax desires to abandon or cease prosecution or maintenance of any Lipocure Patent Right in any country or jurisdiction, Virpax shall provide written notice to Lipocure of such intention to abandon no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such Lipocure Patent Right in the relevant patent office. In such case, upon receipt of a written request by Lipocure to assume responsibility for prosecution and maintenance of such, Lipocure Patent Right, Virpax shall allow Lipocure at its sole cost and expense and by counsel of its own choice, delivered no later than thirty (30) days after receipt of notice from Virpax to assume such responsibility. |
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(b) | Joint Patent Rights. Virpax shall have the first right, but not the obligation, to prepare, file, prosecute and maintain all Joint Patent Rights, at Virpax’s sole expense and by counsel of its choice. Virpax shall keep Lipocure reasonably informed of progress with regard to the preparation, filing, prosecution and maintenance of the Joint Patent Rights, and shall provide to Lipocure copies of all material patent office submissions within a reasonable amount of time following submission thereof by Virpax. In the event that Virpax desires to abandon or cease prosecution or maintenance of any Joint Patent Right, Virpax shall provide written notice to Lipocure of such intention to abandon promptly after Virpax makes such determination, which notice shall be given no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such Joint Patent Right in the relevant patent office. In such case, Lipocure shall have the right, in its discretion, exercisable upon written notice to Virpax delivered no later than thirty (30) days after receipt of notice from Virpax, to assume responsibility for prosecution and maintenance of such Joint Patent Right, at its sole cost and expense and by counsel of its own choice, and if Lipocure exercises such right, then Virpax shall cease to have any rights to such Joint Patent Right; provided that such Joint Patent Right shall be deemed to be a Lipocure Patent Right and therefore subject to this Agreement. |
(c) | Virpax Patent Rights. Virpax shall have the sole right, but not the obligation, to control the preparation, filing, prosecution and maintenance of Virpax Patent Rights at Virpax’s sole expense and by counsel of its choice. |
(d) | Cooperation of the Parties. Each Party agrees to cooperate fully in the preparation, filing, prosecution and maintenance of Patent Rights under this Agreement and in the obtaining and maintenance of any patent term extensions, supplementary protection certificates and the like with respect to any Patent Right as well as in registering the licenses granted hereunder with the applicable authorities. Such cooperation includes, but is not limited to: (i) executing all papers and instruments, or requiring its employees or contractors to execute such papers and instruments, so as to effectuate the joint ownership of Joint Inventions and Joint Patent Rights set forth in Section 8.1, and to enable the other Party to apply for and to prosecute patent applications in any country in accordance with the foregoing provisions of this Section 8.2; and (ii) promptly informing the other Party of any matters coming to such Party’s attention that may affect the preparation, filing, prosecution or maintenance of any such patent applications. |
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8.3 Enforcement and Defense of Patent Rights. Each Party shall notify the other Party in writing within 10 Business Days (except as expressly set forth below) of becoming aware of any alleged or threatened Infringement by a Third Party of any of the Lipocure Patent Rights, Joint Patent Rights or Virpax Patent Rights, including (x) any such alleged or threatened Infringement on account of a Third Party’s manufacture, use or sale of a Licensed Product in the Field, (y) any certification filed in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or similar provisions in other jurisdictions in connection with an ANDA (an Abbreviated New Drug Application in the United States or a comparable application for Marketing Approval under Applicable Law in any country other than the United States) or other NDA for a Licensed Product in the Field (a “Patent Certification”), and (z) any declaratory judgment action filed by a Third Party that is developing, manufacturing or commercializing a Licensed Product in the Field alleging the invalidity, unenforceability or non-infringement of any of the Lipocure Patent Rights, Joint Patent Rights or Virpax Patent Rights ((x)-(z), collectively, “Competitive Infringement”); provided, however, that each Party shall notify the other Party of any Patent Certification regarding any Lipocure Patent Right or Joint Patent Right that it receives, and such Party shall provide the other Party with a copy of such Patent Certification, within five (5) days of receipt.
(a) | Competitive Infringement. Virpax shall have the first right, but not the obligation, to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of a Lipocure Patent Right or a Joint Patent Right, in each case that covers a Licensed Product (collectively, the “Relevant Patent Rights”), at Virpax’s own expense and by counsel of its own choice. If Virpax fails to bring any such action or proceeding with respect to Competitive Infringement of any Relevant Patent Right within ninety (90) days following the notice of alleged Competitive Infringement, Lipocure shall have the right to bring (or defend) and control any such action at its own expense and by counsel of its own choice, and Virpax shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. |
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(b) | Other Infringement. The Parties shall mutually agree on a case-by-case basis (A) whether to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of any Patent Right that is not a Relevant Patent Right, (B) which Party would bring (or defend) and control such action, and (C) how the expenses of, and any recovery from, any such action would be allocated. |
(c) | Virpax Patent Rights. Except as provided in Section 8.4(a), Virpax shall have the sole right, but not the obligation, to bring (or defend) and control any action or proceeding with respect to infringement of any Virpax Patent Right at its own expense and by counsel of its own choice. |
(d) | Cooperation. In the event a Party brings (or defends) an Infringement action in accordance with this Section 8.3, or in the event a Party is entitled to bring (or defend) an infringement action in accordance with this Section 8.3 but lacks standing to do so, the other Party shall cooperate fully, including, if required to bring (or defend) such action, the furnishing of a power of attorney or being named as a party. Neither Party shall enter into any settlement or compromise of any action under this Section 8.3 which would in any manner alter, diminish, or be in derogation of the other Party’s rights under this Agreement without the prior written consent of such other Party, which shall not be unreasonably withheld. |
(e) | Recovery. Except as otherwise agreed by the Parties in connection with a cost- sharing arrangement, any recovery realized by a Party as a result of any action or proceeding pursuant to this Section 8.3, whether by way of settlement or otherwise, shall be applied first to reimburse the documented out-of-pocket legal expenses of the Party that brought (or defended) and controlled such action or proceeding incurred in connection with such action or proceeding, and second to reimburse the documented out-of-pocket legal expenses of the other Party incurred in connection with such action or proceeding, and any remaining amounts shall be retained by the Party that brought (or defended) and controlled such action; provided, however, that: |
(i) any recovery realized by Virpax as a result of any action brought (or defended) and controlled by Virpax pursuant to Section 8.3(a) or Section 8.3(b) (after reimbursement of the Parties’ documented out-of-pocket legal expenses relating to the action or proceeding) shall be allocated as follows:
(1) compensatory damages shall, if awarded, be treated as Net Sales of Licensed Products in the quarter in which such damages are received for purposes of Section 4.3; and
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(2) non-compensatory damages shall be retained by Virpax; and
(ii) any recovery realized by Lipocure as a result of any action brought and controlled by Lipocure pursuant to Section 8.3(a) or Section 8.3(b) (after reimbursement of the Parties’ documented out-of-pocket legal expenses relating to the action or proceeding) shall be allocated as follows:
(1) compensatory damages shall be shared equally by the Parties; and
(2) non-compensatory damages shall be retained by Lipocure.
(a) | Lipocure Patent Rights. Lipocure shall have the right to determine the Lipocure Patent Rights for which it will apply for extension of patent term in any country and/or region for any Licensed Product in the Field. Lipocure shall file for any such extension at Lipocure’s cost and expense. Virpax shall provide all reasonable assistance to Lipocure in connection with such filings, provided that Lipocure shall pay or reimburse any out-of-pocket costs incurred by Virpax in providing such assistance. In the event that Lipocure desires to not apply for a patent extension for any such Lipocure Patent Rights for which there is a basis to file for such extension, Lipocure shall provide written notice to Virpax of such intention to not file no later than seventy (70) days prior to the next deadline for any action that must be taken with respect to such Lipocure Patent Right in the relevant patent office. In such case, upon receipt of a written request by Virpax to assume responsibility for prosecution and maintenance of such Lipocure Patent Right, Lipocure shall allow Virpax at its sole cost and expense and by counsel of its own choice, delivered no later than 30 days after receipt of notice from Lipocure to assume such responsibility, and following the successful filing of any such extension, such country or region shall no longer be deemed to be included in the Territory of this Agreement. |
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(b) | Joint Patent Rights. Virpax shall have the right to determine the Joint Patent Rights for which it will apply for patent term extension in any country and/or region for any Licensed Product in the Field, and Virpax shall file for any such extension at Virpax’s cost and expense. Each Party shall provide all reasonable assistance to the other Party in connection with such filings, provided that the Party filing for any such extension shall pay or reimburse any out-of- pocket costs incurred by the other Party in providing such assistance. |
(c) | Virpax Patent Rights. Virpax shall have the sole right to apply for extension of term for any Virpax Patent Right in any country and/or region for any product, including, without limitation, any Licensed Product in the Field, at Virpax’s sole cost and expense. |
8.5 Infringement of Third Party Rights. Each Party shall promptly notify the other in writing of any allegation by a Third Party that the activity of either Party pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party. Neither Party shall have the right to settle any patent infringement litigation under this Section 8.5 in a manner that diminishes the rights or interests of the other Party without the written consent of such other Party (which shall not be unreasonably withheld).
TERM AND TERMINATION
9.1 Term. The term of this Agreement shall commence on the Effective Date and, unless earlier terminated in accordance with this Article 9, continue until the expiration of the last-to-expire of all royalty payment obligations of Virpax hereunder (the “Term”).
9.2 Termination for Material Breach.
(a) | Each Party shall have the right to terminate this Agreement in its entirety upon written notice to the other Party if such other Party is in material breach of this Agreement and has not cured such breach within ninety (90) days after notice from the terminating Party indicating the nature of such breach,. Such termination shall become effective at the end of such ninety (90) day period unless the breaching Party has cured such breach prior to the end of such period. Any right to terminate under this Section 9.2(a) shall be stayed and the cure period tolled in the event that, during any cure period, the Party alleged to have been in material breach shall have initiated dispute resolution in accordance with Article 11 with respect to the alleged breach, which stay and tolling shall continue until such dispute has been resolved in accordance with Article 11 and any cure required by such dispute resolution procedures has not been timely effected. |
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(b) | Each Party shall have the right to terminate this Agreement in its entirety upon written notice to the other Party with immediate effect if such other Party passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within 60 days; or (ii) a receiver of a liquidator is appointed for the other Party; or (iii) the other Party enters into winding up or insolvency or bankruptcy proceedings; or (iv) the other Party enters into a scheme or arrangement in contemplation of the foregoing with its creditors. Each of the Parties undertakes to notify the other within seven days if any of the above mentioned events occur. |
(c) | For clarity, in the event of material breach of this Agreement by Lipocure that is not cured within the applicable notice period set forth in Section 9.2(a), Virpax, at its sole discretion, may either: |
(i) terminate this Agreement in accordance with Section 9.2(a) (in addition to pursuing any remedy that may be available to Virpax at law or in equity as a result of Lipocure’s breach of this Agreement); or
(ii) elect (A) not to terminate this Agreement, (B) to retain the license granted under Section 2.1, subject to all terms and conditions hereof, and (C) pursue any remedy that may be available to Virpax at law or in equity as a result of Lipocure’s breach of this Agreement, without prejudice to Virpax’s right to terminate this Agreement at a later date pursuant to Section 9.2 (for that uncured material breach or any other uncured material breach of this Agreement by Lipocure) or pursuant to Section 9.4.
9.3 Consequences of Patent Challenge. In the event that Virpax or its Affiliate directly, or through assistance granted to a Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of term or the grant of a supplementary protection certificate with respect to, any Lipocure Patent Right, Lipocure shall be entitled to the following rights:
(i) Until a final decision regarding the challenge process is achieved (the “Challenge Period”), Virpax shall pay Lipocure an amount equal to 100% of the Royalties set forth in Section 4.3 of this Agreement in consideration for the know-how and any other un-patentable and/or un-registered Intellectual Property licensed to Virpax under this Agreement.
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(ii) If Virpax’s patent challenge is unsuccessful, in addition to the payments made under section 9.3 (i), (i) Lipocure shall be entitled to be paid the full and entire amount of Royalties according to section 4.3., which it was entitled to receive during the Challenge Period. For avoidance of doubt, the amounts paid under section 9.3(i) shall not be deducted from the payment of Royalties under this section; (ii) Virpax shall reimburse Lipocure for any costs and/or expenses incurred by Lipocure in connection with such challenge, including without limitation, attorney’s fees.
(iii) Lipocure may terminate this Agreement immediately upon written notice to Virpax.
9.4 At-Will Termination by Virpax. Virpax shall have the right to terminate this Agreement on a country by country basis for any reason or for no reason at any time upon 180 days’ prior written notice to Lipocure, provided Virpax’s termination shall not be deemed to cure any breach existing as of the date of such termination and shall not relieve Virpax of its obligation to pay Royalties pursuant to this Agreement for the period until its effective termination.
9.5 Effect of Expiration or Termination.
(a) | Expiration. Upon expiration (but not on earlier termination) of this Agreement, all licenses granted by Lipocure to Virpax that were in effect immediately prior to such expiration shall survive on a non-exclusive basis, subject only to the payments contemplated in the next sentence of this Section 9.5(a). Notwithstanding anything to the contrary in this Agreement, pursuant to the expiration of this Agreement and/or any Patent Right licensed under this Agreement, and as long as Virpax or any of its Affiliates or Sub-licensees commercialize the Licensed Products and/or the Licensed Compounds, Lipocure shall be entitled to an amount equal to 50% of the Royalties set forth in Section 4.3 of this Agreement in consideration for the know-how and any other un-patentable and/or un-registered Intellectual Property licensed to Virpax under this Agreement. |
(b) | Any Termination. Upon any termination of this Agreement prior to its expiration, the license (on a country by country basis in the event of partial termination by Virpax under Section 9.4) granted to Virpax pursuant to Section 2.1 shall automatically terminate and revert to Lipocure, and all other rights and obligations of the Parties under this Agreement shall terminate, except as expressly provided below in this Section 9.5 or elsewhere in this Article 9; provided that Virpax shall retain the right to sell any existing inventory at the time of termination, provided that any such sales shall be subject to royalty obligations as set forth in Article IV. |
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9.6 Accrued Obligations; Survival. Neither expiration nor any termination of this Agreement shall relieve either Party of any obligation or liability accruing prior to such expiration or termination, nor shall expiration or any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement. In addition, the Parties’ rights and obligations under Sections 6.1, 6.2, 6.3, 6.6, 7.7, 8.1, 8.2(c), 8.4(b), 9.5, 9.6, 9.7 and 9.8 and Articles 5, 10, 11 and 12 of this Agreement shall survive expiration or any termination of this Agreement.
9.7 Return of Confidential Information. Within thirty (30) days following the expiration or termination of this Agreement, except to the extent that a Party retains a license from the other Party as provided in this Article 9, each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s possession or control containing Confidential Information of the other Party; provided that such Party may keep one copy of such materials for archival purposes only subject to a continuing confidentiality obligations. Except with respect to a termination or expiration of this Agreement in which this Agreement provides that Virpax would continue to have the right to develop, manufacture or commercialize Licensed Products ,, Virpax shall return or transfer or assign to Lipocure, within 14 days of termination or expiration of this Agreement, all material, Regulatory Approvals as set forth in section 3.2 and/or all the files and information obtained by Virpax, in soft or hard copy, relating to the Licensed compound, compound Patent Rights or Products connected with this Agreement, and it may not make any further use thereof. Virpax shall fully cooperate with Lipocure to effect such transfer and assignment and shall execute any document and perform any acts required to do so. In case of termination as set out herein, Virpax will not be entitled to any reimbursement of any amount paid to Lipocure under this Agreement. Lipocure, at its expense shall be entitled to conduct an audit in order to ascertain compliance with this provision upon reasonable notice and during normal business hours and Virpax agrees to allow access to Lipocure or their representatives for this purpose.
9.8 Damages; Relief. Termination of this Agreement shall not preclude either Party from claiming any other damages, compensation or relief that it may be entitled to hereunder.
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INDEMNIFICATION
10.1 Indemnification by Virpax. Virpax hereby agrees to save, defend, indemnify and hold harmless Lipocure, its Affiliates, its and their respective officers, directors, agents, employees, successors and assigns (the “Lipocure Indemnitees”) from and against any and all losses, damages, liabilities, expenses and costs, including reasonable and documented legal expense and attorneys’ fees (“Losses”), to which any Lipocure Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party (each, a “Claim”) to the extent such Losses arise out of or relate to (a) the gross negligence or willful misconduct of any Virpax Indemnitee (defined below), (b) the breach by Virpax of any warranty, representation, covenant or agreement made by Virpax in this Agreement, or (c) the development, manufacture, use, sale, offer for sale or other disposition by or on behalf of Virpax or any of its Related Parties of any Licensed Product; except, (i) in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Lipocure Indemnitee or the breach by Lipocure of any warranty, representation, covenant or agreement made by Lipocure in this Agreement and (ii) to the extent of any Claim for which Lipocure is obligated to indemnify Virpax under Section 10.2.
10.2 Indemnification by Lipocure. Lipocure hereby agrees to save, defend, indemnify and hold harmless Virpax, its Affiliates and their respective officers, directors, employees, consultants and agents (the “Virpax Indemnitees”) from and against any and all Losses to which any Virpax Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party to the extent such Losses arise out of or relate to (a) the gross negligence or willful misconduct of any Lipocure Indemnitee, (b) (A) claims with respect to patent infringement patent infringement arising out of the exercise of rights under the Lipocure Patent Rights or (B) claims with respect to patent infringement or misappropriation of trade secrets arising out of the exercise of rights under the Lipocure Know-How and (c) the breach by Lipocure of any warranty, representation, covenant or agreement made by Lipocure in this Agreement; in each case except, (i), in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Virpax Indemnitee or the breach by Virpax of any warranty, representation, covenant or agreement made by Virpax in this Agreement and (ii) to the extent of any Claim for which Virpax is obligated to indemnify Lipocure under Section 10.1.
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10.3 Control of Defense. In the event a Party (the “Indemnified Party”) seeks indemnification under Section 10.1 or 10.2, it shall inform the other Party (the “Indemnifying Party”) of a claim as soon as reasonably practicable after it receives notice of the claim (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a claim as provided in this Section 10.3 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually damaged as a result of such failure to give notice), shall permit the Indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration) using counsel reasonably satisfactory to the Indemnified Party, and shall cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim. If the Indemnifying Party does not assume control of such defense within 15 days after receiving notice of the claim from the Indemnified Party, the Indemnified Party shall control such defense and, without limiting the Indemnifying Party’s indemnification obligations, the Indemnifying Party shall reimburse the Indemnified Party for all costs, including reasonable and documented attorney fees, incurred by the Indemnified Party in defending itself within thirty (30) days after receipt of any invoice therefor from the Indemnified Party. The Party not controlling such defense may participate therein at its own expense. The Party controlling such defense shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto. The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, delayed or conditioned. The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto, that imposes any liability or obligation on the Indemnified Party or that acknowledges fault by the Indemnified Party without the prior written consent of the Indemnified Party. If the Parties cannot agree as to the application of Section 10.1 or 10.2 to any claim, pending resolution of the dispute pursuant to Article 11, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Section 10.1 or 10.2, as applicable, upon resolution of the underlying claim.
10.4 Insurance. Each Party shall procure and maintain adequate levels of insurance that are consistent with industry standards for similarly situated companies, including comprehensive or commercial general liability insurance (including contractual liability and product liability). Such insurance shall include commercially reasonable levels of insurance as may be customary in light of status of activities being conducted. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 10 or otherwise. Each Party shall provide the other Party with written evidence of such insurance upon request. Each Party shall provide the other Party with written notice at least 30 days prior to the cancellation, non-renewal or material change in such insurance which materially adversely affects the rights of the other Party hereunder.
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DISPUTE RESOLUTION
11.1 Disputes. Subject to Section 11.3, any claim, dispute, or controversy as to the breach, enforcement, interpretation or validity of this Agreement (each, a “Dispute”) that cannot be resolved by the Parties within thirty (30) days that a Party is notified of such Dispute, will be referred to the Chief Executive Officer of Lipocure and the Chief Executive Officer of Virpax for attempted resolution, with each party exercising good faith in such attempt. In the event such executives are unable to resolve such Dispute within thirty (30) days of such Dispute being referred to them, then, upon the written request of either Party to the other Party, the Dispute shall be subject to arbitration in accordance with Section 11.2, except as expressly set forth in Section 11.3.
(a) | Any Dispute arising out of or in connection with, or relating to, this Agreement or the transactions contemplated by this Agreement or the formation, applicability, breach, termination or validity thereof, shall be finally settled exclusively by arbitration in accordance with the Rules of Arbitration of the ICC in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the parties. The arbitration shall be conducted by three arbitrators (the “Arbitral Tribunal”). Each Party shall appoint one member of the Arbitral Tribunal and those two members shall jointly appoint the third member. The arbitration shall be conducted in the English language and the seat of the arbitration shall be London, England. |
(b) | The agreement to arbitrate under this clause shall be specifically enforceable. Any award rendered by the Arbitral Tribunal shall be in writing and shall be final and binding upon the parties, and may include an award of costs, including reasonable legal fees and disbursements, to the prevailing party. The parties undertake to carry out any award without delay and waive their right to any form of recourse based on grounds other than those contained in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 insofar as such waiver can validly be made. Judgment upon any award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets and, to the maximum extent permitted by Applicable Law, the parties agree that any court of competent jurisdiction in which enforcement of the award is sought shall have power to enforce the relief awarded by the Arbitral Tribunal, regardless of whether such relief is characterized as legal, equitable or otherwise. |
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(c) | Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of London, England for enforcing the parties’ agreement to arbitrate, enforcing any arbitration Award or obtaining or enforcing interim measures (including injunctive relief). THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINS T ANY OTHER PARTY IN ANY COURT OF COMPETENT JURISDICTION IN ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT AND THE TRANS ACTION AGREEMENTS OR THE TRANS ACTIONS CONTEMPLATED HEREBY. |
11.3 Court Actions. Nothing contained in this Agreement shall deny either Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding. In addition, either Party may bring an action in any court of competent jurisdiction to resolve disputes pertaining to the validity, construction, scope, enforceability, infringement or other violations of Patent Rights or other intellectual property rights, and no such claim shall be subject to arbitration pursuant to Section 11.2.
MISCELLANEOUS
12.1 Rights Upon Bankruptcy. All rights and licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United States Code and other similar laws in any jurisdiction outside the U.S. (collectively, the “Bankruptcy Laws”), licenses of rights to be “intellectual property” as defined under the Bankruptcy Laws. If a case is commenced during the Term by or against a Party under Bankruptcy Laws then, unless and until this Agreement is rejected as provided in such Bankruptcy Laws, such Party (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall perform all of the obligations provided in this Agreement to be performed by such Party. If a case is commenced during the Term by or against a Party under the Bankruptcy Laws, this Agreement is rejected as provided in the Bankruptcy Laws and the other Party elects to retain its rights hereunder as provided in the Bankruptcy Laws, then the Party subject to such case under the Bankruptcy Laws (in any capacity, including debtor-in-possession) and its successors and assigns (including a Title 11 trustee), shall provide to the other Party copies of all Information necessary for such other Party to prosecute, maintain and enjoy its rights under the terms of this Agreement promptly upon such other Party’s written request therefor. All rights, powers and remedies of the non-bankrupt Party as provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including, without limitation, the Bankruptcy Laws) in the event of the commencement of a case by or against a Party under the Bankruptcy Laws.
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12.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of England, excluding its conflicts of laws principles, except as to any issue which depends upon the validity, scope or enforceability of any Patent, which issue shall be determined in accordance with the laws of the country in which such patent was issued.
12.3 Entire Agreement; Amendments. This Agreement (including the Exhibits and Schedules hereto) is both a final expression of the Parties’ agreement and a complete and exclusive statement with respect to all of its terms. This Agreement supersedes all prior and contemporaneous agreements and communications, whether oral, written or otherwise, concerning any and all matters contained herein. The Exhibits and Schedules to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of both Parties hereto.
12.4 Non-Waiver. The failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance. Any waiver by a Party of a particular provision or right shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time and shall be signed by such Party.
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12.5 Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party (which consent shall not be unreasonably withheld); provided, however, that either Party may assign this Agreement and its rights and delegate its obligations hereunder without the other Party’s consent:
(a) | in connection with the transfer or sale all or substantially all of the business of such Party to which this Agreement relates to a Third Party (“Third Party Acquirer”), whether by merger, sale of stock, sale of assets or otherwise (each, a “Sale Transaction”); or |
(b) | to an Affiliate, provided that the assigning Party shall remain liable and responsible to the non-assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate. |
The rights and obligations of the Parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties, and the name of a Party appearing herein will be deemed to include the name of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this section. Any assignment not in accor dance with this Agreement shall be void. In the event of an assignment and assumption of rights and obligations under this Agreement to a Third Party in connection with a Sale Transaction, the assigning Party shall be relieved of all obligations to the non-assigning Party assumed by the applicable Third Party.
12.6 Force Majeure. Each Party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such Party’s reasonable control, including but not limited to Acts of God, fire, flood, explosion, earthquake, or other natural forces, war, civil unrest, acts of terrorism, accident, destruction or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of raw materials, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances.
12.7 Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.
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12.8 Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile or electronic mail (in each case, if promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postag e prepaid, return receipt requested, addressed as follows:
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or to such other address(es) as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered, if personally delivered or sent by facsimile on a business day (or if delivered or sent on a non-business day, then on the next business day); (b) on the business day after dispatch, if sent by nationally- recognized overnight courier; or (c) on the third (3rd) business day following the date of mailing, if sent by mail.
12.9 Interpretation. The headings of clauses contained in this Agreement preceding the text of the sections, subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and shall not constitute any part of this Agreement, or have any effect on its interpretation or construction. All references in this Agreement to the singular shall include the plural where applicable. The term “including” or “includes” as used in this Agreement means including, without limiting the generality of any description proceeding such term, and the word “or” has the inclusive meaning represented by the phrase “and/or.” Unless otherwise specified, references in this Agreement to any section shall include all subsections and paragraphs in such section and references in this Agreement to any subsection shall include all paragraphs in such subsection. All references to days in this Agreement shall mean calendar days, unless otherwise specified. Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist. This Agreement has been prepared in the English language, and the English language shall control its interpretation. In addition, all notices required or permitted to be given hereunder, and all written, electronic, oral or other communications between the Parties regarding this Agreement shall be in the English language.
12.10 Relationship between the Parties. The Parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture or similar business relationship between the Parties. Neither Party is a legal representative of the other Party, and neither Party may assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other Party for any purpose whatsoever.
12.11 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.
12.12 No Third Party Rights. The provisions of this Agreement are for the exclusive benefit of the Parties, and no other person or entity shall have any right or claim against any Party by reason of these provisions or be entitled to enforce any of these provisions against any Party.
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12.13 Further Assurances. Each Party agrees to do and perform all such further acts and things and will execute and deliver such other agreements, certificates, instruments and documents necessary or that the other Party may deem advisable in order to carry out the intent and accomplish the purposes of this Agreement and to evidence, perfect or otherwise confirm its rights hereunder.
12.14 Costs. Except as specifically provided in this Agreement, each Party shall be solely responsible for all costs, fees and other expenses incurred in connection with this Agreement.
12.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument. This Agreement may be executed by facsimile or PDF signatures, which signatures shall have the same force and effect as original signatures.
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In Witness Whereof, the parties hereto have duly executed this License Agreement as of the Effective Date.
LipocureRX, Ltd. | ||
By: | /s/ Yechezkel Barenholz | |
Name: | YECHEZKEL BARENHOLZ | |
Title: | Prof Director & CSO | |
/s/ Dr. Liana Patt | ||
Dr. Liana Patt, CEO, LIPOCURE |
[Signature Page to Lipocure License Agreement]
VIRPAX PHARMACEUTICALS, LLC | ||
By: | /s/ Anthony Mack | |
Name: | Anthony Mack | |
Title: | CEO |
[Signature Page to Lipocure License Agreement]
Exhibit A
LIPOCURE PATENTS
Family: 3374 Title: [**]
Inventor |
Cohen Rivka |
Barenholz Yechezkel |
Application | Patent | |||||||||||||||||||
Patent ID | Status | Country | Date | Number | Date | Number | ||||||||||||||
3374-00 | Expired | US | 7/10/2008 | 61/103,440 | ||||||||||||||||
3374-01 | Exhausted | PCT | 11/10/2009 | PCT/IL2009/000966 | ||||||||||||||||
3374-02 | Exhausted | PCT | 11/10/2009 | PCT/IL2009/000967 | ||||||||||||||||
3374-03 | Granted | US | 21/03/2017 | 13/123,130 | 25/07/2017 | 9,713,591 | ||||||||||||||
3374-04 | Examination | Europe | 11/10/2009 | 9756063.5 | ||||||||||||||||
3374-05 | Granted | China | 11/10/2009 | 200980148060.50 | 20/01/2016 | 200980148060.50 | ||||||||||||||
3374-14 | Examination | US | 10/10/2009 | 15/626,836 |
Exhibit B
VIRPAX SPECIFICATIONS
Exhibit 10.13
Certain identified information has been
excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
COLLABORATION AND LICENCE AGREEMENT
This Collaboration and Licence Agreement (this “Agreement”) is made effective as of 11th of April 2019 (the “Effective Date”), by and between
(1) | Nanomerics Ltd, with offices at New Bridge Street House, 30-34 New Bridge Street, London, EC4V 6BJ, UK (“Nanomerics”); and |
(2) | VIRPAX PHARMACEUTICALS, INC., with offices at 101 Lindenwood Drive, Suite 225, Malvern, PA 19355, USA (“Virpax”). |
Recitals
(A) | WHEREAS, Nanomerics owns or otherwise Controls, world-wide exclusive rights to the Compound, Device, Technology and Product (as these terms are defined below); |
(B) | WHEREAS, Virpax is in the business of acquiring, developing, manufacturing, marketing and selling pharmaceutical products; and |
(C) | WHEREAS, Nanomerics desires to grant an exclusive world-wide license to Virpax, and Virpax desires to take such a licence, to develop and commercialise Products and, in connection therewith, to engage in a collaborative program utilising Nanomerics’ knowledge, skills and expertise in the clinical development of Products and in attracting external funding for such development. |
Agreement
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
1. | Definitions |
Unless otherwise specifically provided in this Agreement, the following terms when used with a capital letter at the beginning, shall have the following meanings:
“Affiliate” means, with respect to a Person, any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first Person. “Control” and, with correlative meanings, the terms “controlled by” and “under common control with” mean (a) the power to direct the management or policies of a Person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance, resolution, regulation or otherwise, or (b) to own more than 50% of the outstanding voting securities or other ownership interest of such Person.
“Annual Net Sales” means the Net Sales made during a given Calendar Year.
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
“Applicable Law” means the applicable laws, rules and regulations, including any rules, regulations, guidelines or other requirements of the Health Authorities that may be in effect from time to time.
“Calendar Quarter” means each successive period of three (3) calendar months commencing on 1st January, 1st April, 1st July and 1st October.
“Calendar Year” means each successive period of twelve (12) calendar months commencing on 1st January.
“Clinical Development Plan” means the plan attached hereto as Schedule 1 outlining the clinical development of the first Licensed Product up to end of Phase II Clinical Trials, as may be amended from time to time in accordance with Article 21.
“Compound” means Nanomerics’ proprietary compound known as [**], a composition of matter comprising the [**].
“Collaboration Term” has the meaning specified in Section 13.2.
“Combination Product” means a Product that contains the Compound together with one or more other active ingredient(s).
“Commercial Milestone” has the meaning set forth in Section 7.3.
“Commercially Reasonable Efforts” means, with respect to the clinical development or Exploitation of the Product, or with respect to any other obligation of a Party hereunder as the case may be, efforts and resources commonly used in research-based pharmaceutical companies of similar standing as the Party in question to discharge a similar obligation or accomplish a similar objective with respect to compounds or products with similar commercial and scientific potential at a similar stage in their lifecycle or in a similar therapeutic area, taking into consideration their safety and efficacy, their cost to develop, the competitiveness of alternative compounds and products and the nature and extent of their market exclusivity (including Patent coverage and regulatory exclusivity), the likelihood of Health Registration Approval, their expected profitability, including the amounts of marketing and promotional expenditures and all other relevant factors. Commercially Reasonable Efforts shall be determined based on the Territory as a whole and without reference to specific markets or group of markets.
“Confidential Information” means any and all data, results, know-how (including the Licenced Know-How), plans, business information and other Information, whether oral or in writing or in any other form, disclosed before, on or after the Effective Date by one Party to the other Party, including the terms of this Agreement.
“Control” means, with respect to any item of information, Patent or other IP Protection Right, possession of the right, whether directly or indirectly, and whether by ownership, licence or otherwise, to assign, or grant a licence, sublicense or other right to or under, such information, Patent or other IP Protection Right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party, or the rights of any Third Party in or to such information, Patent or other IP Protection Right.
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Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
“Defending Party” has the meaning set forth in Section 10.9.
“Device” means the drug delivery [**] as further specified in Schedule 2 or any other device used by Virpax, its Affiliates or Sublicensees as part of Licensed Product.
“Device Field” means [**].
“Disclosing Party” has the meaning set forth in Section 9.2.
“Distributor” has the meaning set forth in Section 3.2.
“Effective Date” means the date as set forth in the preamble to this Agreement.
“Europe” means the European Economic Area as it may be constituted from time to time together with, for avoidance of doubt, the United Kingdom, regardless of its membership of the European Union or the EEA.
“Exploit” means to make, have made, import, use, sell, or offer for sale, including to research, develop, apply for and hold Health Registration Approval, register, modify, enhance, improve, Manufacture, have Manufactured, hold/keep (whether for disposal or otherwise), formulate, optimise, have used, export, transport, distribute, promote, market or have sold or otherwise dispose or offer to dispose of, a product or process.
“Exploitation” means the act of Exploiting a product or process. “Field” means all human use.
“First Commercial Sale” means the first sale for monetary value for use or consumption by the general public of a Licensed Product in any country after Health Registration Approval for such Licensed Product has been obtained in such country. For the avoidance of doubt, sales prior to receipt of all Health Registration Approvals necessary to commence regular commercial sales, such as so-called “treatment IND sales,” “named patient sales” and “compassionate use sales,” shall not be a First Commercial Sale.
“Force Majeure” means an event that is beyond a Party’s reasonable control, including acts of God, strikes, lock-outs or other industrial/labour disputes, war, riot, civil commotion, terrorist act, malicious damage, epidemics, quarantines, fire, flood, storm, or natural disaster.
“Funding” means funding provided by one or more Third Parties for use in the Program as described in Schedule 3 hereto (the “Funding Plan”).
“Funding Completion Date” means the date being the earlier of: (a) the date upon which the Funding has been fully received by Virpax; and (b) the Funding Waiver Date as specified in Section 13.5.1.
“Funding Expiry Date” means the date (if any) specified as such in the Funding Plan and as defined in Section 13.5.1, or if no such date is specified, [**].
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competitive harm if publicly disclosed.
“Generic Product” means product (other than Licensed Products) comprising Compound as an active ingredient delivered intranasally, the marketing approval for which has been obtained by reference to data comprised in any Health Registration Approval for the Compound which has been generated hereunder or is otherwise proprietary to either of the parties.
“Health Authority” means any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the Exploitation of the Product in the Territory.
“Health Registration Approval” means, with respect to a country in the Territory, any and all approvals, licences, registrations or authorisations of any Health Authority necessary to commercially distribute, sell or market a Licensed Product in such country, including, where applicable, (a) pricing or reimbursement approval in such country, (b) pre- and post-approval marketing authorisations (including any prerequisite manufacturing approval or authorisation related thereto), and (c) labelling approval.
“Improvement” means any improvement, adaptation, modification or upgrading arising during the Term, and any IP Protection Rights relating thereto.
“In-licensed Patents” has the meaning set forth in Section 11.2.2.
“IND” means an Investigational New Drug application in the US, or any equivalent application in any other jurisdiction.
“Indemnified Party” means a Party, its Affiliates or its or their respective directors, officers, employees, agents, partners and shareholders seeking to recover a Loss under Section 12.1 or 12.2.
“Indemnifying Party” means a Party from whom recovery of a Loss is sought under Section 12.1 or 12.2.
“Indirect Taxes” means value added taxes, sales taxes, consumption taxes and other similar taxes.
“Information” means all technical, scientific and other know-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results, laboratory notes and notebooks, and other material, including: high- throughput screening, gene expression, genomics, proteomics and other drug discovery and development technology; biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre- clinical, clinical, safety, manufacturing and quality control data and information, including study designs and protocols; assays and biological methodology; Manufacturing and quality control procedures and data, including test procedures; and synthesis, purification and isolation techniques, (whether or not confidential, proprietary, patented or patentable) in written, electronic or any other form now known or hereafter developed, but excluding the Regulatory Documentation.
“Infringement Suit” has the meaning set forth in Section 10.8.2.
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competitive harm if publicly disclosed.
“IP Protection Rights” means any and all legal means of establishing rights in and to ideas, inventions, discoveries, know-how, data, databases, documentation, reports, materials, writings, designs, computer software, processes, principles, methods, techniques and other information, including Patents, trade secrets, trademarks, service marks, trade names, registered designs, design rights, copyrights (including rights in computer software and database rights), domain names and any rights or property similar to any of the foregoing in any part of the world, whether registered or not, together with the right to apply for the registration of any such rights.
“Joint Research Committee” or “JRC” means the joint committee established by the Parties pursuant to Article 5 to manage and steer the Program during the Collaboration Term.
“Knowledge” means the good faith understanding of any given facts and information of a senior qualified person of Nanomerics as of the Effective Date after having used Commercially Reasonable Efforts to perform a reasonably diligent investigation with respect to such facts and information immediately prior to the Effective Date.
“Licensed Know-How” means the Licensed Compound Know-How and the Licensed Device Know-How.
“Licensed Compound Know-How” means all Information (other than the Licensed Device Know-How) which is in the possession of Nanomerics or its Affiliates and that Nanomerics or its Affiliates own or otherwise Control, as of the Effective Date or at any time during the Term that is necessary or useful for the Exploitation of the Product.
“Licensed Device Know-How” means all Information which is in the possession of Nanomerics or its Affiliates and that Nanomerics or its Affiliates Control, as of the Effective Date or at any time during the Term that is necessary or useful for the Exploitation of the Device as part of the Product.
“Licenced Improvement” means any Improvement to the Licensed Know-How that is conceived, reduced to practice, developed or discovered by or on behalf of Nanomerics, its Affiliates or their respective employees and agents (whether alone or jointly with others), or otherwise Controlled by Nanomerics or its Affiliates or their respective employees and agents at any time during the Term.
“Licensed Patents” means the Patents set out in Schedule 4 hereto, and any Patents owned or Controlled by Nanomerics or its Affiliates filed or issued after the Effective Date that claim or cover Licensed Improvements.
“Licenced Products” means any Products and Combination Products.
“Losses” means any and all direct or indirect liabilities, damages, losses or expenses, including interest, penalties, and reasonable lawyers’ fees and disbursements. In calculating Losses, the legal duty to mitigate on the part of the Party suffering the Loss shall be taken into account.
“Manufacture” and “Manufacturing” means, with respect to the Compound, Device or Licensed Product the synthesis, manufacturing, processing, formulating, packaging, labelling, holding and quality control testing thereof.
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competitive harm if publicly disclosed.
“Major Markets” means France, Germany, Italy, Spain, the United Kingdom and the USA.
“Nanomerics Results” means all Results specific to: [**].
“NDA” means a New Drug Application filed in accordance with Section 505(b)(1) of the US Food Drug & Cosmetic Act (“the Act”) and applicable regulations and requirements of the United States Food and Drug Administration and any successor agency thereto (FDA) as from time to time amended and in effect, or any equivalent application in any other jurisdiction.
“Net Sales” means the gross amounts received for sales of Licensed Products by or on behalf of Virpax, its Affiliates and its and their Sublicensees to Third Parties, after deduction of:
a) | normal and customary trade, quantity or prompt settlement discounts (including rebates, chargebacks and allowances) actually allowed, price adjustments; and purchasing group, wholesaler and distributor administration fees, commissions and services fees actually paid; |
b) | amounts repaid or credited because of rejections, returns or recalls of goods, including amounts paid or refunded for wastage and outdated products; |
c) | rebates and similar payments made with respect to sales paid for by any governmental or regulatory authority such as, by way of illustration and not in limitation of the Parties’ rights hereunder, Federal or state Medicaid, Medicare or similar state program in the United States or equivalent governmental program in any other country; |
d) | excise taxes, Indirect Taxes, customs duties, customs levies and import fees imposed on the sale, importation, use or distribution of the Products; |
e) | other customary deductions consistent with Generally Accepted Accounting Principles, or in the case of non-United States sales, other applicable accounting standards; and |
f) | charges made and received for storage, handling, transportation, packaging, postage, insurance and other distribution expenses. |
Net Sales shall be calculated using Virpax’ internal audited systems used to report such sales as adjusted for any of items (a) to (f) above not taken into account in such systems.
“Owned Patents” has the meaning set forth in Section 11.2.2.
“Pain Control” means any form of pharmacological treatment of pain, including mild, moderate, severe, acute or chronic pain, including pre- and post-operative and other uses.
“Parties” means Virpax and Nanomerics and “Party” means either of Virpax or Nanomerics.
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“Patents” means (a) all national, regional and international patents and patent applications, including provisional patent applications, (b) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from either of these, including divisionals, continuations, continuations-in-part, provisionals, converted provisionals, and continued prosecution applications, (c) any and all patents that have issued or in the future issue from the foregoing patent applications ((a) and (b)), including utility models, petty patents and design patents and certificates of invention, (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re- examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent applications ((a), (b) and (c)), and (e) any similar rights, including so-called pipeline protection, or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any such foregoing patent applications and patents.
“Payments” has the meaning set forth in Section 8.1.
“Phase I Clinical Trial” means studies of a molecule in a limited number of healthy humans with primary endpoints to establish that such molecule is reasonably safe for continued testing and to support its continued testing in a Phase II Clinical Trial. A Phase I Clinical Trial shall be deemed to have commenced when the first subject is dosed in such Phase I Clinical Trial.
“Phase II Clinical Trial” means studies of a molecule in a limited number of humans to determine efficacy in the indication for which a product is intended, in order to provide proof of concept or to determine optimum efficacious dosing regimens. A Phase II Clinical Trial shall be deemed to have commenced when the first patient is dosed in such Phase II Clinical Trial.
“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organisation, including a government or political subdivision, department or agency of a government.
“Pre-clinical Development Plan” means Schedule 5 hereto outlining pre-clinical work remaining on the Effective Date in order to file an IND with the FDA for the first Licensed Product in the USA.
“Product” means a product containing Compound as the active ingredient, in finished form for human application by intranasal administration.
“Program” means the activities to be undertaken by the Parties under the Funding Plan, the Pre-clinical Development Plan and the Clinical Development Plan.
“Program Milestone” has the meaning set forth in Section 7.2.
“Prosecuting Party” has the meaning set forth in Section 10.5.
“Receiving Party” has the meaning set forth in Section 9.2.
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“Regulatory Documentation” means all applications, registrations, licences, authorisations and approvals, all correspondence submitted to or received from Health Authorities (including minutes and official contact reports relating to any communications with any Health Authority) and all supporting documents and all clinical studies and tests, relating to the Product, and all data contained in any of the foregoing, including all investigational new drug applications, Health Registration Approvals, regulatory drug lists, advertising and promotion documents, adverse event files and complaint files.
“Results” means ideas, inventions, discoveries, know-how, data, documentation, reports, materials, writings, designs, computer software, processes, principles, methods, techniques and other information, recorded in any form, that are discovered, conceived, reduced to practice or otherwise generated through work performed under or in connection with the Program by or on behalf of either Party or by the Parties jointly, including any IP Protection Rights pertaining to any of the foregoing.
“Sublicensee” has the meaning set forth in Section 3.2.
“Technology” means [**] further identified in Schedule 6 as it may be developed and improved during the term of this Agreement and including any derivatives thereof.
“Term” means the period beginning on the Effective Date and continuing until the earlier of the date upon which this Agreement expires by its terms or is terminated in accordance with Article 13.
“Territory” means all countries in the world, except for those countries in which this Agreement is terminated pursuant to Section 13.3 or 13.5.1.2
“Third Party” means any Person not including the Parties and the Parties’ respective Affiliates.
“Third Party Claim” has the meaning set forth in Section 12.1.
“Third Party Sublicense Payment” means any cash consideration (upfront or milestone payments) or any non- cash consideration (to be valued at any relevant open market price for such or, if an open market price is not ascertainable, at a reasonable value determined at an arms-length basis), received by Virpax net of any Indirect Taxes in return for any sublicense granted to a Third Party pursuant to Section 3.1 below.
“Trademark” means any word, name, symbol, colour, designation or device or any combination thereof for use in the course of trade, including any domain name, trademark, trade dress, brand mark, trade name, brand name, logo or business symbol used by Virpax in connection with the Compound or Licensed Products.
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“Valid Claim” means, with respect to a Licensed Product in a particular country, either:
(i) | any claim of a granted and unexpired Licensed Patent in such country that (a) has not been held permanently revoked, unenforceable or invalid 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, and (b) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise; or |
(ii) | a claim of a pending Licensed Patent application, which claim was filed and is being prosecuted in good faith and has not been abandoned or finally disallowed without the possibility of appeal or re-filing of the application, provided that such claim has not been pending for more than five (5) years. |
“Virpax Information” has the meaning set forth in Section 9.1.
“Virpax Results” means all Results other than the Nanomerics Results.
2. | Construction |
Except where the context requires otherwise, whenever used the singular includes the plural, the plural includes the singular, the use of any gender is applicable to all genders and the word “or” has the inclusive meaning represented by the phrase “and/or.” Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The headings of this Agreement are for convenience of reference only and do not define, describe, extend or limit the scope or intent of this Agreement or the scope or intent of any provision contained in this Agreement. The term “including” or “includes” as used in this Agreement means including, without limiting the generality of any description preceding such term. The wording of this Agreement shall be deemed to be the wording mutually chosen by the Parties and no rule of strict construction shall be applied against any Party.
3. | Grant of Rights |
3.1 | Licence Grants to Virpax. Subject to the terms and conditions of this Agreement, Nanomerics hereby grants to Virpax an exclusive (including with regard to Nanomerics and its Affiliates) right and licence in the Territory, with the right to grant sublicenses pursuant to Section 3.2, under Nanomerics’ and its Affiliates’ rights, titles, and interests in and to the Licenced Patents, the Licenced Know-How and the Licensed Improvements to: |
3.1.1. | Exploit the Licensed Products comprised partly of the Device, in the Device Field; and, |
3.1.2. | Exploit the Compound, the Technology and any Licensed Products not comprising the Device, and any Improvements thereto for all purposes in the Field. |
3.2 | Sublicenses. Virpax shall have the right to grant sublicenses, through multiple tiers of sublicenses, under the licences granted in Section 3.1, to its Affiliates and to any other Person provided that: |
3.2.1. | the sub-licence is in writing and contains like obligations and undertakings by the sub-licensee as are contained in this Agreement including in particular (but not limited to) clause 9 (confidentiality), and Virpax ensures that all sub-licensees duly observe and perform the same; and; |
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3.2.2. | Virpax shall remain responsible for all acts and omissions of such sub-licensees as though they were by Virpax and shall indemnify, keep indemnified and hold harmless Nanomerics from and against all such costs, expenses and liabilities, which Nanomerics incurs or suffers as a result of the default or negligence of any sub-licensee; |
3.2.3. | the sub-licence will terminate automatically on the expiration or termination of this Agreement for any reason; |
3.2.4. | Virpax shall notify Nanomerics in writing of any sub-licence granted pursuant to this clause and shall at the same time provide Nanomerics with a copy of such sub-licence, redacted as to any commercially sensitive or confidential provisions. |
3.2.5. | Virpax shall otherwise ensure that all Persons to which it grants sublicenses comply with all terms and conditions of this Agreement. |
Where Virpax grants a sublicense to a Person that is not an Affiliate of Virpax, and such Person is not a Distributor, such Person shall be a “Sublicensee” for purposes of this Agreement.
Virpax shall have the right, in its sole discretion, to appoint its Affiliates, and Virpax and its Affiliates shall have the right, in their sole discretion, to appoint any other Persons, in the Territory or in any country of the Territory, to distribute, market and sell Licenced Product (with or without packaging rights), in circumstances where the Person purchases on its own account its requirements of Licenced Product from Virpax or its Affiliates for on- sale to such Person’s customers. Such Person shall be identifiable in the pharmaceutical industry, and would usually be designated as a wholesaler or a distributor, and such Person shall not otherwise make any royalty or other payment to Virpax with respect to its on-sale of Licensed Products. Where Virpax or its Affiliates appoints such a Person and such Person is not an Affiliate of Virpax, that Person shall be a “Distributor” for purposes of this Agreement.
3.3 | Covenants |
3.3.1. | Publication. To the extent Applicable Law permits Nanomerics to conduct research and development activities with respect to Compounds or Licenced Products notwithstanding the exclusive licence grants to Virpax under Section 3.1, Nanomerics agrees that neither it nor its Affiliates will publish or present any material or file any Patent applications with respect to such activities without the prior written consent of Virpax in each case. For the avoidance of doubt, the Parties acknowledge that University College London (“UCL”) retains a research license with respect to patents underlying the Technology which allows UCL’s employees and students to conduct bona fide academic research or teaching without infringing such patents, and that UCL its employees or students may make publications or presentations complying with such research licence over which Nanomerics has no control. |
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3.3.2. | Non-Compete. During the Term Nanomerics covenants that it and its Affiliates shall not (a) conduct any activity with, for the benefit of, or sponsored by, any Person, that to Nanomerics’ Knowledge has as a specific goal or intent discovering, identifying, Exploiting or otherwise commercialising products that include the Compound; or, [**] For avoidance of doubt and subject to the exclusive rights granted to Virpax hereunder, Nanomerics shall not, directly or indirectly, Exploit or otherwise use the Compound or Product in any form or presentation for any purpose in the Territory. The Parties acknowledge that all restrictions contained in this Section 3.4.2 are reasonable, valid and necessary for the adequate protection of the Licenced Product business and that Virpax would not have entered into this Agreement without the protection afforded it by this Section 3.4.2. |
3.3.3. | No Encumbrance. Nanomerics shall not assign, transfer, convey or otherwise encumber its rights to the Licensed Patents, Licensed Know-How, Licensed Improvements or Health Registration Approvals in any way that is detrimentally inconsistent with the exclusive licenses or other rights granted to Virpax under this Agreement. |
3.4 | Exclusivity Term. Virpax’s exclusive position granted by Section 3.1 shall expire with respect to each separate Licenced Product, on a country-by-country basis, on the date when Virpax’s obligation to pay royalties with respect to such Licenced Product pursuant to Section 7.9 expires. Upon expiry of Virpax’s exclusive position with respect to a Licenced Product in a country, Virpax’s licence with respect to such Licenced Product in such country shall become non-exclusive, fully paid-up, perpetual and irrevocable and the Net Sales of such Licenced Product in such country shall be excluded from all Net Sales calculations in Article 7 (including the calculation of royalties, thresholds and ceilings). In such circumstances (but not in any circumstance where this Agreement has been terminated by Nanomercis for breach by Virpax, or by Vipax at will) Virpax, its Affiliates and Sub- licensees shall be allowed to continue Exploiting such Licenced Product and using all Licenced Know-How and Joint Know-How in connection therewith on a non-exclusive basis in such country with no further consideration to Nanomerics. |
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4. | Delivering the Program |
4.1 | Information Disclosure; Assistance. Nanomerics shall, and shall cause its Affiliates to, at Virpax’s cost but without additional compensation, disclose and make available to Virpax, in whatever form Virpax may reasonably request, Regulatory Documentation, Licenced Know-How, Licensed Improvements and any other Information claimed or covered by any Licenced Patent or otherwise relating, directly or substantially, to the Compound or Licenced Products, as soon as reasonably practical after the Effective Date to the extent not done so already and thereafter promptly after the earlier of the development, making, conception or reduction to practice of each such item of Regulatory Documentation, Licenced Know-How, Licensed Improvement or other Information. |
4.2 | Diligence Obligations. Effective from the Funding Completion Date, Virpax undertakes to (i) use Commercially Reasonable Efforts at its own cost and expense to develop at least one Licenced Product and to conduct all development necessary to obtain Health Registration Approvals for a Licenced Product in each of the Major Markets, and (ii) use Commercially Reasonable Efforts to commercialise such Licenced Product in each of the Major Markets in the Territory, provided, however, that such obligations are expressly conditioned upon Nanomerics substantially performing its obligations hereunder to the extent any non-performance hinders any Exploitation by Virpax, and such obligations of Virpax shall be delayed or suspended as long as any such condition exists. For the avoidance of doubt, Virpax shall not be obligated to obtain Health Registration Approval for, or commercialise, more than one Licenced Product in any Major Market. In the event that Virpax decides to discontinue the development or commercialisation of a Licenced Product in favour of another Licenced Product, its obligations under this Section 4.2 shall cease with respect to such initial Licenced Product in favour of such other Licenced Product. Virpax shall perform its obligation under this Section 4.2 in good scientific manner and in compliance in all material respects with all Applicable Law. Virpax shall have no other obligations towards Nanomerics, express or implied, to Exploit Licenced Products in the Territory. Notwithstanding anything herein to the contrary, Virpax shall be deemed not to have met the diligence obligations in this Section 4.2 should it have failed to dose the first subject in (and thereafter diligently pursue in good faith) a Phase I Clinical Trial of a Licensed Product within twelve (12) months of the Funding Completion Date.. |
4.3 | Reporting Virpax shall provide Nanomerics (through JRC or otherwise) with quarterly progress reports on the clinical development of Licenced Products in the Territory. Such report shall cover general information on Virpax’s clinical development activities in the previous Calendar Quarter, a summary of the activities planned in the next twelve (12) months, and a timetable of planned and actual submissions for Health Registration Approvals. Virpax shall keep Nanomerics updated in reasonable detail with respect to submissions for Health Registration Approvals, and progress therewith. In any event, if and when a Health Registration Approval is obtained in any country of the Territory, Virpax shall promptly inform Nanomerics of such Health Registration Approval. |
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4.4 | Conduct of the Program During the Collaboration Term and under the direction and supervision of the JRC, each Party shall (a) perform or cause to be performed its obligations under the Program in good scientific manner and in compliance in all material respects with all Applicable Law, including good laboratory practices and good clinical practices, and (b) allocate sufficient time, effort, equipment and skilled personnel to complete such activities successfully and promptly. Following the Effective Date, the Parties shall promptly commence the Program, provided, however, that neither party shall be obligated to initiate any activities under the Clinical Development Plan until the Funding has been fully received by Virpax. Each Party shall assume responsibility for its own costs and expenses for the Program or as otherwise might be agreed in writing. |
4.5 | Cooperation. Each Party shall cooperate with any and all reasonable requests for assistance from the other Party with respect to the activities under the Program, including by making its employees, consultants and other scientific staff available upon reasonable notice during normal business hours at their respective places of employment to consult with such other Party on issues arising in connection with the Program. |
4.6 | Regulatory Records. Nanomerics and Virpax each shall maintain, or cause to be maintained, records of its respective activities under the Program in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of its respective activities under the Program, which shall record only such activities and shall not include or be commingled with records of activities outside the scope of this Agreement, and which shall be retained by such Party for at least five (5) years after the termination of this Agreement, or for such longer period as may be required by Applicable Law. Each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records. |
5. | Management of the Program |
5.1 | Responsibilities of JRC. The Parties shall establish a Joint Research Committee (the “JRC”) to oversee the initiation, planning and performance of the activities under the Program. In particular, the responsibilities of the JRC shall include: (a) establishing prioritisation criteria for specific components under the Program; (b) determining within thirty (30) days of the completion of each stage of the Program whether the completion thereof has been successful and deciding whether or not to continue the Program into the next stage (i.e., making “stop/go decisions”); (c) monitoring workflow and overall Program progress; (d) ensuring timely and appropriate collaboration in the filing of Patent applications; (e) assigning tasks and responsibilities taking into account each Party’s respective specific capabilities and expertise in order to avoid duplication and enhance efficiency and synergies; (f) monitoring timely execution of the Program; and (g) reviewing and proposing to the Parties any amendments to Program. |
5.2 | Formation of JRC. The JRC shall consist of up to six (6) members with the requisite experience and seniority to enable them to make decisions on behalf of the Parties with respect to the Program, with equal numbers appointed by each Party, which shall include a Co-Chair to be designated by each Party. Each Party shall have the right to replace its respective JRC representatives upon written notice to the other Party, provided that any such substitute representative shall have substantially the equivalent experience and seniority as the representative that such person replaces. |
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5.3 | Disputes. The JRC shall endeavour to reach consensus on all matters brought before it with each Party having a single vote, irrespective of the number of representatives actually in attendance at a meeting; provided, however, that in the event the JRC is unable to resolve an outstanding matter before it, such matter shall be resolved in good faith by the Parties’ CEOs. Any final decision mutually agreed to by the CEOs of the Parties shall be in writing and shall be conclusive and binding on the Parties. If such resolution is unattainable by the CEOs within thirty (30) days from the date the matter in dispute is first brought to their attention, and this occurs after start of clinical trials hereunder in regard of a Licensed Product, the dispute shall be resolved in accordance with Virpax’s position (except in the case of disputes relating to whether payment is due Nanomerics under this Agreement, which shall be resolved in accordance with Article 17). Any dispute resolution that is unattainable by the CEOs prior to start of such clinical trials shall be resolved in accordance with Article 17. |
5.4 | Meetings. The JRC shall meet quarterly and more frequently when required. The meetings will be held in person or by teleconference or videoconference. A quorum of the JRC shall exist whenever there is present at a meeting each of the Co-Chairs or their respective designees. In addition, the JRC may act without a formal meeting by a written memorandum signed by the Co-Chairs of the JRC. Whenever any action by the JRC is required hereunder during a time period in which the JRC is not scheduled to meet, either Co-Chair shall have the right to call a special meeting or the Co-Chairs may cause the JRC to take the action without a meeting in the applicable time period. Any such additional meetings shall be held at places and on dates selected by the |
Co-Chairs.
5.5 | Expenses. Nanomerics and Virpax each shall bear all expenses of its JRC members related to such members’ participation on the JRC and attendance at JRC meetings. |
5.6 | Minutes. The JRC shall keep accurate minutes of its deliberations, which minutes shall record all proposed decisions and all actions recommended or taken and confirmation of any Program Milestones that have been reached. The Parties, on an alternating basis, shall prepare and circulate the draft minutes. Draft minutes shall be edited by the Co-Chairs and shall be issued in final form only with the approval and agreement of the Co- Chairs. |
5.7 | Dissolution of JRC. Following the expiration of the Collaboration Term the JRC shall be dissolved and Nanomerics shall provide Virpax with consultation services as Virpax may reasonably request during the reminder of the Term, including by making Nanomerics’ employees, consultants and other scientific staff available upon reasonable notice during normal business hours to consult with Virpax, its Affiliates or Sub- licensees on issues arising in connection with Exploitation of the Licensed Products. Such services shall be provided on reasonable terms agreed in good faith by the Parties. |
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6. | Ownership of Results from the Program |
6.1 | Virpax shall exclusively own all the Virpax Results, and Nanomerics shall exclusively own all the Nanomerics Results. Each Party shall promptly disclose to the other in writing the development, making, conception or reduction to practice of any Results. |
6.2 | Virpax hereby grants to Nanomerics the non-exclusive, perpetual, royalty free right and licence to use those Virpax Results referable specifically to the Products for regulatory purposes and uses with respect only to products (other than the Products) which comply with Nanomerics’ non-compete obligations as specified in clause 3.2.2. |
6.3 | Nanomerics shall, and does hereby, assign, and shall cause its Affiliates and its and their employees and agents, as applicable, to so assign, to Virpax, without additional compensation, such right, title and interest in and to any Virpax Results. Virpax shall, and does hereby, assign, and shall cause its Affiliates and its and their employees and agents, as applicable, to so assign, to Nanomerics, without compensation, such right, title and interest in and to any Nanomerics Results. Assignment and transfer of all such Results shall occur instantly and automatically and shall not require any further deeds or documents to be exchanged between the Parties. |
7. | Consideration |
7.1 | Total Obligation. The milestone and royalty payments payable by Virpax to Nanomerics pursuant to this Article 7 represent all of Virpax’s financial obligations to Nanomerics under this Agreement. |
7.2 | Program Milestones. Upon achievement of each milestone specified below (each a “Program Milestone”), Virpax shall, within the timescale specified, make the corresponding non-refundable payment to Nanomerics, as follows: |
7.2.1. | a payment of U.S.$ [**] within [**] days following the Funding Completion Date; |
7.2.2. | a payment of U.S.$ [**] within [**] days following completion of the first Phase II Clinical Trial with respect to a Licensed Product in the Territory; and |
7.2.3. | a payment of U.S.$ [**] within [**] days following first receipt by Virpax of an NDA approval for a Licensed Product in the USA. |
7.3 | Commercial Milestones. Upon achievement of each milestone specified below (each a “Commercial Milestone”), Virpax shall, within the timescale specified, make the corresponding non-refundable payment to Nanomerics, as follows: |
7.3.1. | a payment of US$ [**] within [**] days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales exceeds US$ fifty million (50,000,000); |
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7.3.2. | a payment of US$ [**] within [**] days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales exceeds US$ one hundred million (100,000,000); |
7.3.3. | a payment of US$ [**] within [**] days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales exceeds US$ three hundred million (300,000,000); |
7.3.4. | a payment of US$ [**] within [**] days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales exceeds US$ five hundred million (500,000,000); and |
7.3.5. | a payment of US$ [**] within [**] days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales exceeds US$ eight hundred million (800,000,000). |
While each Program Milestone and Commercial Milestone is payable once only, more than one Commercial Milestone may be payable with respect to Annual Net Sales achieved in the same Calendar Year. For example, if in Calendar Year “A” Annual Net Sales exceed US$ three hundred million (300,000,000) and in all previous Calendar Years, Annual Net Sales had been less than US$ fifty million (50,000,000) and so no Commercial Milestones had previously been paid, in Calendar Year A, all three Commercial Milestones pursuant to clauses 7.3.1, 7.3.2 and 7.3.3 totalling US$ [**] would be payable, with Annual Net Sales of US$ fifty million (50,000,000), US$ one hundred million (100,000,000) and US$ three hundred million (300,000,000) all having been first exceeded in that Calendar Year A.
7.4 | Upfront and Milestone Payments by Sublicensee. Within thirty (30) days of receipt by Virpax of: |
7.4.1. | any Third Party Sublicense Payment, Virpax shall pay to Nanomerics a non- refundable amount, equal to [**] of the net receipts of any such payment excluding any Indirect Taxes; |
7.4.2. | any other consideration from a Third Party which is not referable to any services to be provided by Virpax, and which has been made specifically because of Virpax’s rights to the Licensed Patents and Licensed Products, but not with the predominant purpose of being used in the development of Licensed Products (for example, but not by way of limitation, any consideration where a consequence of the payment of which includes any preferential treatment of a Third Party with respect to Licensed Products, whether by way of price, exclusivity or otherwise), Virpax shall pay to Nanomerics a non-refundable amount equal to [**] of the value of any such consideration (excluding any Indirect Taxes). |
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7.5 | Each of the Program Milestones and Commercial Milestones set forth above shall be payable only once under this Agreement. Further, in the event that Virpax discontinues the Exploitation of a given Licensed Product in favour of another Licensed Product, any milestones paid to Nanomerics with respect to such first Licensed Product shall be credited against the equivalent milestones, if any, due with respect to such subsequent Licensed Product. |
7.6 | Royalties. In addition to the foregoing payments, Virpax shall, subject to Sections 7.7 and 7.8, pay Nanomerics a royalty of [**] of the Annual Net Sales of Licensed Product in the Territory. |
7.7 | Combination Products. With respect to Combination Products, the Annual Net Sales used for the calculation of the royalties under Section 7.6 shall be determined as follows: |
A A + B |
x | Net Sales of the Combination Product, where: |
A = | standard sales price of the Product (adjusted pro rata for quantity), containing the Compound as the sole active ingredient as the Combination Product in question, in the given country. |
B = | standard sales price of the ready-for-sale form of a product (adjusted pro rata for quantity) containing the other therapeutically active ingredient(s) that is contained in the Combination Product in question, in the given country. |
7.8 | Reduction of Royalty. |
7.8.1. | Royalty Stacking. If, during the Term, Virpax enters into an agreement with a Third Party in order to obtain a licence under a patent right of a Third Party that is necessary or desirable for Virpax, its Affiliates or any sublicensee to Exploit any Licensed Product (other than with respect to the use as part of a Licensed Product of a delivery device other than the Device, for which the cost shall be solely Virpax’s responsibility), then, upon entry into any such agreement and thereafter during the remainder of the period during which Virpax owes royalties to Nanomerics hereunder, the amounts payable under Article 7.6 hereof shall be reduced by [**] of all amounts payable by or on behalf of Virpax to such Third Party in connection with obtaining such rights; provided however, that in no event shall such amounts payable to Nanomerics be reduced as a result of this Section 7.8 by more than [**] of the royalties under Article 7.6 otherwise due to Nanomerics in a particular Calendar Quarter. For the purposes of this Section 7.8.1, the Parties’ respective alliance managers shall endeavour to agree in good faith whether a Third Party licence is “necessary” or “desirable”. A Third Party licence which results in an objectively demonstrable and material (relative to the existing value) increase in commercial value of the Product, the Compound, and/or its or their Exploitation, and which does not have a demonstrable materially adverse effect on either of the Parties, shall be deemed necessary or desirable. Should the Parties fail to agree whether any Third Party licence: (a) meets the criteria for being deemed necessary or desirable; or (b) is in fact necessary or desirable; such failure to agree shall be referred for resolution in accordance with Article 17. |
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7.8.2. | Maximum Amount of Royalty Reduction. In no event shall the royalties payable to Nanomerics under Article 7 be reduced by more than [**] in any Calendar Quarter as a result of the reductions set forth in this Section 7.8. |
7.9 | Royalty Term. Virpax’s obligation to pay royalties shall commence, on a country-by-country basis, with respect to each separate Licensed Product, on the date of First Commercial Sale of such Licensed Product in such country. The obligation shall expire, on a country-by-country basis, with respect to each separate Licensed Product, on the latest to occur of (a) [**] of the First Commercial Sale of the first Licensed Product in such country; (b) the expiration date in such country of the last to expire of any Valid Claim; and, (c) the date upon which a Generic Product has been on the market in such country for a period of no fewer than ninety (90) days. |
7.10 | Sales Subject to Royalties. Sales between Virpax and its Affiliates shall not be subject to royalties hereunder. Royalties shall be calculated on Virpax’s and its Affiliates’ and it and their Sub-licensees’ sale of the Licensed Products to a Third Party. Royalties shall be payable only once for any given batch of the Licensed Products. For purposes of determining Net Sales, the Licensed Product shall be deemed to be sold upon Virpax, its Affiliates or Sub-licensees receipt of payment for the Licensed Product and a “sale” shall not include, and no royalties shall be payable on, transfers by Virpax, its Affiliates or Sublicensees of free samples of Licensed Products or clinical trial materials containing Compound or transfers of Licensed Products to patients under any Virpax, Affiliate or Sub-licensee’s patient assistance programme or other transfers or dispositions for charitable, promotional, pre-clinical, clinical, manufacturing, testing or qualification, regulatory or governmental purposes. |
7.11 | Royalty Payments. The royalties shall be calculated quarterly as of the last day of March, June, September and December respectively, for the Calendar Quarter ending on that date. Virpax shall pay the royalties in conjunction with the delivery of a written report to Nanomerics within forty-five (45) days after the end of each Calendar Quarter that shows, with respect to each country and each Licensed Product, the sales volume and Net Sales during such Calendar Quarter. |
7.12 | Currency; Mode of Payment. |
7.12.1. | Currency. All payments required under this Agreement shall be made in U.S. Dollars. For the purpose of computing the Net Sales of Products sold in a currency other than U.S. Dollars, such currency shall be converted from local currency to U.S. Dollars by Virpax in accordance with the rates of exchange for the relevant month for converting such other currency into U.S. Dollars used by Virpax’s internal accounting systems, which are independently audited on an annual basis. |
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7.12.2. | Mode of Payment. All payments set forth in this Article 7 shall be remitted by wire transfer to the following bank account of Nanomerics or such other account as Nanomerics may designate in writing to Virpax: |
BANK ACCOUNT
[**]
7.13 | Records Retention; Audit. |
7.13.1. | Until the sixth (6th) anniversary of January 31 of the Calendar Year in which a Product is sold, Virpax shall keep or cause to be kept accurate records or books of account in accordance with applicable generally accepted accounting principles showing the information that is necessary for the accurate determination of the royalties due hereunder with respect to the sale of such Product. |
7.13.2. | Upon the written request of Nanomerics, Virpax shall permit a certified public accountant or a person possessing similar professional status and associated with an independent accounting firm acceptable to the Parties to inspect during regular business hours and no more than once a year and going back no more than three (3) years preceding the current year, all or any part of Virpax’s records and books necessary to check the accuracy of the royalties paid. The accounting firm shall enter into appropriate obligations with Virpax to treat all information it receives during its inspection in confidence, except for the purposes of presenting the findings of its audit. The accounting firm shall disclose to Nanomerics and Virpax only whether the royalty reports are correct and details concerning any discrepancies, but no other information shall be disclosed to Nanomerics. The charges of the accounting firm shall be paid by Nanomerics, except that if the royalties have been understated by more than [**], the charges shall be paid by Virpax. Virpax shall make good any underpayment of royalties within forty-five (45) days of the disclosure of the accounting firm’s report. |
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8. | Taxes |
8.1 | General The royalties, milestones and other amounts payable by Virpax to Nanomerics pursuant to this Agreement (“Payments”) shall not be reduced on account of any taxes unless required by Applicable Law. Nanomerics alone shall be responsible for paying any and all taxes (other than withholding taxes required by Applicable Law to be paid by Virpax) levied on account of, or measured in whole or in part by reference to, any Payments it receives hereunder. Virpax shall deduct or withhold from the Payments any taxes that it is required by Applicable Law to deduct or withhold. Notwithstanding the foregoing, if Nanomerics is entitled under any applicable tax treaty to a reduction of rate of, or the elimination of, applicable withholding tax, it may deliver to Virpax or the appropriate governmental authority (with the assistance of Virpax to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve Virpax of its obligation to withhold tax, and Virpax shall apply the reduced rate of withholding, or dispense with withholding, as the case may be, provided that Virpax has received evidence, in a form satisfactory to Virpax, of Nanomerics’ delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least fifteen (15) days prior to the time that the Payments are due. If, in accordance with the foregoing, Virpax withholds any amount, it shall pay to Nanomerics the balance when due, make timely payment to the proper taxing authority of the withheld amount, and send to Nanomerics proof of such payment within sixty (60) days following that payment. For purposes of this Agreement, the stated amount of the Payments payable by Virpax shall include any sales tax that Nanomerics may be required to collect. |
8.2 | Indirect Taxes. All Payments are inclusive of Indirect Taxes. If any Indirect Taxes are chargeable in respect of any Payments, Virpax shall pay such Indirect Taxes at the applicable rate in respect of any such Payments following the receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by Nanomerics in respect of those Payments, such Indirect Taxes to be payable on the due date of the payment of the Payments to which such Indirect Taxes relate. |
9. | Confidentiality and Non-Disclosure |
9.1 | Virpax Information. Nanomerics recognises that by reason of, inter alia, Virpax’s status as an exclusive licensee or owner of the Virpax Results pursuant to Article 6, Virpax has an interest in Nanomerics’ retention in confidence of certain information, including proprietary information of Virpax, that is known to Nanomerics and without regard to whether such information was originally discovered, generated, or recorded by Virpax or Nanomerics. Accordingly, until the expiration of Virpax’s exclusive position with respect to a Product under Section 7.9, Nanomerics shall, and shall cause its Affiliates and their respective officers, directors, employees and agents to, keep completely confidential, and not publish or otherwise disclose, and not use directly or indirectly for any purpose (a) the Results and (b) any other Information, including any Confidential Information of Nanomerics or Virpax, relating to (i) any Licensed Product, including the Compound, any IP Protection Rights with respect thereto, and any Regulatory Documentation, including Health Registration Approvals, with respect thereto or (ii) the Exploitation of such Product, including development, sales or marketing plans therefor (collectively the “Virpax Information”); except to the extent (w) the Virpax Information is in the public domain through no fault of Nanomerics, its Affiliates or any of their respective officers, directors, employees and agents, (x) such disclosure or use would be expressly permitted under Section 9.3, or (y) such disclosure or use is otherwise expressly permitted by the terms of this Agreement. For clarification, the disclosure by Nanomerics to Virpax or by Virpax to Nanomerics of Virpax Information shall not cause such information to cease to be subject to the provisions of this Section 9.1. In the event this Agreement is terminated in its entirety by Virpax pursuant to Section 13.3 or by Nanomerics pursuant to Section 13.4, this Section 9.1 shall have no continuing force or effect and Virpax Information shall be deemed to be Confidential Information of Virpax or Nanomerics, as applicable, for purposes of the surviving provisions of this Agreement. |
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9.2 | Confidentiality Generally. Subject to Section 9.1, at all times during the term of this Agreement and for a period of 5 years following termination or expiration hereof, each Party (the “Receiving Party”) shall, and shall cause its officers, directors, employees, agents, Affiliates and Sublicensees to, keep confidential and not publish or otherwise disclose and not use, directly or indirectly, for any purpose, any Confidential Information provided to it by the other Party (the “Disclosing Party”), except to the extent such disclosure or use is otherwise expressly permitted by the terms of this Agreement or is reasonably necessary for the performance of this Agreement. For the avoidance of doubt, the treatment of Confidential Information that is also Virpax Information is governed by the terms of Section 9.1, while the treatment of Confidential Information that is not also Virpax Information is governed by this Section 9.2. |
9.3 | Permitted Disclosures. Nanomerics may disclose Virpax Information and each Party may disclose Confidential Information (other than Virpax Information) to the extent that such disclosure is: |
9.3.1. | made in response to a valid order of a court of competent jurisdiction or other competent authority; provided, however, that the Receiving Party shall first have given notice to the Disclosing Party and given the Disclosing Party a reasonable opportunity to quash any such order or obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or authority or, if disclosed, be used only for the purpose for which the order was issued; and provided further that if such order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information that is legally required to be disclosed in response to such court or governmental order; |
9.3.2. | made by or on behalf of by Virpax, its Affiliates or sublicensees to a Health Authority as may be necessary or useful in connection with any filing, application or request for a Health Registration Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available; |
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9.3.3. | made by a Party to a patent authority as may be necessary or useful for purposes of obtaining or enforcing a Patent (consistent with the terms and conditions of Article 10); provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available; or |
9.3.4. | otherwise required by law; provided, however, that if Nanomerics is required to disclose Virpax Information, or either Party is required to disclose Confidential Information of the other Party, the Party required to make the disclosure shall (a) provide to the other Party reasonable advance notice of and an opportunity to comment on any such required disclosure, (b) if requested by the other Party, seek confidential treatment with respect to any such disclosure to the extent available, and (c) use good faith efforts to incorporate the comments of the other Party in any such disclosure or request for confidential treatment; or |
9.3.5. | made by Virpax or its Affiliates to Third Parties as may be necessary or useful in connection with the Exploitation of the Compound or Licensed Products as contemplated by this Agreement, including subcontracting or sublicensing transactions in connection therewith. |
Notwithstanding the foregoing, in the event that either Party is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body to disclose this Agreement, in whole or in part, the Parties shall reasonably agree on a redacted version of this Agreement as necessary to protect the Confidential Information of the Parties prior to making such disclosure.
9.4 | Exclusions. Notwithstanding the foregoing, Confidential Information shall not include any information that: |
9.4.1. | is or hereafter becomes part of the public domain by public use, publication, general knowledge or the like through no wrongful act, fault or negligence on the part of the Receiving Party; |
9.4.2. | can be demonstrated by documentation or other competent proof to have been in the Receiving Party’s or its Affiliates’ possession prior to disclosure by the Disclosing Party; |
9.4.3. | is subsequently received by the Receiving Party or its Affiliates from a Third Party or a Sublicensee who is not bound by any obligation of confidentiality with respect to said information; |
9.4.4. | is generally made available to Third Parties by the Disclosing Party without restriction on disclosure; or |
9.4.5. | is independently developed by or for the Receiving Party or its Affiliates without reference to the Disclosing Party’s Confidential Information. |
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9.5 | Publications and Presentations. The Parties acknowledge that scientific publications must be strictly monitored to prevent any adverse effect from premature publication of results of the research and development activities hereunder. Accordingly, no fewer than thirty days prior to the expected date of publication or presentation, Nanomerics shall provide to Virpax, any material related to the Program, the Virpax Results or the Exploitation of Licensed Products that Nanomerics wishes to publish or present, and Nanomerics shall not publish, present or otherwise disclose any such material without the prior written consent of Virpax, which shall not be unreasonably withheld nor delayed. Each Party’s contribution to such Results shall be duly recognised in such publications or presentations. |
9.6 | Use of Name/Publicity. |
9.6.1. | Neither Party shall mention or otherwise use the name, insignia, symbol, trademark, trade name or logotype of the other Party or its Affiliates in any publication, press release, promotional material or other form of publicity without the prior written consent of the other Party. The restrictions imposed by this Section 9.6.1 shall not prohibit either Party from making any disclosure identifying the other Party that is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body, provided that any such disclosure shall be governed by this Article 9. Further, the restrictions imposed on each Party under this Section 9.6.1 are not intended, and shall not be construed, to prohibit a Party from identifying the other Party in its internal business communications, provided that any Confidential Information or Virpax Information in such communications remains subject to this Article 9. |
9.6.2. | Notwithstanding the foregoing, Virpax, its Affiliates and Sublicensees shall have the right to use the name of Nanomerics and its Affiliates to the extent necessary or useful in connection with the Exploitation of the Compound and Products as contemplated by this Agreement, including subcontracting and sublicensing transactions in connection therewith. |
9.6.3. | Neither Party shall issue any press release or make any other public announcement or statement concerning this Agreement or the transactions covered by it without the prior written approval of the other Party, except that each Party (after consultation with counsel) may make such announcements and disclosures, if any, as may be required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body, or in connection with a public offering of securities or any filing with the U.S. Securities and Exchange Commission or a foreign equivalent. |
10. | Licensed Patents; Patent Prosecution and Defence; Trademarks |
10.1 | Licensed Patents Should at any time during the Term, Nanomerics or its Affiliates own or otherwise Control any Patents that are necessary or useful for the Exploitation of the Compound, the Device, the Technology or the Product, such Patents shall be deemed Licensed Patents for the purposes of his Agremeent and shall be added to Schedule 4. |
10.2 | Prosecution. Each Party shall appoint a patent co-ordinator for the purposes of coordinating their activities under this Section 10. Nanomerics shall have the first right, but not the obligation, at its sole cost and expense, through counsel of its choosing, to obtain, prosecute (including any interferences, reissue proceedings and re- examinations) and maintain all Licensed Patents throughout the world. |
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10.3 | Nanomerics shall obtain, prosecute and maintain the Licensed Patents in those countries listed in Schedule 4 (which in any event shall include the Major Markets) and shall have the first right to determine (in consultation with Virpax) in which other countries to obtain, prosecute and maintain the Licensed Patents. If Nanomerics declines, or otherwise fails to diligently pursue such action, to obtain prosecute or maintain any Licensed Patent in any country, Virpax shall have the right, providing that to do so would not result in a demonstrably material adverse effect on the Exploitation of Licensed Products, but not the obligation, to take such action through counsel of its choosing, with respect to such Licensed Patent in such country. The reasonable cost and expense of such action shall be borne equally by the Parties, and Nanomerics’ contribution to such cost and expense shall be deducted by Virpax from any Royalties payable with respect to such Licensed Patent in such country. |
10.4 | Virpax shall have the right to request that Nanomerics obtain, prosecute and maintain a Licensed Patent in a particular country. If Nanomerics declines, or otherwise fails, to initiate any such requested action with respect to a Licensed Patent within sixty (60) days (or, if after initiating any requested action, Nanomerics at any time thereafter fails to diligently pursue such action), Virpax shall have the right, providing that to do so would not result in a demonstrably material adverse effect on the Exploitation of Licensed Products, but not the obligation, to take such action, through counsel of its choosing, with respect to such Licensed Patent. The reasonable cost and expense of such action shall be borne equally by the Parties, and Nanomerics’ contribution to such cost and expense shall be deducted by Virpax from any Royalties payable with respect to such Licensed Patent in such country. |
10.5 | Obtaining, Prosecuting and Maintaining Patents. |
10.5.1. | The Party obtaining, prosecuting or maintaining Licensed Patents pursuant to Section 10.1 (the “Prosecuting Party”) shall keep the other Party (the “Non-Prosecuting Party”) advised as to material developments and all steps to be taken with respect to such Patents and shall furnish the Non-Prosecuting Party with copies of such applications for Patents, amendments thereto and other related correspondence to and from patent offices, and, to the extent reasonably practicable, permit the Non-Prosecuting Party an opportunity to offer its comments thereon before the Prosecuting Party makes a submission to a patent office which could materially affect the scope or validity of the patent coverage that may result. The Non-Prosecuting Party shall offer its comments, if any, promptly, but in no event shall the Prosecuting Party be required to delay any such submission. The Non-Prosecuting Party shall, and shall cause its Affiliates to, reasonably assist and cooperate with the Prosecuting Party in obtaining, prosecuting and maintaining Licensed Patents. |
10.5.2. | Nanomerics shall (a) provide to Virpax all Information, including a correct and complete list of Licensed Patents covering the Licenced Product(s) or otherwise necessary or reasonably useful to enable Virpax make filings with Health Authorities with respect to the Licensed Patents, including as required or allowed in connection with (i) in the United States, the FDA’s Orange Book and (ii) outside the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents and (b) cooperate with Virpax’s reasonable requests in connection therewith, including meeting any submission deadlines, in each case, to extent required or permitted by Applicable Law. |
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10.6 | Enforcement. In the event that either Party has cause to believe that a Third Party may be infringing any of the Licensed Patents, such Party shall promptly notify the other Party in writing, identifying the alleged infringer and the alleged infringement complained of and furnishing the information upon which such determination is based. Other than with respect to a Third Party’s Abbreviated New Drug Application (ANDA) making a Paragraph IV filing in its certification against any of the Licensed Patents as may be listed in the Orange Book as contemplated by Section 10.5.2 (“Paragraph IV Filing”), Nanomerics shall have the first right, in its sole discretion, but after notifying Virpax (if time permits), through counsel of its choosing, to take any measures it deems appropriate to stop such infringing activities by such Third Party or to grant to the infringing Third Party adequate rights and licences necessary for continuing such activities. Upon reasonable request by Nanomerics, Virpax shall give Nanomerics all reasonable information and assistance, at Nanomerics expense, including allowing Nanomerics access to Virpax’ files and documents and to Virpax’ personnel who may have possession of relevant information and, if necessary for Nanomerics to prosecute any legal action, joining in the legal action as a party and Nanomerics shall reimburse Virpax for reasonable costs and expenses incurred by Virpax with respect to such joinder. Virpax shall use its best efforts to obtain any consents required by Third Parties owning Patents licensed to Virpax in order for Nanomerics to remove such infringement. Should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing, to take any measures it deems appropriate to stop such infringing activities by such Third Party or to grant to the infringing Third Party adequate rights and licences necessary for continuing such activities. With respect to any Paragraph IV Filing, Virpax shall be entitled, in its sole discretion, through counsel of its choosing, to take any measures it deems appropriate to challenge such action. Upon reasonable request by Virpax, Nanomerics shall give Virpax all reasonable information and assistance, including allowing Virpax access to Nanomerics’ files and documents and to Nanomerics’ personnel who may have possession of relevant information and, if necessary for Virpax to prosecute any legal action, joining in the legal action as a party and Virpax shall reimburse Nanomerics for reasonable costs and expenses incurred by Nanomerics with respect to such joinder. Nanomerics shall use its best efforts to obtain any consents required by Third Parties owning Patents licensed to Nanomerics in order for Virpax to remove such infringement. |
10.7 | Costs and Recovery. The Party pursing any action under Section 10.6 shall bear its own costs and expenses related thereto. Any amounts recovered by either Party pursuant to Section 10.6 , whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by or paid to Virpax and, to the extent attributable to lost sales of Licensed Products, being deemed [**] for which Virpax shall pay Nanomerics any Royalties that may be owed with respect to such [**] under Sections 7.6 or 7.7. |
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10.8 | Third Party Rights, Third Party Litigation. |
10.8.1. | Third Party Rights. If, in the opinion of Virpax, the Exploitation of Licensed Products by Virpax, its Affiliates or any of its sublicensees infringes or misappropriates any Patent or any Intellectual Property Right of a Third Party in any country, such that Virpax or any of its Affiliates, Distributors, customers or Sublicensees cannot Exploit the Licensed Products in such country without infringing the Patent or Intellectual Property Right of such Third Party, then, Nanomerics shall have the first right, but not the obligation, through counsel of its choosing, to negotiate and obtain a licence from such Third Party as necessary for Virpax and its Affiliates or sublicensees to Exploit the Licensed Products in such country. Should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing to negotiate and obtain a licence from such Third Party as necessary for Virpax and its Affiliates or sublicensees to Exploit the Licensed Products in such country. |
10.8.2. | Third Party Litigation. In the event of any actual or threatened suit against Nanomerics, Virpax or its Affiliates, Sublicensees or customers alleging that the Exploitation of Licensed Products, or that the Exploitation of a Licensed Patent or Licensed Know-How or any part thereof by or on behalf of Virpax under this Agreement, infringes the Patent or other intellectual property rights of any Person (an “Infringement Suit”), the Party first becoming aware of such Infringement Suit shall promptly give written notice to the other Party. Nanomerics shall have the first right, but not the obligation, through counsel of its choosing, to assume direction and control of the defence of claims arising therefrom (including the right to settle such claims in its sole discretion). Should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing to assume direction and control of the defence of claims arising therefrom (including the right to settle such claims in its sole discretion). |
10.9 | Cooperation. The Party not defending an action or claim pursuant to Section 10.6 (the “Non-Defending Party”) shall provide to the other Party (the “Defending Party”) all reasonable assistance requested by the Defending Party in connection with any action, claim or suit under Section 10.6 , including allowing the Defending Party access to the Non-Defending Party’s files and documents and to the Non-Defending Party’s personnel who may have possession of relevant information. In particular the Non-Defending Party will promptly make available to the Defending Party, free of charge, all information in its possession or control that it is aware will assist the Defending Party in responding to any such action, claim or suit. |
10.10 | Nanomerics shall keep Virpax’s patent co-ordinator reasonably well updated on any material aspects regarding the prosecution of, and infringement of or by the Licensed Patents. The Parties shall strive to achieve consensus, through their respective patent co-ordinators, as to the jurisdictions in which prosecution is pursued, and the actions taken or to be taken with respect to infringement. Failing a consensus, any disagreements to be handled as if they are disputes of the JRC, and shall be dealt with in accordance with Section 5.3. |
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10.11 | Trademarks. Virpax shall have the sole right to select the Trademarks for the marketing and sale of the Licensed Products in the Territory. Virpax shall own such Trademarks and all IP Protection Rights and other rights and goodwill with respect thereto. Nanomerics shall not, and shall not permit its Affiliates to, use any trademark that is the same as or confusingly similar to, the Trademarks. |
11. | Warranties |
11.1 | Each Party warrants to the other that: |
11.1.1. | it has full legal power to extend the rights and licences granted to the other under this Agreement and perform its obligations hereunder; |
11.1.2. | it has full power and authority to enter into this Agreement and has taken all necessary action on its part required to authorise the execution and delivery of this Agreement; |
11.1.3. | neither it nor any researcher engaged by it, in any capacity, in the Program has been debarred or is subject to debarment or has otherwise been disqualified or suspended from performing scientific or clinical investigations or otherwise subjected to any restrictions or sanctions by the FDA or any other governmental or regulatory authority or professional body with respect to the performance of scientific or clinical investigations. |
11.2 | Nanomerics warrants that: |
11.2.1. | the execution, delivery and performance of this Agreement will not result in a violation of, or be in material conflict with, or constitute a material default, under any agreement in existence as of the Effective Date between Nanomerics and Third Parties and that it is not party to any other agreements that limits Virpax’s rights under this Agreement. Nanomerics will not assign, transfer, convey or otherwise encumber its rights to the Licensed Patents or Licensed Know-How and shall not use the Licensed Patents, Licensed Know-How or Licensed Improvements itself or grant any right, title or interest to any Person that is inconsistent with the exclusive licence granted herein or Virpax’s other rights under this Agreement. |
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11.2.2. | Nanomerics is the sole and exclusive owner of the entire right, title and interest in the Patents listed on Schedule 4(A) (the “Owned Patents”) and the Licensed Compound, Licensed Know-How and the Technology, and is entitled to grant the licences specified herein. Nanomerics is the exclusive licensee of the Device in the Device Field listed on Schedule 4(B) (the “In-Licensed Patents”) and the Licensed Device Know-How is entitled to grant the licences specified herein. Except as provided in Schedule 4(B), Nanomerics has no Knowledge that such rights are subject to any encumbrance, lien or claim of ownership by any Third Party. A list of the Owned Patents and the In-Licensed Patents and a copy of all licence and other agreements regarding the In-Licensed Patents (the “In- Licence Agreements”) (redacted as to commercially sensitive or confidential provisions), as amended to the date hereof, have been provided to Virpax prior to the Effective Date. The Owned Patents and the In-Licensed Patents constitute all of the Licensed Patents as of the Effective Date. Nanomerics shall promptly provide Virpax with notice of any alleged, threatened or actual breach of any In-Licence Agreement. As of the Effective Date, none of Nanomerics, its Affiliates and, to their Knowledge, any Third Party is in breach of any In-Licence Agreement. |
11.2.3. | To Nanomerics’ and its Affiliates’ Knowledge, the Licensed Patents: (i) comprise all of the Patents that Nanomerics or its Affiliates own or otherwise Control, as of the Effective Date that are necessary or useful for the Exploitation of the Compound, the Device, the Technology or the Product, (ii) are being diligently procured from the respective Patent Offices in accordance with all Applicable Law; and (iii) have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for payment. |
11.2.4. | As of the Effective Date, to Nanomerics’ and its Affiliates’ Knowledge, there is no actual infringement or threatened infringement of the Licensed Patents, Licensed Know-How or the Regulatory Documentation by any Person. |
11.2.5. | To Nanomerics’ and its Affiliates’ Knowledge, Virpax’s Exploitation of the Regulatory Documentation, the Licensed Patents or the Licensed Know-How hereunder, so far as Nanomerics is aware of any such intended Exploitation, will not infringe any Patent or other intellectual property or proprietary right of any Person. |
11.2.6. | The Licensed Patents existing as of the Effective Date are subsisting and are not invalid or unenforceable, in whole or in part. The Licensed Know-How existing as of the Effective Date is subsisting. The conception, development and reduction to practice of the Regulatory Documentation, the Licensed Patents and Licensed Know-How existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person. There are no claims, judgments or settlements against or amounts with respect thereto owed by Nanomerics or any of its Affiliates relating to the Regulatory Documentation, the Licensed Patents or the Licensed Know-How. No claim or litigation has been brought or threatened by any Person alleging, and Nanomerics has no notice of any possible claim, whether or not asserted, that (a) the Licensed Patents or the Licensed Know-How are invalid or unenforceable or (b) the Regulatory Documentation, the Licensed Patents or the Licensed Know-How or the disclosing, copying, making, assigning, licensing or Exploiting of the Regulatory Documentation, the Licensed Patents or the Licensed Know-How, or products and services embodying the Regulatory Documentation, or the Compound, Licensed Products violates, infringes or otherwise conflicts or interferes with any intellectual property or proprietary right of any Person. |
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12. | Indemnification and Insurance |
12.1 | Indemnification of Nanomerics. In addition to any other remedy available to Nanomerics, Virpax shall indemnify, defend and hold harmless Nanomerics, its Affiliates and its and their respective directors, officers, agents and employees in full and on demand, from and against any and all Losses incurred by them to the extent resulting from or arising out or in connection with any claims made or demands, causes of action, suits brought by a Sublicensee or Third Party (collectively, “Third Party Claims”) against Nanomerics, its Affiliates or their respective directors, officers, agents or employees (a) that arise or result from any intentional misconduct or gross negligence on the part of Virpax or its Affiliates in performing any activity contemplated by this Agreement or the breach of any provision of this Agreement by Virpax except for any Loss for which Nanomerics has an obligation to indemnify Virpax and its Affiliates pursuant to Section 12.2, as to which Loss each Party shall indemnify the other to the extent of their respective liability for such Loss, or (b) that allege that the claimant has suffered personal injury or death as a result of use of the Products, except to the extent such Losses arise as a result of the negligence, fraud, wilful misconduct or wrongful act of the Indemnified Party, its Affiliates or its or their respective officers, directors, partners, shareholders, employees or agents. |
12.2 | Indemnification of Virpax. In addition to any other remedy available to Virpax, Nanomerics shall indemnify, defend and hold harmless Virpax, its Affiliates, Sub-licensees and its and their respective directors, officers, agents and employees in full and on demand, from and against any and all Losses incurred by them to the extent resulting from or arising out of or in connection with any Third Party Claims against Virpax, its Affiliates or their respective directors, officers, agents or employees that (a) arise or result from any intentional misconduct or gross negligence on the part of Nanomerics or its Affiliates in performing any activity contemplated by this Agreement, or the breach of any provision of this Agreement by Nanomerics, except for any Losses for which Virpax has an obligation to indemnify Nanomerics and its Affiliates pursuant to Section 12.1, as to which Losses each Party shall indemnify the other to the extent of their respective liability for such Losses or (b) that allege that the claimant has suffered personal injury or death as a result of the Exploitation of any Products by Nanomerics, its Affiliates or licensees prior to or after the Term. |
12.3 | Indemnification Procedure. Should the Indemnified Party intend to claim indemnification hereunder from the Indemnifying Party, the Indemnified Party shall promptly notify the Indemnifying Party in writing of any Losses in respect of which the Indemnified Party intends to claim such indemnification and the Indemnifying Party shall be entitled, but not obligated, to assume the defence of any Third Party Claims thereof with counsel selected by it. The Indemnified Party, including its Affiliates, directors, officers and employees, shall co-operate fully, at the Indemnifying Party’s expense, with the Indemnifying Party and its legal representatives in the investigation and defence of any Third Party Claim covered by this indemnification. The indemnification shall not apply to amounts paid in settlement of any Third Party Claim if such settlement is effected without the consent of the Indemnifying Party. |
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12.4 | LIMITATION ON DAMAGES. EXCEPT IN CIRCUMSTANCES OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT BY A PARTY OR ITS AFFILIATES, OR WITH RESPECT TO THIRD PARTY CLAIMS UNDER SECTION 12.1 OR 12.2, OR WITH RESPECT TO MILESTONES ROYALTIES OR OTHER PAYMENTS ACCRUED OR OWED BUT UNPAID, NO PARTY OR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS, MILESTONES OR ROYALTIES, WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARISING OUT OF (a) THE DEVELOPMENT, MANUFACTURE, USE OR SALE OF ANY PRODUCT OR COLLABORATION COMPOUND DEVELOPED, MANUFACTURED OR MARKETED HEREUNDER, OR (b) ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT. |
12.5 | Insurance. Each Party shall have and maintain such type and amounts of liability insurance programs as is normal and customary in the pharmaceutical industry generally for Persons similarly situated, and shall upon request provide the other Party with a copy of its policies of insurance in that regard, along with any amendments and revisions thereto. |
13. | Term and Termination |
13.1 | Term. This Agreement shall become effective on the Effective Date and shall continue in full force and effect, unless earlier terminated pursuant to this Article 13 or as elsewhere explicitly set forth in this Agreement, for as long as Virpax is developing or otherwise Exploiting Licensed Products for which royalties will be or are owed to Nanomerics pursuant to Article 7. |
13.2 | Collaboration Term. The Collaboration Term shall commence on the Effective Date and continue for as long as Nanomerics is required to perform activities under the Program. |
13.3 | Termination by Virpax. Virpax shall have the right in its sole discretion to terminate this Agreement in its entirety or with respect to any country (not being a Major Market, a Member State of the European Union, or China) for any reason upon one hundred and eighty (180) days’ prior written notice to Nanomerics. Upon termination, Virpax shall assign to Nanomerics all its right title and interest in Virpax Results. |
13.4 | Termination by Nanomerics. Nanomerics shall have the right in its sole discretion to terminate this Agreement in its entirety by giving Virpax thirty (30) days written notice if the Funding Completion Date has not occurred prior to 31st January 2020. |
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13.5 | Termination by either Party. |
13.5.1. | Failure to Raise Funding. Either Party may terminate this Agreement by giving the other Party thirty (30) days prior written notice if Virpax has not secured the Funding by such date(s) as set forth in the Funding Plan (“the Funding Expiry Date”). Should Nanomerics be the Party giving such notice, Virpax may: |
13.5.1.1 | respond in writing to Nanomerics on a date (“the Funding Waiver Date”) prior to the expiry of said 30 days period that it wishes to proceed under the Agreement and that it has secured sufficient funding from other sources than those identified in the Funding Plan as required to proceed with the Program, in which case Virpax shall be deemed to have fully received the Funding and Nanomerics shall not be entitled to terminate the Agreement pursuant to this Section 13.5.1; or, |
13.5.1.2 | respond in writing Nanomerics prior to the expiry of said 30 days period that it reasonably is of the opinion that the Funding will be fully received by Virpax within a reasonable period after the the Funding Expiry Date. With such written response Virpax shall provide Nanomerics with such information as is required for Nanomerics to assess the reasonableness or otherwise of Virpax’s opinion. The Parties shall meet promptly following such written response by Virpax to negotiate in good faith whether or not there should be an extension to the Funding Expiry Date, and if so how long. During such good faith negotiations, Nanomerics’ notice to terminate shall be suspended. Ten days following the commencement of such good faith negotiations, Nanomerics’ notice to terminate shall be reactivated, or, at Nanomerics’ discretion, withdrawn. |
13.5.2. | Material Breach. In the event of a material breach of this Agreement by a Party where such breach is capable of cure and such breach remains uncured for ninety (90) days after notice by the non- breaching Party specifying the breach and requiring its remedy, the non-breaching Party may terminate this Agreement immediately. If Virpax commences an action in which it challenges the validity, enforceability or scope of any of the Licensed Patents, it shall be deemed a material breach of this Agreement. |
13.5.3. | Bankruptcy. Either Party may terminate this Agreement immediately upon written notice to the other Party in the event that the other Party shall file in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an the appointment of a receiver or trustee of such other Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, or if the other Party shall propose or be a party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors. |
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13.6 | Consequences of Termination. |
13.6.1. | The expiration or termination of this Agreement shall be without prejudice to any rights or obligations of the Parties that may have accrued prior to such expiration or termination and, except as otherwise expressly provided herein, shall not limit any rights or remedies which may be available at law or otherwise. |
13.6.2. | Upon the termination or expiration of this Agreement, each Party shall, at its sole expense, promptly return to the other Party all Confidential Information and, at such other Party’s option, either destroy or return to such other Party all Provided Materials received from such other Party. Notwithstanding the foregoing, the General Counsel of each Party may retain one copy of each business document generated by such Party in connection with this Agreement for archival purposes only, and all such retained documents shall be subject to the confidentiality obligations of this Agreement. |
13.6.3. | In the event of termination by Virpax pursuant to Section 13.3 or 13.5.3 or by Nanomerics pursuant to Section 13.4, 13.5.2 or 13.5.3 Virpax shall transfer and assign to Nanomerics (a) all of its ownership in any Results specifically referable to the Compound or Licensed Products; (b) all Regulatory Documentation; and, (c) any Health Registration Approval, all free of charge. |
13.7 | Survival. The termination of this Agreement shall not relieve the Parties from performing any obligations accrued prior to the date this Agreement terminates. The provisions of this Agreement that by their nature constitute continuing obligations shall survive expiration or termination of this Agreement (including each Party’s obligations under Sections 3.5,13.4 through 13.7 and Articles 1, 2, 6, 9, 12, 17 and 24). |
14. | Force Majeure |
No liability shall result from delay in performance or non-performance, in whole or in part, by either of the Parties to this Agreement to the extent that such delay or non-performance is caused by an event of Force Majeure.
The Force Majeure Party shall within five (5) business days of becoming aware of the Force Majeure event, give written notice to the other Party stating the nature of the Force Majeure event, its anticipated duration and any action being taken to avoid or minimize its effect. Any suspension of performance shall be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party shall take all commercially reasonable steps to remedy its inability to perform.
15. | Assignment |
Except as expressly provided in this Agreement, neither Party may assign its rights or delegate its obligations under this Agreement, whether by operation of law or otherwise, in whole or in part without the prior written consent of the other Party, except that (a) either Party shall always have the right, without such consent, to perform any or all of its obligations and exercise any or all of its rights under this Agreement through any of its Affiliates, and (b) on written notice to the other Party may assign any or all of its rights and delegate any or all of its obligations hereunder to any of its Affiliates or to any successor in interest (whether by merger, acquisition, asset purchase or otherwise) to all or substantially all of the business to which this Agreement relates. Any permitted successor of a Party or any permitted assignee of all of a Party’s rights under this Agreement that has also assumed all of such Party’s obligations hereunder in writing shall, upon any such succession or assignment and assumption, be deemed to be a party to this Agreement as though named herein in substitution for the assigning Party, whereupon the assigning Party shall cease to be a party to this Agreement and shall cease to have any rights or obligations under this Agreement. All validly assigned rights of a Party shall inure to the benefit of and be enforceable by, and all validly delegated obligations of such Party shall be binding on and be enforceable against, the permitted successors and assigns of such Party. Any attempted assignment or delegation in violation of this Article 15 shall be void.
Page 32 of 43
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
16. | Severability |
To the fullest extent permitted by Applicable Law, the Parties waive any provision of law that would render any provision of this Agreement invalid, illegal or unenforceable in any respect. If any provision of this Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and shall not form part of this Agreement. To the fullest extent permitted by Applicable Law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Agreement shall remain in full force and effect, and the Parties shall use their best efforts to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with Applicable Law and achieves, as nearly as possible, the original intention of the Parties.
17. | Governing Law and Dispute Resolution |
This Agreement shall in all respects be governed by the laws of New York, USA, without reference to the conflict of law provisions. Any controversy arising out of this Agreement shall finally be settled by the rules of the Arbitration Institute of the International Chamber of Commerce. The proceedings shall take place in New York, USA, if brought by Nanomerics, and in London, England if brought by Virpax, and shall be conducted in the English language.
18. | Notices |
Any notice, request, or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement, and shall be deemed given only if hand delivered or sent by an internationally recognised overnight delivery service, costs prepaid, or by fax (with transmission confirmed), to the Party to whom notice is to be given at the following address (or at such other address such Party may have provided to the other Party in writing referencing this Article 18):
If to Nanomerics: | |
Address: | New Bridge Street House, 30-34 New Bridge Street, London, EC4V 6BJ UK |
For the attention of: | Dr Andreas Schatzlein |
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Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
19. | Relationship of the Parties |
The status of a Party under this Agreement shall be that of an independent contractor. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties or commitments on behalf of the other Party. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.
20. | Entire Agreement |
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement. This Agreement supersedes all prior agreements, whether written or oral, with respect to the subject matter of this Agreement. Each Party confirms that it is not relying on any statements, representations, warranties or covenants of any person (whether a Party to this Agreement or not) except as specifically set out in this Agreement. Nothing in this Agreement is intended to limit or exclude any liability for fraud. All Schedules and Exhibits referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. In the event of any inconsistency between any such Schedules or Exhibits and this Agreement, the terms of this Agreement shall govern.
21. | Amendment |
Any amendment or modification of this Agreement must be in writing and signed by authorised representatives of both Parties.
22. | Waiver and Non-Exclusion of Remedies |
A Party’s failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy shall not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth herein.
Page 34 of 43
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
23. | No Benefit to Third Parties |
Except for any rights and immunities granted in this Agreement to any Virpax or Nanomerics Affiliates, the provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other Persons except as otherwise expressly provided Article 15.
24. | Equitable Relief |
In the event of a breach or threatened breach of any provision of Section 3.4.2 or Article 9, Virpax shall be authorised and entitled to seek from any court of competent jurisdiction equitable relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which Virpax may be entitled in law or equity. Nothing in this Article 24 is intended, or should be construed, to limit Virpax’s right to equitable relief or any other remedy for a breach of any other provision of this Agreement.
In the event of a breach or threatened breach of any provision of Article 9, Nanomerics shall be authorised and entitled to seek from any court of competent jurisdiction equitable relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which Nanomerics may be entitled in law or equity. Nothing in this Article 24 is intended, or should be construed, to limit Nanomerics’ right to equitable relief or any other remedy for a breach of any other provision of this Agreement.
25. | Further Assurance |
Each Party shall perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Agreement.
26. | Expenses |
Except as otherwise expressly provided in this Agreement, each Party shall pay the fees and expenses of its respective lawyers and other experts and all other expenses and costs incurred by such Party incidental to the negotiation, preparation, execution and delivery of this Agreement.
27. | Counterparts |
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument.
[Remainder of Page Was Intentionally Left Blank]
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Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
28. | Execution |
THIS AGREEMENT IS EXECUTED by the authorised representatives of the Parties on the dates indicated below but effective as of the Effective Date.
SIGNED for and on behalf of | SIGNED for and on behalf of | |||
NANOMERICS LTD | VIRPAX PHARMACEUTICALS, INC | |||
/s/ Andreas G. Schätzlein | /s/ Anthony P. Mack | |||
Name : | Andreas G. Schätzlein | Name : | Anthony P. Mack | |
Title : | Chief Executive Officer | Title : | Chairman & Chief Executive Officer | |
Date: | 11th of April 2019 | Date: | April 11, 2019 |
29. | Schedules: |
1 | Clinical Development Plan |
2 | The Device |
3 | Funding Plan |
4 | Licensed Patents |
5 | Pre-Clinical Development Plan |
6 | The Technology |
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SCHEDULE 1: CLINICAL DEVELOPMENT PLAN NES 100 - PROPOSED CDP OUTLINE
Studies | Population |
# of Patients Ph 1 |
Arms | PEP | Duration of treatment | |||||||
Ph 1 | Randomized, PBO-controlled, SAD and MAD | Healthy Volunteers |
SAD 48 (8 per treatment group; 6 active; 2 PBO per dose level); MAD 18 (6 active per dose level) |
NES 100 5 mg NES 100 10 mg NES 100 20 mg NES 100 30 mg |
SAD: Dose finding Safety, Effectiveness Substudy PK real-time;
MAD: Best 3 doses following DSMB |
SAD: 1 day
MAD: TBD |
Page 37 of 43
SCHEDULE 2: THE DEVICE
The device provides an apparatus for the nasal delivery of a medicament, comprising a sealed container containing the medicament and a gaseous propellant for the medicament (‘Capsule’) and a delivery device, in use, holds the sealed flexible container; and when actuated in use, causes the sealed flexible container to be ruptured and the propellant to expel the medicament from the container, thereby delivering the medicament.
Specifically, the capsule comprises a container for a fluid, a chamber for containing a particulate, and a pair of channels which run between the container and the chamber to provide fluidic communication between the container and the chamber.
An advantage of the dispenser is that it may be used and will operate in any orientation. Thus it may be used in upright, inverted or laid-down fashion. Another advantage is that it solves the problem of deaggregating and/or fluidising particulates using relatively uncomplicated and potentially inexpensive technology.
Page 38 of 43
SCHEDULE 3: FUNDING PLAN
NCATS/BrIDGs
The National Center for Advancing Translational Sciences (NCATS), is one of the 27 Institutes and Centers (ICs) at the National Institutes of Health (NIH), and is transforming translational science to get more treatments to more patients more quickly. NCATS relies on the data, new technologies and teamwork to develop, demonstrate and disseminate innovations that reduce, remove or bypass costly and time-consuming bottlenecks in translational research. NCATS focuses on what is common across diseases and the translational process. The Center conducts and supports research on both the scientific and operational aspects of translation to lead to more predictive and successful development of new medical interventions, such as drugs, diagnostics, and medical devices, for all human diseases. By emphasizing collaboration, innovation, deliverables and team science, the Center serves as a catalyst to enable others in the translational research ecosystem to work more effectively.
Translation is the process of turning observations in the laboratory, clinic and community into interventions that improve the health of individuals and the public — from diagnostics and therapeutics to medical procedures and behavioral changes. Translational science is the field of investigation focused on understanding the scientific and operational principles underlying each step of the translational process.
NCATS studies translation on a system-wide level as a scientific and operational problem.
The Bridging Interventional Development Gaps (BrIDGs) program enables research collaborations to advance candidate therapeutics for both common and rare diseases into clinical testing. Investigators do not receive grant funds through this program. Instead, selected researchers partner with NCATS experts to generate pre-clinical data and clinical-grade material through government contracts for use in Investigational New Drug (IND) applications to a regulatory authority such as the Food and Drug Administration (FDA). In general, BrIDGs provides synthesis, formulation, pharmacokinetic and toxicology expertise and resources to its collaborators.
NIH contractors conduct pre-clinical studies under the direction of NCATS staff. NCATS, along with any co-funding NIH Institutes and Centers, supports contract costs. The decision to collaborate on a proposed project is based on an internal assessment of scientific merit, programmatic fit and the availability of NIH funds.
The Conafay Group
Virpax Pharmaceuticals Inc has entered into a Consulting Agreement with The CONAFAY Group (TCG). The Conafay Group has been assisting Virpax in its government affairs and business interests. TCG is helping to position Virpax to become well connected and competitive within the federal market. TCG will identify and coordinate outreach to key federal personnel, potential strategic collaborators and key opinion leaders. They will also identify and work towards capturing military and civilian interest in the use of non-opioid pain medications, to include socialization and likely pursuance of near-term funding opportunities to strengthen the relationship.
Moreover, The Conafay Group is identifying opportunities within the Federal Agencies for in-kind services to offset the cost of Virpax’s preclinical studies and clinical trials.
Grant Writers
Virpax interviewed several Grant writers and Firms that specialize in Grant writing before entering into a Consulting Agreement with Noll & Associates, LLC.
Noll & Associates, LLC has been in the Biomedical research consulting, including non-dilutive revenue opportunities, grants, and human subjects’ research design and compliance since 2003.
The principal consultant, Elizabeth Noll has more than 25 years in the Bioscience arena inclusive of Cardiology, Genetics, Neuroscience and Cancer. She has been involved in Grant writing for the past 16 years.
She will assist Virpax in writing Grants to be submitted to NCATS/BrIDGs for in-kind services.
Page 39 of 43
NCATS/BrIDGs was recommended to Virpax as a funding solution by The Conafay Group, who are experts in identifying opportunities within the Federal Agencies and is experienced at helping to position Virpax in becoming well connected and competitive within the federal market.
Virpax approached NCATS/BrIDGs on March 15, 2019. Virpax was invited to submit a “Structured Summary” regarding the NES100 Product which will be co-authored by Virpax, The Conafay Group, and our non-dilutive Revenue Consultant, Beth Noll, who has 25 years of experience winning Federal Grants and Contracts, and has a greater than 95% success rate, with more than $100,000,000.00 in Awards.
One of the positives about BrIDGs is that they use a rolling calendar for Funding submissions.
Funding Plan Timeline
Virpax has identified April 12, 2019 as the first major Milestone delivery date to BrIDGs.
Completion Date - two page Structured Summary, prepared by Conafay, Virpax and Noll - April 11, 2019. Submission Date - two page Structured Summary, by Virpax - April 12, 2019.
Mandatory Structured Summary review and Pre-Proposal Teleconference, with Virpax and BrIDGs Staff will occur by April 26, 2019.
Review/decision period of the Structured Summary by BrIDGs Staff completed by - May 24, 2019.
Based on a positive outcome from the BrIDGs Staff review, the preparation of the Full Proposal by Virpax and Noll Consulting will commence May 24, 2019 and complete June 28, 2019.
Submission of Full Proposal by Virpax is June 28, 2019.
Review of Full Proposal by BrIDGs with anticipated completion - September 30, 2019.
Award of in-kind services for NES100 PreClinical through Filing NDA Program anticipated – September 30, 2019
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SCHEDULE 4: LICENSED PATENTS
Your Ref | Subject Matter | Country | Assignee | Case Category | Application No | Application Date | Lodged Date | Publication No | Publication Date |
Grant Registration No |
Grant Registration Date |
Case Status | ||||||||||||
SOLUBILISING CARBOHYDRATES | SOLUBILISING POLYSACCHARIDES SUBSTITUTED WITH HYDROPHILIC AND HYDROPHOBIC GROUPS | CA | UCL | PCT National Phase | 2499686 | 22/09/2003 | 21/03/2005 | 2499686 | 21/08/2012 | Granted/Registered | ||||||||||||||
SOLUBILISING CARBOHYDRATES | SOLUBILISING POLYSACCHARIDES SUBSTITUTED WITH HYDROPHILIC AND HYDROPHOBIC GROUPS | EP | UCL | PCT National Phase | 03748286.6 | 22/09/2003 | 18/04/2005 | 1543040 | 22/06/2005 | EP1543040 | 13-Feb-19 | Granted & being validated in GB, FR, DE | ||||||||||||
SOLUBILISING CARBOHYDRATES | SOLUBILISING POLYSACCHARIDES SUBSTITUTED WITH HYDROPHILIC AND HYDROPHOBIC GROUPS | JP | UCL | PCT National Phase | 2004-537308 | 22/09/2003 | 22/09/2003 | 2006-503933 | 02/02/2006 | 4865228 | 18/11/2011 | Granted/Registered | ||||||||||||
SOLUBILISING CARBOHYDRATES | SOLUBILISING POLYSACCHARIDES SUBSTITUTED WITH HYDROPHILIC AND HYDROPHOBIC GROUPS | US | UCL | PCT National Phase | 10/528,603 | 22/09/2003 | 21/03/2005 | 2006-0167116 | 27/07/2006 | 7741747 | 22/06/2010 | Granted/Registered | ||||||||||||
INTRANASAL | DELIVERY OF DRUGS | CA | Nanomerics | PCT National Phase | 2928697 | 03/11/2014 | 25/04/2016 | Pending | ||||||||||||||||
INTRANASAL | DELIVERY OF DRUGS | EP | Nanomerics | PCT National Phase | 14802477.1 | 03/11/2014 | 19/05/2016 | 3065779 | 14/09/2016 | Allowed | ||||||||||||||
INTRANASAL | DELIVERY OF DRUGS | JP | Nanomerics | PCT National Phase | 2016-526933 | 03/11/2014 | 25/04/2016 | 2016-539100 | JP6486349 | 01/03/2019 | Granted | |||||||||||||
INTRANASAL | DELIVERY OF DRUGS | US | Nanomerics | PCT National Phase | 15/034,321 | 03/11/2014 | 04/05/2016 | 2016/0279189 | 29/09/2016 | US10,213,474 | 26/02/2019 | Granted | ||||||||||||
MICELLAR CLUSTERS | POLYMERIC MICELLAR CLUSTERS AND THEIR USES IN FORMULATING DRUGS | EP | UCL | PCT National Phase | 07789150.5 | 08/08/2007 | 06/03/2009 | 2051998 | 29/04/2009 | EP2051998 | 13/02/2019 | Granted, being validated in GB, FR, DE | ||||||||||||
MICELLAR CLUSTERS | POLYMERIC MICELLAR CLUSTERS AND THEIR USES IN FORMULATING DRUGS | JP | UCL | PCT National Phase | 2009-523342 | 08/08/2007 | 09/02/2009 | 2010-506827 | 04/03/2010 | JP5469458 | 07/02/2014 | Granted/Registered | ||||||||||||
MICELLAR CLUSTERS | POLYMERIC MICELLAR CLUSTERS AND THEIR USES IN FORMULATING DRUGS | US | UCL | PCT National Phase | 12/376,827 | 08/08/2007 | 26/02/2010 | 2010-0159014 | 24/06/2010 | 8470371 | 25/06/2013 | Granted/Registered | ||||||||||||
PARTiCULATE DISPENSER |
A CAPSULE IS PROVIDED FOR USE IN A DISPENSER FOR MEDICAMENT. |
UK | Alchemy Healthcare Limited | PCT National Phase | 14/04/2008 | 2459257 | 21/10/2009 | 2459257 | Granted | |||||||||||||||
PARTiCULATE DISPENSER |
A CAPSULE IS PROVIDED FOR USE IN A DISPENSER FOR MEDICAMENT. |
EP | Alchemy Healthcare Limited | PCT National Phase | 14/04/2009 | 2271388 | 12/01/2011 | 2271388 | 11/11/2015 | Granted | ||||||||||||||
PARTiCULATE DISPENSER |
A CAPSULE IS PROVIDED FOR USE IN A DISPENSER FOR MEDICAMENT. |
US | Alchemy Healthcare Limited | PCT National Phase | 14/04/2009 | 2011-0114671 | 19/05/2011 | 8695592 | 15/04/2014 | Granted | ||||||||||||||
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT |
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT | UK | Alchemy Healthcare Limited | PCT National Phase | 05/10/2001 | 2380410 | 09/04/2003 | 2380410 | Granted | |||||||||||||||
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT |
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT | DE | Alchemy Healthcare Limited | PCT National Phase | 03/10/2002 | 1434614 | 07/07/2004 | 1434614 | Granted | |||||||||||||||
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT |
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT | FR | Alchemy Healthcare Limited | PCT National Phase | 03/10/2002 | 1434614 | 07/07/2004 | 1434614 | Granted | |||||||||||||||
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT |
APPARATUS FOR THE NASAL OR ORAL DELIVERY OF A MEDICAMENT | US | Alchemy Healthcare Limited | PCT National Phase | 03/10/2002 | 2005-0028813 | 17/04/2003 | 7163013 | 16/01/2007 | Granted |
Page 41 of 43
SCHEDULE 5: PRE-CLINICAL DEVELOPMENT PLAN
Item | Time (months) | ||
Drafting and submission of pIND meeting request and receipt of guidance | Months 1 -3 | ||
Device – NM0127 dose discharge and stability study | Months 1 - 9 | ||
● | Assessing plume geometry and discharge of NM0127 powder from the device over a 90 day period | ||
● | Assessing powder characteristics (particle size drug content, amorphous nature, moisture content) when contained in the device over a 90 day period | ||
Device – Human Factors (patient acceptance) device study | Months 1 - 9 | ||
● | Formative usability evaluation using a prototype device in a simulated way, followed by human factors feedback on the device and instructions | ||
NM0127 nasal tolerability study in the rat | Months 5 - 9 | ||
● | Repeat dose 28 day toxicology study of NM0127 in the healthy rat model at three dose levels, with active ingredient analysis in the plasma and active ingredient analysis in the brain with one group. | ||
● | Complete terminal toxicology assessment on all organs | ||
Total | 9 |
Page 42 of 43
SCHEDULE 6: THE TECHNOLOGY
NM127
NM127 is a nanoenabled nasal enkephalin formulation with comparable preclinical activity to morphine. NM127 is active in all animal pain models tested. The formulation contains a combination of the peptide and Nanomerics’ MET technology comprising the GCPQ polymer and potentially other excipients. NM127 presents as a microparticle sized powder formed from the combined Molecular Envelope Technology - enkephalin nanoparticles.
Page 43 of 43
Exhibit 10.14
Certain
identified information has been excluded because it is both not material and
would likely cause competitive harm if publicly disclosed.
AMENDMENT NO. 1
to the Nanomerics / Virpax Collaboration and License Agreement
This Amendment No. 1 (the “Amendment”) to the Collaboration and License Agreement dated April 11th 2019, by and between Nanomerics Ltd. (“Nanomerics”) and Virpax Pharmaceuticals, Inc. (“Virpax”) (the “Agreement”), is made effective as of Dec 30th, 2019 (the “Amendment Effective Date”).
_
WHEREAS, the Parties wish to amend the Agreement to include a program for the pre- clinical development of a Product for post-traumatic stress disorder (“PTSD”).
NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows:
1. | INTERPRETATION |
Any capitalized term not separately defined in this Amendment shall have the meaning ascribed to it in the Agreement. In addition, the following terms have the following meanings:
“PTSD Funding” means funding provided by one or more Third Parties for use in the PTSD Program as described in Schedule 3.b hereto (the “PTSD Funding Plan”).
“PTSD Program” means the pre-clinical work required to develop an IND-ready Product for use in PTSD as set forth in Schedule 5.b hereto. The PTSD Program will draw on Results generated under the Pre-clinical Development Plan set forth in Schedule 5 and will only include work specifically required or useful for a Product aimed for the PTSD indication and not included in the Pre-clinical Development Plan enclosed to the Agreement as Schedule 5.
The terms of this Amendment will be deemed to be incorporated as part of and not in conflict with the Agreement. In the event of any conflict or inconsistency between any of the terms of this Amendment with any of the terms of the Agreement, the terms of this Amendment will prevail and the Agreement will be deemed to have been amended to the extent necessary to give effect to the terms of this Amendment.
1
Certain
identified information has been excluded because it is both not material and
would likely cause competitive harm if publicly disclosed.
2. | AMENDMENTS |
The following defined terms in Article 1 of the Agreement are hereby amended to read as follows:
“Program” means the activities to be undertaken by the Parties under the Funding Plan, the PTSD Funding Plan, the Pre-clinical Development Plan and the Clinical Development Plan.
An new and additional Program Milestone is hereby included as a new sub-clause under Section 7.2 of the Agreement as follows:
“a payment of U.S. [**] within [**] days following the PTSD Funding having been fully received by Virpax.”
3. | AMENDMENT EFFECTIVE DATE |
This Amendment shall become effective on the Amendment Effective Date.
4. | ENTIRE AGREEMENT |
This Amendment, together with the Agreement, constitutes the entire agreement between the Parties with respect to the subject matter of the Agreement. The Parties hereby agree that subject to the modifications specifically stated in this Amendment, all terms and conditions of the Agreement shall remain in full force and effect.
[Signatures to follow on the next page]
2
Certain
identified information has been excluded because it is both not material and
would likely cause competitive harm if publicly disclosed.
This Agreement has been signed by the Parties’ duly authorized signatories. This Agreement may be executed and transmitted via email in Portable Document Format (PDF), and in counterparts, each of which taken together, shall constitute one agreement binding on the Parties with the same force and effect as an original signed agreement.
NANOMERICS LTD | VIRPAX PHARMACEUTICALS, INC | |||
/s/ Andreas Schätzlein | /s/ Anthony P. Mack | |||
Name: | Andreas Schätzlein | Name: | Anthony P. Mack | |
Title: | CEO | Title: | Chairman & CEO | |
Date: | Dec 30th 2019 | Date: | January 9, 2020 |
Schedules:
3.b | PTSD Funding Plan |
5.b | PTSD Pre-Clinical Development Plan |
3
Exhibit 10.15
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
RESEARCH AND LICENSE AGREEMENT
This Research and License Agreement (“Agreement”) is made on this 11th day of August 2019 (the “Effective Date”) by and between:
YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW UNIVERSITY OF JERUSALEM, LTD., of Hi Tech Park, Edmond J. Safra Campus, Givat Ram, Jerusalem 91390, Israel (“Yissum”) of the first part; and
VIRPAX PHARMACEUTICALS, INC., of 101 Lindenwood Drive, Suite 225, Malvern, PA 19355 USA (the “Company”), of the second part;
(each of Yissum and the Company, a “Party”, and collectively the “Parties”)
WHEREAS: | in the course of research conducted by Professor Yechezkel Barenholz (the “Researcher”), at the University (as defined in Section 1 below), the Researcher developed technology enabling the creation of quick-onset and long-acting formulations of opioid antagonists for mass casualty situations, as more fully described in the patent application(s) listed in Appendix A (collectively, the “Existing Patents”); and |
WHEREAS: | pursuant to the regulations of the University, the rights and title to all inventions, know-how and the results of research created by scientists of the University vest solely with Yissum, including the technology developed by the Researcher as aforesaid; and |
WHEREAS: | the Company has represented to Yissum that (i) the Company is experienced in the development of products in the Field similar to those to be based on the inventions and the results of research that are the subject of this Agreement; and (ii) either by itself or through having obtained third party funding, it has the financial capacity and the strategic commitment to facilitate the development, production, marketing, sale and distribution of such products; and |
WHEREAS: | the Company is interested in the performance of research, by and under the supervision of the Researcher at the Hebrew University of Jerusalem, as specified in the research program attached to this Agreement as Appendix B; and is willing to finance the performance of such research in accordance with the budget set out in Appendix B; and |
WHEREAS: | the Company wishes to obtain an exclusive license from Yissum for the development and commercialization, in the Field, of the inventions covered by the Existing Patents, as well as the results of the research conducted under this Agreement; and |
WHEREAS: | Yissum agrees to grant the Company such a license, all in accordance with the terms and conditions of this Agreement. |
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
NOW THEREFORE THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. | Interpretation and Definitions |
1.1. | The preamble and appendices to this Agreement constitute an integral part hereof and shall be read jointly with its terms and conditions. |
1.2. | In this Agreement, unless otherwise required or indicated by the context, the singular shall include the plural and vice-versa, the masculine gender shall include the female gender, “including” or “includes” shall mean including, without limiting the generality of any description preceding such terms and the use of the term “or” shall mean “and/or” and any reference to the term “sale” shall include the sale, lease, rental, or other disposal of any Product. |
1.3. | The headings of the Sections in this Agreement are for the sake of convenience only and shall not serve in the interpretation of the Agreement. |
1.4. | In this Agreement, the following capitalized terms shall have the meanings appearing alongside them, unless provided otherwise: |
1.4.1. | “Affiliate” shall mean any person, organization or other legal entity which controls, or is controlled by, or is under common control with, the Company. “Control” shall mean the holding of more than fifty percent (50%) of (i) the equity, or (ii) the voting rights, or (iii) the right to elect or appoint directors. |
1.4.2. | “Development Plan” shall mean the written plan and timetable, a copy of which is attached to this Agreement as Appendix C, for the development and the commercialization of Products, including specific development milestones, prepared by the Company and approved by Yissum pursuant to Section 5.1 below. |
1.4.3. | “Development Results” shall mean the results of activities carried out by the Company or by third parties (other than the Researcher and his/her team or any other University employee) at the direction of the Company pursuant to the Development Plan or otherwise in fulfillment of the Company’s obligations hereunder (including its development obligations under Section 5 below), including any invention, patent or patent application, product, material, method, discovery, composition, process, technique, know-how, data, information or other result which do not form part of the Licensed Technology, and further including any governmental or regulatory filing submitted, or approval, license, registration, or authorization obtained, by the Company, an Affiliate or Sublicensee in respect of the Products, as well as any other information, data, material, results, devices and know-how arising from the performance of the Development Plan. |
1.4.4. | “Field” shall mean the use of the Licensed Technology for administration of opioid antagonists alone or in combination with other active ingredients including but not limited to respiratory stimulants. |
2
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.4.5. | “First Commercial Sale” shall mean the first sale of a Product by the Company, an Affiliate or a Sublicensee after the receipt of any required regulatory approval to market and sell such Product. Notwithstanding the foregoing and for the avoidance of doubt, sales of Products for the purposes of clinical trials or other testing prior to a First Commercial Sale shall entitle Yissum to payment of consideration in accordance with Section 7 below, but shall not be considered a First Commercial Sale. |
1.4.6. | “Know-How” shall mean any non-public, proprietary, tangible or intangible information, techniques, technology, practices, trade secrets, inventions, methods, processes, knowledge, ancillary materials, results or devices (whether patentable or not) developed by the Researcher, prior to the execution of this Agreement, solely and directly related to the subject matter claimed in the Existing Patents, and belonging to Yissum and described generally in Appendix A. |
1.4.7. | “License” shall have the meaning set forth in Section 3.1 below. |
1.4.8. | “Licensed Patents” shall mean (i) the Existing Patents and any patents derived from the Agreement for Rendering Research Services of August , 2019 between Yissum and the Company, and any patent application that claims priority therefrom; as well as (ii) all divisions, continuations, continuations-in-part, re- examinations, reissues, renewals, registrations, confirmations, substitutions, or extensions, including European Supplementary Protection Certificates (“SPCs”) (within the meaning of such term under Council Regulation (EU) No. 1768/92), and/or any other similar statutory protection, and any provisional applications, national, regional, PCT or similar applications and any and all patents issuing from, and patentable inventions, methods, processes, and other subject matter disclosed or claimed in, any or all of the foregoing and any and all improvements thereto. |
1.4.9. | “Licensed Technology” shall mean the Know-How, the Research Results and the Licensed Patents. |
1.4.10. | “Net Sales” shall mean: |
(a) | the gross sales price invoiced for sales of Products by the Company, an Affiliate or Sublicensee to a third party; or |
(b) | the fair market value of non-monetary consideration received in connection with such sales; |
after deduction of: (i) commercially reasonable discounts and return credits to the extent actually taken by third parties; and (ii) sales taxes, including VAT paid by customers for transfer in full to applicable tax authorities; provided that such deductions shall be directly related to the sale of Products that were awarded within the regular running of the business of the Company, Affiliate or Sublicensee. For the sake of clarity, any payment or rebate received by the Company, an Affiliate or Sublicensee from any governmental agency directly in relation to the sales shall be considered as Net Sales.
3
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
In the event of sales of Products made through a distributor, or marketing agent where the transfer to the distributor or marketing agent was made for a price certain without the Company, Affiliate or Sublicensee being entitled to any further compensation for such transfer based upon the price at which the distributor or marketing agent sells Products to a third party, the sales made by such distributor or marketing agent to a third party shall not be deemed gross sales for the purposes of this Agreement. Rather, the gross sales shall be the amounts invoiced for Products transferred to such distributor or marketing agent by the Company, an Affiliate or Sublicensee.
In the event of sales or deductions not made at “arms-length”, then for the purpose of calculation of Royalties (as defined below) to Yissum, Net Sales shall be calculated in accordance with arms- length prices for sale of Products to an independent third party purchaser and arms-length deductions, to be determined by the current market conditions, or in the absence of such conditions, according to the assessment of an independent appraiser to be selected by the Parties.
1.4.11. | “Product” shall mean any product, system, device, material, method, process or service, the development, manufacture, provision or sale of which, in whole or in part (i) uses, exploits, comprises, contains, improves upon or incorporates the Licensed Technology or any part thereof, or is otherwise covered thereby, or falls within the scope thereof, in whole or in part, or uses the Licensed Technology as a basis for subsequent modifications; or (ii) but for the License (as defined below) would infringe any claim of a Licensed Patent. |
1.4.12. | “Representatives” shall mean employees, researchers, officers, agents, subcontractors, consultants, and/or any other person or entity acting on a Party’s behalf. |
1.4.13. | “Research” shall mean the research to be conducted by the Researcher pursuant to the Research Program and Research Budget during the Research Period. |
1.4.14. | “Research Budget” shall mean the budget set forth in Appendix B. |
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.4.15. | “Research Period” shall mean the expected length of the Research Program, as set forth in Appendix B. |
1.4.16. | “Research Program” shall mean the program under which the Research shall be funded by the Company and shall be carried out and conducted by the Researcher, as set forth in Appendix B. |
1.4.17. | “Research Results” shall mean any inventions, products, materials, compounds, compositions, substances, methods, processes, techniques, know-how, data, information, discoveries and other results of whatsoever nature, discovered or occurring in the course of, or arising from, the performance of the Research, including any patent applications and patents (which shall be added to the list of Licensed Patents set forth on Appendix A), information, material, results, devices or know-how arising therefrom. |
1.4.18. | “Researcher” shall mean Prof. Yechezkel Barenholz, or such other person(s) as determined and appointed from time to time by Yissum to supervise and to perform the Research, if applicable. |
1.4.19. | “Subcontracting Agreement” shall mean (i) a bona fide subcontracting agreement with a subcontractor in which the Company must grant the subcontractor the right to make use of the Licensed Technology on behalf of the Company, and for which use the Company is required to pay or otherwise compensate the subcontractor, including, but not limited to, manufacturing or developing any of the Products (or part thereof); or (ii) a bona fide arms-length research agreement, pursuant to which an academic or research institution is engaged for the purpose of performing research, on the Company’s behalf, for the development of any of the Products (or part thereof); provided that in no event shall the consideration (if any) therefor comprise any Products; and further provided that such subcontracting agreement in (i) and (ii) above shall contain terms substantially as protective in relation to the Licensed Technology, as the terms of this Agreement; and the term “Subcontractor” shall be construed accordingly. |
1.4.20. | “Sublicense” shall mean any grant by the Company or its Affiliates of any of the rights granted under this Agreement or any part thereof; including the right to develop, manufacture, market, sell or distribute the Licensed Technology or any Product, for which grant the recipient of the Sublicense is required to pay the grantor of the Sublicense (or the grantor’s related entity), excluding a Subcontracting Agreement. |
1.4.21. | “Sublicense Consideration” shall mean any proceeds or consideration or benefit of any kind whatsoever, whether monetary or otherwise, that the Company or an Affiliate may receive from a Sublicensee as a direct or indirect result of the grant of a Sublicense or an option for a Sublicense and/or pursuant thereto, except amounts received by the Company which constitute royalties based on sales by Sublicensees in respect of which the Company is required to pay Royalties to Yissum. |
5
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
1.4.22. | “Sublicense Fees” shall have the meaning set forth in Section 7.6 below. |
1.4.23. | “Sublicensee” shall mean any third party to whom the Company or an Affiliate shall grant a Sublicense or an option for a Sublicense. For the sake of clarity, Sublicensee shall include any other third party (other than a Subcontractor) to whom such rights shall be transferred or assigned, or who may assume control thereof by operation of law or otherwise. |
1.4.24. | “Territory” shall mean worldwide |
1.4.25. | “University” shall mean the Hebrew University of Jerusalem and each of its branches. |
2. | The Research |
2.1. | The Company hereby undertakes to finance performance of the Research in accordance with the Research Program and Research Budget during the Research Period or any amendments thereof. |
2.2. | The Research shall be conducted by and under the supervision of the Researcher. Should the Researcher be unable to complete the Research for any reason, Yissum shall notify the Company in writing of the identity of a suitable replacement researcher. If the Company does not object in writing to the replacement researcher on reasonable grounds within thirty (30) days of this written notification, the substitute researcher shall be deemed acceptable to the Company. Alternatively, the Company shall have the right to terminate the Research, provided that (i) no monies paid to Yissum for the Research in accordance with the Research Budget and pursuant to the schedule set forth in Appendix B, will be refundable; and (ii) the Company shall be responsible for the payment of any accrued fees and expenses due to Yissum based on work duly performed up to the date of termination and those irrevocable commitments that were part of the Research Budget and entered into by Yissum prior to having received the Company’s written notice of termination. |
2.3. | For the avoidance of doubt, should the Company wish to place its employees in the laboratories of the Researcher on any campus of the University in connection with the Research or any other aspect of this Agreement it may do so after executing a separate agreement with Yissum setting out the terms of such placement. |
2.4. | As compensation to Yissum for the Research, subject to any earlier termination of the Research pursuant to Section 2.2 above, the Company shall pay Yissum the total sum of ______________________ US Dollars ($_____________) |
[To be determined upon receipt of the NIH Grant Approval], payable as set forth in Appendix B.
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
2.5. | Yissum shall have the right of first offer to conduct any additional research not included in the Research Program, which may be required by the Company to develop a Product, provided that there are employees of the University competent and available to perform such additional research. |
2.6. | For the avoidance of doubt, (a) the Researcher(s) may, where reasonably necessary or appropriate during the Research Period, reallocate the Research Fee among the various expense categories set forth in the Research Budget in Appendix B; and (b) nothing herein shall prevent Yissum or the University or the Researcher from obtaining any finance or grants from other entities for research regarding the Licensed Technology, provided that such entities shall not be granted rights in the Research or Research Results prejudicial to the rights granted to the Company in this Agreement. The results of any such research financed by other entities shall not form part of the Licensed Technology and shall not be subject to the License hereunder. |
2.7. | Within thirty (30) days of the end of each six (6) months of the Research Program, Yissum shall present the Company with a written report from the Researcher summarizing the results of the Research during the preceding year. |
2.8. | Nothing contained in this Agreement shall be construed as a warranty on the part of Yissum that any results or inventions will be achieved by the Research, or that the Research Results, if any, are or will be commercially exploitable. Yissum makes no warranties whatsoever as to the commercial or scientific value of the Research Results. |
2.9. | Should the Company choose to (a) retain the services of the Researcher or any other employee of the University in connection with the Research or the License; or (b) grant any benefit, including cash payments or securities of any kind, to the Researcher or any other employee of the University, it shall do so only through a written agreement executed between the Company and Yissum. Any such agreement will require, among other things, that any intellectual property rights generated under such agreement will be governed by the terms of this Agreement. |
3. | The License |
3.1. | Subject to the full performance by the Company of its obligations in accordance with this Agreement, Yissum hereby grants the Company an exclusive license to make commercial use of the Licensed Technology, in order to develop, manufacture, market, distribute or sell a Product, all within the Field and the Territory only, subject to and in accordance with the terms and conditions of this Agreement (the “License”). For the avoidance of doubt, the license to the Know-How shall be exclusive only as it relates to the application of such Know-How to creating Products within the Field. |
7
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
3.2. | Notwithstanding the provisions of Section 3.1, above, Yissum, on behalf of the University, shall retain the right (i) to make, use and practice the Licensed Technology for the University’s own research and educational purposes; (ii) to license or otherwise convey to other academic and not-for-profit research organizations, the Licensed Technology for use in non-commercial research; and (iii) to license or otherwise convey the Licensed Technology to any third party for research or commercial applications outside the Field. |
3.3. | For the avoidance of doubt, however, should the Company fail, within twelve (12) months from Effective Date, (a) to raise at least [**] for further research and development of the Licensed Technology; and (b) to allocate at least [**] of the amounts so raised for research to be conducted by the Researcher at the University, the License granted in Section 3.1 above may be cancelled and this Agreement terminated at Yissum’s discretion. |
4. | Term of the License |
The License shall expire, if not earlier terminated pursuant to the provisions of this Agreement, on a country-by-country, Product-by-Product basis, upon the later of: (i) the date of expiration in such country of the last to expire Licensed Patent included in the Licensed Technology; (ii) the date of expiration of any exclusivity on the Product granted by a regulatory or government body in such country; or (iii) the end of a period of twenty (20) years from the date of the First Commercial Sale in such country. Should the periods referred to in Subsections (i) or (ii) expire in a particular country prior to the period referred to in Subsection (iii), above, the license in that country or those countries shall be deemed a license to the Know-How during such post-expiration period.
Upon the expiration of the later of the periods set forth in Subsections (i) through (iii) above (and provided that the License has not been terminated prior thereto), the Company shall have a fully-paid exclusive license to the Know-How only as it relates to the application of such Know-How to creating Products within the Field.
5. | Development and Commercialization |
5.1. | The Company undertakes, at its own expense, to use commercially reasonable efforts to carry out the development, regulatory, manufacturing and marketing work necessary to develop and commercialize Products in accordance with the Development Plan approved by Yissum, a copy of which shall be attached to this Agreement as Appendix C within sixty (60) days of the Effective Date. The Development Plan may be modified from time to time by the Company as reasonably required in order to achieve the commercialization goals set forth above, upon Yissum’s prior written approval, but without derogating from the dates of the achievement of the Milestones set forth in this Section 5. All terms and conditions of the License and this Agreement shall apply to the modified Development Plan and subsequent Development Results. Notwithstanding anything to the contrary contained herein, the Company undertakes to use commercially reasonable efforts to meet all of the following milestones identified in Section 7.3 below for at least one Product (the “Development Milestones”). |
8
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
5.2. | The Parties shall establish a steering committee (the “Committee”) to oversee the Research, Research program and the exercise of the License. Each Party shall be entitled to designate two (2) representatives to the Committee (the “Committee Representatives”), which shall meet at least twice per calendar year. The Committee Representatives shall be bound by the confidentiality arrangements set out in this Agreement. The Company shall consult with Yissum, via Yissum’s Committee Representatives, in respect of significant decisions related to the exercise of the License. For the avoidance of doubt, the Committee shall be a forum for the exchange of information between the Parties with respect to the foregoing matters, shall act only in an advisory capacity and shall not have decision-making powers. |
The Company shall (i) provide Yissum with periodic written reports (“Development Reports”) not less than once per every six (6) months concerning all material activities undertaken in respect of the exercise of the License, (ii) keep Yissum informed on a timely basis concerning all material activities and changes to the Development Plan undertaken in respect of the exercise of the License, and (iii) at Yissum’s request, from time to time, provide Yissum with further information relating to the Company’s activities in exercise of the License. The Development Reports shall include detailed descriptions of the progress and results, if any, of: (a) the tests and trials conducted and all other actions taken by the Company pursuant to the Development Plan, and a summary of the Development Results and any other related work effected by the Company or by any Affiliate or Sublicensee during the six (6) month period prior to the report, (b) manufacturing, sublicensing, marketing and sales during the six (6) month period prior to the report; (c) the Company’s plans in respect of the testing, undertaking of trials or commercialization of Products for the following six (6) months; and (d) projections of sales and marketing efforts following the First Commercial Sale. Development Reports shall also set forth a general assessment regarding the achievement of any milestones; the projected – or actual – completion date of the development of a Product and the marketing thereof; as well as a description of any corporate transaction involving the Products or the Licensed Technology. If progress in respect of a Product differs from that anticipated in its Development Plan or a preceding Development Report, the Company shall explain, in its Development Report, the reason therefor and shall prepare a modified Development Plan for Yissum’s review and approval. The Company shall also make reasonable efforts to provide Yissum with any reasonable additional data that Yissum reasonably requires to evaluate the performance of the Company hereunder.
5.3. | The Company shall pursue the development and registration of, at least one Product in the US for the indications set forth in the Development Plan. |
5.4. | Upon completion of the development of any Product, the Company undertakes to perform all commercially reasonable actions necessary to maximize Net Sales of such Product on a regular and consistent basis. Payments of the License Maintenance Fee as set forth in Section 7 below, shall not release the Company from its obligation as stated in this Section. |
9
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
5.5. | If the Company shall not meet the Development Milestones or shall not commercialize the Products within a reasonable time frame, unless such delay is caused by (i) the requirements of a regulatory or other governmental authority; (ii) force majeure in accordance with Section 17.9, below; or (iii) unless the Company and Yissum have agreed in writing to amend the Development Plan, Yissum shall notify the Company in writing of the Company’s failure to meet its obligations of diligence and shall allow the Company one hundred eighty (180) days to cure such failure of diligence. The Company’s failure to cure within such one hundred eighty (180) day period to Yissum’s reasonable satisfaction shall be a material breach of this Agreement, entitling Yissum to immediate termination under Section 15.2 below. |
5.6. | The Company shall perform all its activities hereunder in accordance with all applicable laws and regulations, and shall procure the receipt of all approvals and consents necessary for the performance of its obligations hereunder. |
5.7. | The Company agrees to provide Yissum or the University (for no consideration) a defined number of units of any Product developed or manufactured under this Agreement at cost, for academic research purposes only. |
6. | Sublicenses |
6.1. | The Company may grant Sublicenses provided that such Sublicenses are in accordance with the provisions of this Agreement. The Company shall provide Yissum with an executed copy of a Sublicense or an amendment to such Sublicense within ten (10) days of their execution. |
6.2. | In the context of any Sublicense, the Company will obtain an agreement from the relevant Sublicensee (i) that such Sublicensee may only use the Licensed Technology and any related information received from the Company in connection with the further development and commercialization of a Product, and will keep the same confidential; and (ii) naming Yissum as a third party beneficiary with the right to directly enforce the use and confidentiality provisions described in Subsection (i) above, the reporting provisions indemnification obligations set out below, the set forth below. |
6.3. | The Company shall ensure that any Sublicense shall include material terms that require the Sublicensee to comply with the terms of this Agreement, including, Section 14 below, the breach of which terms shall be a material breach. Any act or omission of the Sublicensee which is not promptly remedied by the Company or the Sublicensee and which would have constituted a breach of this Agreement by the Company had it been an act or omission of the Company, and which the Company has not made best efforts to promptly cure, including termination of the Sublicense, shall constitute a breach of this Agreement by the Company. In the case of any such act or omission by any Sublicensee that would have constituted a material breach of this Agreement by Company entitling Yissum to terminate this Agreement had it been the act or omission of Company hereunder, (a) Company will take reasonable steps to cause such material breach to be cured (if curable) in a timely manner or (b) if such material breach cannot be cured in a timely manner, Company will notify Yissum of such material breach promptly after Company becomes aware of the relevant act or omission of the Sublicensee and understands both that such act or omission constitutes a material breach and that such material breach is not curable, and the Parties will discuss in good faith the appropriate measures to be taken, which may include termination of the Sublicense. Yissum will not have the right to terminate this Agreement on account of such material breach by such Sublicensee, if (i) such breach is cured in a reasonable time period or (ii) Company discusses with Yissum possible courses of action, and terminates such Sublicense agreement based on a right to terminate the Sublicense agreement (which Company undertakes to include in the Sublicense agreement) if such material breach is not cured within sixty (60) days and Yissum requests Company to terminate the Sublicense agreement due to such failure to cure the material breach. |
10
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
6.4. | Without derogating from the generality of Section 6.3 above, the Company shall require each Sublicensee to provide it with regular written royalty reports that include at least the detail that the Company is required to provide pursuant to Section 8.2 below. Upon request, the Company shall provide such reports to Yissum. |
6.5. | For the avoidance of any doubt it is hereby declared that under no circumstance whatsoever shall a Sublicensee be entitled to assign such Sublicense or further Sublicense the License or any part thereof without the prior written consent of Yissum, which shall not be unreasonably delayed or withheld. |
7. | License Consideration |
In consideration for the grant of the License, the Company shall pay Yissum the following consideration during the term of the License as set forth in Section 4 above:
7.1. | Royalties at a rate of [**] of Net Sales (the “Royalties”). |
7.2. | Beginning on the fifth (5th) anniversary and each year thereafter, the Company shall pay Yissum an annual License maintenance fee of $50,000 (the “License Maintenance Fee”) within thirty (30) days after each anniversary of the Effective Date. The License Maintenance Fee is non- refundable, but may be credited each year against Royalties payable on account of Net Sales made during that year. |
11
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
7.3. | The Company shall pay Yissum the following amounts in connection with the achievement of the following milestones (whether by the Company, an Affiliate or a Sublicensee): |
Milestone | Payment | |
Successful completion of formulation development in R&D scale | [**] | |
Successful completion of scale-up to pivotal scale | [**] | |
Dosing of 1st patient in the first Phase I clinical trial | [**] | |
Dosing of 1st patient in the first Phase II clinical trial | [**] | |
Dosing of 1st patient in the first Phase III clinical trial | [**] | |
Regulatory approval of NDA application | [**] | |
Commercial launch in the USA | [**] | |
Commercial launch in the European Union | [**] |
7.4. | The Company shall pay Yissum Sublicense fees of the following percentages of Sublicense Considerations (the “Sublicense Fees”) at a rate as follows: |
7.4.1. | If the Company executes the Sublicense Agreement prior to the investment of an aggregate of [**], not including any amounts received by the Company from grants from governmental or non-profit entities – [**]; |
7.4.2. | If the Company executes the Sublicense Agreement subsequent to the investment of an aggregate of [**] but prior to the investment of an aggregate of [**] US dollars, not including any amounts received by the Company from grants from governmental or non-profit entities – [**]; |
7.4.3. | If the Company executes the Sublicense Agreement subsequent to the investment of an aggregate of [**] not including any amounts received by the Company from grants from governmental or non-profit entities – [**]. |
12
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
8. | Reports and Accounting |
8.1. | The Company shall give Yissum written notice of any (i) Sublicense Consideration received; (ii) First Commercial Sale made; or (iii) Milestone achieved. |
8.2. | One (1) month after the end of each calendar quarter commencing from the earliest of (i) the First Commercial Sale; (ii) the grant of a Sublicense or receipt of Sublicense Consideration; or (iii) the occurrence of a Milestone, the Company shall furnish Yissum with a quarterly report (“Periodic Report”), certified as being correct by the chief financial officer of the Company, detailing the total sales and Net Sales effected during the preceding quarter, the total Sublicense Consideration received during the preceding quarter and the total Royalties, Sublicense Fees and, if relevant, any payments on account of the achievement of Milestone due to Yissum in respect of that period. Once the events set forth in Subsection (i), (ii) or (iii) above, have occurred, Periodic Reports shall be provided to Yissum whether or not Royalties, Sublicense Fees or payments on account of the achievement of Milestone are payable for a particular calendar quarter. The Periodic Reports shall contain full particulars of all Product sales made by the Company, Affiliates or Sublicensees and of all Sublicense Consideration received, including a breakdown of the number and type of Products sold, discounts, returns, the country and currency in which the sales were made, invoice dates and all other data enabling the Royalties and Sublicense Fees payable to be calculated accurately. |
8.3. | The Company shall pay the amounts due to Yissum for the reported period within thirty (30) days of the presentation of the Periodic Report against an invoice issued by Yissum for such amounts. All payments under this Agreement shall be computed and paid in US dollars, using the appropriate foreign exchange rate reported by the Bank of Israel on the last working day of the calendar quarter. Payment of value added tax or any other tax, charge or levy applicable to the payment to Yissum of the consideration as detailed in Section 7 above, shall be borne by the Company and added to each payment in accordance with the statutory rate in force at such time. All payments made to Yissum by an Israeli entity shall be made without the withholding of any taxes, provided that Yissum shall supply such Israeli entity, at its request, with a tax certificate indicating an official exemption from tax withholding , for so long as Yissum has such a certificate. For the avoidance of doubt, if Yissum does not supply such certificate, the Israeli entity shall withhold taxes according to applicable law. All other payments to Yissum by non-Israeli entities shall be made without the withholding of any taxes. Payments may be made by check or by wire transfer to the following account: |
[**]
8.4. | The Company shall keep, and shall require its Affiliates and Sublicensees to keep, full and correct books of account in accordance with applicable Generally Accepted Accounting Principles as required by international accounting standards enabling the Royalties and Sublicense Fees to be calculated accurately. Starting from the first calendar year after the First Commercial Sale, or the first grant of a Sublicense, whichever occurs first, an annual report, authorized by a certified public accountant, shall be submitted to Yissum within ninety (90) days of the end of each calendar year, detailing Net Sales and Sublicense Consideration, Royalties and Sublicense Fees, both due and paid (the “Annual Reports”). The Annual Reports shall also include the Company’s sales and royalty forecasts for the following calendar year, if available. |
13
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
The Company shall, and shall require and cause its Affiliates and Sublicensees to, retain such books of account for five (5) years after the end of each calendar year during the period of this Agreement, and, if this Agreement is terminated for any reason whatsoever, for five (5) years after the end of the calendar year in which such termination becomes effective.
8.5. | Yissum will either (i) allow the Company a credit against future Royalties to be paid for Royalties previously paid on account of Net Sales, as appropriate, that were reported as bad debts in the Company’s annual audited financial statements; or (ii) if such bad debts are recorded by the Company in its annual audited financial statement after the Company’s obligation to pay Royalties has ceased, Yissum shall repay any Royalties received on account of Net Sales that were reported as bad debts by the Company. |
8.6. | Yissum shall be entitled to appoint not more than two (2) representatives who must be independent certified public accountants or such other professionals as appropriate (the “Auditors”) to inspect during normal business hours the Company’s and its Affiliates’ books of account, records and other relevant documentation to the extent relevant or necessary for the sole purpose of verifying the performance of the Company’s payment obligations under this Agreement, the calculation of amounts due to Yissum under this Agreement and of all financial information provided in the Periodic Reports, provided that Yissum shall coordinate such inspection with the Company or Affiliate (as the case may be) in advance. In addition, Yissum may require that the Company, through the Auditors, inspect during normal business hours the books of account, records and other relevant documentation of any Sublicensees, to the extent relevant or necessary for the sole purpose of verifying the performance of the Company’s payment obligations under this Agreement, the calculation of amounts due to Yissum under this Agreement and of all financial information provided in the Periodic Reports, and the Company shall cause such inspection to be performed. The Parties shall reconcile any underpayment or overpayment within thirty (30) days after the Auditors deliver the results of the audit. Any underpayment shall be subject to interest in accordance with the terms of Section 8.7 below. In the event that any inspection as aforesaid reveals any underpayment by the Company to Yissum in respect of any year of the Agreement in an amount exceeding five percent (5%) of the amount actually paid by the Company to Yissum in respect of such year, then the Company shall, in addition, pay the cost of such inspection. |
8.7. | Any sum of money due Yissum which is not duly paid on time shall bear interest from the due date of payment until the actual date of payment at the rate of annual LIBOR plus five percent (5%) per annum accumulated on a monthly basis. |
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Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
9. | Ownership |
9.1. | All right, title and interest in and to the Licensed Technology vest and shall vest solely in Yissum, and the Company shall hold and make use of the rights granted pursuant to the License solely in accordance with the terms of this Agreement. |
9.2. | All rights in the Development Results shall be solely owned by the Company, except to the extent that an employee of the University, including, the Researcher, is considered an inventor of a patentable invention arising from the Development Results, in which case such invention and all patent applications and/or patents claiming such invention (“Joint Patents”) shall be owned jointly by the Company and Yissum, as appropriate. |
9.3. | Upon the execution of this Agreement, the Company shall execute the letter of assignment attached to this Agreement as Appendix D concerning its interest in any Joint Patents that will provide that such interest will be irrevocably assigned to Yissum in the event that the Company is declared bankrupt, is voluntarily or involuntarily dissolved, or otherwise ceases operations. |
10. | Patents |
10.1. | Within thirty (30) days of the Effective Date, the Company shall reimburse Yissum for all previous documented expenses and costs relating to the registration and maintenance of the Licensed Patents listed in Appendix A. |
10.2. | Yissum, in consultation with the Company, shall be responsible for the filing, prosecution and maintenance of the Licensed Patents in the Territory, at the Company’s expense (the “Ongoing Patent Expenses”). Each application and every patent registration shall be made and registered in the name of Yissum or, should the law of the relevant jurisdiction so require, in the name of the relevant inventors and then assigned to Yissum. The Company agrees to have Yissum’s patent counsel directly bill the Company for such expenses and shall directly pay such bills in accordance with patent counsel’s directions. |
10.3. | The Company undertakes and warrants that no amounts utilized by the Company for such payment of Ongoing Patent Expenses or for the reimbursement of Yissum’s past documented expenses and costs relating to the registration and maintenance of the Licensed Patents listed in Appendix A will be (i) funding provided by the Israel Innovation Authority (the “IIS”); (ii) funding that is earmarked as supplementary funding (“mimun mashlim”) for an IIS-approved project; or funding provided to the Company from any other governmental or regulatory institution of the State of Israel. |
15
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
10.4. | Subject to the above, the Parties shall consult and make every effort to reach agreement in all respects relating to the manner of making applications for and registering the patents, including the time of making the applications, the countries where applications will be made and all other particulars relating to the registration and maintenance of the Licensed Patents. Notwithstanding the foregoing, Yissum reserves the sole right to make all final decisions with respect to the preparation, filing, prosecution and maintenance of such patent applications and patents. |
10.5. | The Parties shall assist each other in all respects relating to the preparation of documents for the registration of any patent or any patent-related right upon the request of the other Party. Both Parties shall take all appropriate action in order to assist the other to extend the duration of a Licensed Patent or obtain any other extension obtainable under law, to maximize the scope of the protection afforded by the Licensed Patents. |
10.6. | In the event that the Company is approached by a patent examiner or attorney in connection with any matter that is the subject matter of this Agreement, it shall give Yissum immediate notice of such approach. The Company shall only reply to such approaches after consultation with Yissum and subject to its consent. |
10.7. | The Company, shall mark, and shall cause its Affiliates and Sublicensees to mark, all Products covered by one or more of the Licensed Patents with patent numbers (or the legend “patent pending”) applicable to such Product. The Company shall ensure that its Sublicensee complies with the provisions of this Section. |
10.8. | If at any time during the term of this Agreement the Company decides that it is undesirable, as to one or more countries, to file, prosecute or maintain any patents or patent applications within the Licensed Patents, it shall give at least ninety (90) days written notice thereof to Yissum, and upon the expiration of the ninety (90) day notice period (or such longer period specified in the Company’s notice) the Company shall be released from its obligations to bear the expenses to be incurred thereafter as to such patent(s) or patent application(s). As of such time, such patent(s) or application(s) shall be removed from the Licensed Technology and Yissum shall be free to grant rights in and to such patent(s) or patent application(s) in such countries to third parties, without further notice or obligation to the Company, and the Company shall have no rights whatsoever to exploit such patent(s) or patent application(s) or the Know-How related thereto in that jurisdiction. Notwithstanding the foregoing, the Company shall be required to bear the costs and expenses for filing, prosecuting and maintaining the Licensed Patents in at least the following jurisdictions: the United States, Japan, China, the United Kingdom, Germany and France (the “Required Jurisdictions”). Should the Company fail to do so in any one of the Required Jurisdictions, Yissum shall be entitled to terminate this Agreement without any further notice and without any need to compensate the Company in any manner |
16
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
10.9. | The foregoing does not constitute an obligation, representation or warranty, express or implied, on the part of Yissum that any patent or patent registration application will indeed be made or registered or be registerable in respect of the Licensed Technology or any part thereof, nor shall it constitute an obligation, representation, or warranty, express or implied, on the part of Yissum that a registered patent will be valid or afford any protection. For the avoidance of doubt, nothing in this Agreement constitutes an obligation, representation or warranty, express or implied, on the part of Yissum regarding the validity of or the protection afforded by any of the patents or patent registration applications detailed in Appendix A or regarding the commercial exploitability or any other value of the Licensed Technology or that the Licensed Technology will not infringe the rights of any third party. |
11. | Patent Rights Protection |
11.1. | The Company and Yissum shall each inform the other promptly in writing of any alleged infringements by a third party of the Licensed Patents in the Territory, together with any available written evidence of such alleged infringement. |
11.2. | To the extent permitted by applicable law, if the Company, its Affiliate or any Sublicensee makes (directly or indirectly), any assertion, application or claim, or initiates or supports (directly or indirectly) any action or proceeding, that challenges the validity, enforceability or scope of any of the Licensed Patents (“Challenge Proceeding”), Yissum will have the right, at any time following the commencement of the Challenge Proceeding, to terminate this Agreement and the Royalty rates specified in this Agreement will be tripled with respect to Net Sales of Products that are sold, leased or otherwise transferred during the course of such Challenge Proceeding, and the percentage due to Yissum in respect of Sublicense Consideration will be tripled with respect to Sublicense Consideration during such period. If the outcome of such Challenge Proceeding is a determination in favor of Yissum, (a) the Royalty rate with respect to Net Sales of Products and the percentage due to Yissum with respect to Sublicense Consideration will remain at such triple rate as aforesaid; and (b) Company will reimburse Yissum for all expenses incurred by Yissum (including reasonable attorneys’ fees and court costs) in connection with such Challenge Proceeding. If the outcome of such Challenge Proceeding is a determination in favor of Company, Company will have no right to recoup any Royalties or Sublicense Fees paid before or during the course of such Challenge Proceeding. |
11.3. | The Company, its Affiliate or Sublicensee shall have the first right in its own name and at its own expense to initiate any legal action and enforce the Licensed Patents against any infringement of such Licensed Patents. Before the Company, its Affiliate or its Sublicensee commences an action with respect to any infringement, the Company shall give careful consideration to the views of Yissum in making its decision whether or not to initiate any legal action and, if relevant, make these views known to its Affiliate or Sublicensee. The Company shall, or, if relevant, shall ensure that its Affiliate or Sublicensee shall, continuously keep Yissum apprised of all developments in the action and shall continuously provide Yissum with full information and copies of all documents relevant to the proceedings, including, all documents filed with the courts by the parties to the legal action(s) and all correspondence with the other parties to the proceedings, and shall seek Yissum’s input and approval on any substantive submissions or positions taken in the litigation regarding the scope, validity or enforceability of the Licensed Patents. |
If Yissum shall determine that the legal actions taken by the Company may adversely affect Yissum’s rights hereunder, Yissum shall be entitled to appoint its own counsel to represent it in such litigation and the Company shall reimburse Yissum its actual payments for such legal representation. If the Company, its Affiliate or its Sublicensee elects to commence an action as described above and Yissum is a legally indispensable party to such action (being the registered owner of the infringed patent rights), Yissum, at the Company’s expense, may be joined as a co-plaintiff, provided that all the following conditions shall be fulfilled:
(a) the Company shall continuously provide Yissum with full information and copies of all documents relevant to the proceedings, including, all documents filed with the courts by the parties to the legal action(s) and all correspondence with the other parties to the proceedings, as well as all drafts of written submissions relating to such legal action that are sent to the Company for review, and all Yissum’s comments in respect thereof will be taken into account;
(b) any out of pocket expenses incurred by the Company or Yissum in connection with such action(s), including all legal and litigation related fees and expenses, all out of pocket expenses for external assistance required to comply with any discovery or other motions and any costs or amounts awarded to the counterparties in such action(s) shall be borne by the Company;
(c) if Yissum shall determine that a conflict of interest exists between the Company and Yissum, Yissum shall be entitled, at its own expense, to appoint its own counsel to represent it in such litigation and the Company shall make best efforts to ensure that such counsel chosen by Yissum is fully informed and receives all material necessary to adequately participate in such action; and
(d) the Company shall bear all costs, expenses and awards incurred by or awarded against Yissum, with respect to any action filed against Yissum alleging that an action initiated by the Company pursuant to the terms of this Section 11 was anticompetitive, malicious, or otherwise brought for an improper purpose, whether by a counterparty to such aforementioned action or by any third party.
17
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
If Yissum is not required by law to be joined as a co-plaintiff, Yissum, to the extent permitted by law, and at its own cost, may elect to join the action as a co-plaintiff at its own initiative and shall jointly control the action with the Company, its Affiliate or its Sublicensee. Irrespective of whether Yissum joins any such action as described above it shall provide reasonable cooperation to the Company, its Affiliate or its Sublicensee. The Company shall reimburse Yissum for any costs it incurs as part of an action brought pursuant to this Section where Yissum has not elected to join the action as a co-plaintiff at its own initiative.
11.4. | If the Company, its Affiliate or its Sublicensee does not bring an action against an alleged infringer pursuant to Section 11.3, above, or has not commenced negotiations with said infringer for discontinuance of said infringement within one hundred and eighty (180) days after learning of said infringement, Yissum shall have the right, but not the obligation, to bring an action for such infringement at its own expense, and retain all proceeds from such action. If the Company has commenced negotiations with said infringer for the discontinuance of said infringement within such one hundred and eighty (180) day period, the Company shall have an additional period of ninety (90) days from the end of the first one hundred and eighty (180) day period to conclude its negotiations before Yissum may bring an action for said infringement. |
11.5. | No settlement, consent judgment or other voluntary disposition of an infringement suit may be entered without the consent of Yissum, which consent shall not be unreasonably withheld, conditioned or delayed. For the avoidance of doubt and notwithstanding anything to the contrary herein, should Yissum bring an action as set forth in Section 11.4 above, it shall have the right to settle such action by licensing the Licensed Technology outside the Field, or part of it, to the alleged infringer. |
11.6. | Any award or settlement payment resulting from an action initiated by the Company pursuant to this Section 11 shall be utilized, first to effect reimbursement of documented out-of-pocket expenses incurred by both Parties in relation to such legal action, and thereafter shall be paid to the Company and shall be deemed Sublicense Consideration received under this Agreement, in respect of which Sublicense Fees shall be due to Yissum. |
11.7. | If either Party commences an action and then decides to abandon it, such Party will give timely notice to the other Party. The other Party may continue the prosecution of the suit after both Parties agree on the sharing of expenses. |
18
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
12. | Confidentiality |
12.1. | For the purposes of this Agreement (i) “Yissum Confidential Information” means this Agreement and the terms hereof and any and all reports, details, data, formulations, solutions, designs, and inventions and other information disclosed to the Company or any of its Representatives by Yissum or any of Yissum’s Representatives in connection with the Licensed Technology, Yissum, the University, the Researcher and other Representatives of Yissum and/or the University, whether in written, oral, electronic or any other form, except and to the extent that that any such information: (a) was known to the Company at the time it was disclosed, other than by previous disclosure by or on behalf of Yissum, as evidenced by the Company’s written records at the time of disclosure; (b) is in the public domain at the time of disclosure or becomes part of the public domain thereafter other than as a result of a violation by the Company or any of its Representatives of the confidentiality obligations herein; (c) is lawfully and in good faith made available to the Company by a third party who is not subject to obligations of confidentiality with respect to such information; or (d) is independently developed by the Company without the use of Yissum Confidential Information, as demonstrated by documentary evidence; and (ii) “Company Confidential Information” means this Agreement and the terms hereof and any and all reports, details, data, formulations, solutions, designs, and inventions and other information disclosed by or on behalf of the Company under this Agreement, whether in written, oral, electronic or any other form, except and to the extent that any such information: (a) was known to Yissum or the University at the time it was disclosed, other than by previous disclosure by or on behalf of the Company, as evidenced by Yissum’s or the University’s written records at the time of disclosure; (b) is in the public domain at the time of disclosure or becomes part of the public domain thereafter other than as a result of a violation by Yissum or its Representatives of the confidentiality obligations herein; (c) is lawfully and in good faith made available to Yissum or the University by a third party who is not subject to obligations of confidentiality with respect to such information; or (d) is independently developed by Yissum or the University without the use of the Company Confidential Information, as demonstrated by documentary evidence |
12.2. | Yissum Confidential Information. The Company undertakes that during the term of this Agreement and for a period of five (5) years subsequent thereto, it shall maintain full and absolute confidentiality of and shall not use the Yissum Confidential Information other than for the purposes of this Agreement. The Company undertakes not to convey or disclose any of the Yissum Confidential Information to any third party without the prior written permission of Yissum. The Company shall be liable for its officers or employees or other Representatives maintaining absolute confidentiality of and not using or disclosing the Yissum Confidential Information except as expressly provided herein. The Company shall treat such Yissum Confidential Information with the same degree of care and confidentiality that it maintains or protect its own confidential information, but in any event, no less than a reasonable degree of care and confidentiality. |
12.3. | Notwithstanding the foregoing, the Company may only disclose the Yissum Confidential Information: |
(a) | to those of its Representatives who have a “need to know” such information as necessary for the exercise of its rights and/or performance of its obligations hereunder, provided that such Representatives are legally bound by agreements which impose similar confidentiality and non-use obligations to those set out in this Agreement. The Company shall be responsible for ensuring that its Representatives abide by such undertakings of confidentiality; and |
19
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
(b) | to any potential third party investor, including, any government, public foundation and/or private foundation, in connection with seeking potential funding for the Company, provided that such potential third party investor has executed a confidentiality and non- use agreement which imposes similar obligations to those set out in this Agreement; and |
(c) | to any competent authority for the purposes of obtaining any approvals or permissions required for the exercise of the License and/or the implementation of this Agreement, or in the fulfillment of a legal duty owed to such competent authority (including a duty to make regulatory filings or to comply with any other reporting requirements); and |
(d) | to the extent required to be disclosed under any law, rule, regulation, court, or order of any competent authority, provided that the Company promptly notifies Yissum thereof in order to enable Yissum to seek an appropriate protective order or other reliable assurance that confidential treatment will be accorded to such information (with the Company’s assistance, if necessary), and such disclosure shall be made to the minimum extent required. |
12.4. | The Company Confidential Information. Yissum undertakes that during the term of this Agreement and for a period of five (5) years subsequent thereto, it shall maintain in confidence, and shall not use the Company Confidential Information other than for the purposes of this Agreement. Yissum undertakes not to convey or disclose any of the Company Confidential Information to any third party without the prior written permission of the Company. Yissum shall treat such Company Confidential Information with the same degree of care and confidentiality that each of them maintains and protects its own confidential information, but in any event, no less than a reasonable degree of care and confidentiality. |
12.5. | Notwithstanding the foregoing, Yissum may only disclose the Company Confidential Information: |
(a) | to the University and to those of the Representatives of Yissum and/or the University who have a “need to know” such information as necessary for the exercise of Yissum’s rights or performance of Yissum’s obligations hereunder, provided that such Representatives are legally bound by agreements which impose similar confidentiality and non-use obligations to those set out in this Agreement; and |
(b) | to any competent authority in connection with the filing and prosecution of patent applications relating to the Licensed Technology, or in the fulfillment of a legal duty owed to any competent authority; and |
20
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
(c) | to the extent required to be disclosed under any law, rule, regulation, court, or order of any competent authority, provided that Yissum promptly notifies the Company thereof in order to enable the Company to seek an appropriate protective order or other reliable assurance that confidential treatment will be accorded to such information (with Yissum’s assistance, if necessary), and such disclosure shall be made to the minimum extent required. |
12.6. | Both Parties shall be responsible and liable to each other for any breach by its Representatives, Affiliates, Subcontractors, Sublicensees and investors of the undertakings of confidentiality set forth in this Section 12 as if such breach were a breach by either Party itself. |
12.7. | Without prejudice to the foregoing, the Company shall not mention the name of the University, Yissum or the Researcher, unless required by law, in any manner or for any purpose in connection with this Agreement, the subject of the Research or any matter relating to the Licensed Technology, without obtaining the prior written consent of Yissum. |
12.8. | Neither Party shall issue any press release or other media statement regarding the execution, existence or terms of this Agreement or any developments of the Licensed Technology without the prior written approval of the other Party. |
12.9. | The provisions of this Section shall be subject to permitted publications pursuant to Section 13 below. |
13. | Publications |
13.1. | Yissum shall ensure that no publications in writing, in scientific journals or orally at scientific conventions relating to the Licensed Technology, the Development Plan, the Development Results or the Product, which are subject to the terms and conditions of this Agreement, are published by it or the Researcher, without first submitting such proposed publication to the Company for its written consent at least thirty (30) days prior to submitting it the journal or other forum. |
13.2. | The Company undertakes to reply to any such request for publication by Yissum within thirty (30) days of its receipt of a request in connection with the publication of articles in scientific journals, and within seven (7) days of its receipt of a request in connection with article abstracts. The Company may only decline such a request upon reasonable grounds, which shall be fully detailed in writing, requiring the postponement of such publication because it contains patentable subject matter for which patent protection should be sought, or the removal of any Company Confidential Information. |
13.3. | Should the Company decide to object to publication as provided in sub- Section 13.2, the publication shall be postponed for a period of not more than three (3) months from the date the publication was sent to the Company, to enable the filing of an appropriate patent application, or until the removal of the Company Confidential Information. Thereafter, the publication will automatically be permitted. |
21
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
13.4. | The provisions of this Section 13 shall not prejudice any other right, which Yissum has pursuant to this Agreement or at law. |
13.5. | For the avoidance of doubt, the prohibitions with respect to disclosure and publication set out in Sections 12 and 13 shall not apply to internal research and educational activities at the University for the Researcher and University employees provided that such persons are subject to written obligations of confidentiality substantially similar to those set forth in Section 12. |
14. | Warranties, Liability and Indemnity |
14.1. | YISSUM WARRANTS TO THE COMPANY THAT IT HAS NOT RECEIVED ANY WRITTEN CLAIMS THAT THE LICENSED TECHNOLOGY INFRINGES THE INTELLECTUAL PROPERTY OF A THIRD PARTY. EXCEPT AS STATED HEREIN AND TO THE EXTENT PERMITTED BY THE APPLICABLE LAW, YISSUM MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED TECHNOLOGY. IN PARTICULAR, YISSUM MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED TECHNOLOGY WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHTS OF ANY THIRD PARTY. IN ADDITION, NOTHING IN THIS AGREEMENT MAY BE DEEMED A REPRESENTATION OR WARRANTY BY YISSUM AS TO THE VALIDITY OF ANY OF THE LICENSED PATENTS OR THEIR REGISTRABILITY OR OF THE ACCURACY, SAFETY, EFFICACY, OR USEFULNESS, FOR ANY PURPOSE, OF THE LICENSED TECHNOLOGY. YISSUM HAS NO OBLIGATION, EXPRESS OR IMPLIED, TO SUPERVISE, MONITOR, REVIEW OR OTHERWISE ASSUME RESPONSIBILITY FOR THE PRODUCTION, MANUFACTURE, TESTING, MARKETING OR SALE OF ANY PRODUCT. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NEITHER YISSUM NOR THE RESEARCHER, NOR THE UNIVERSITY, NOR THE REPRESENTATIVES OF YISSUM AND/OR OF THE UNIVERSITY SHALL HAVE ANY LIABILITY WHATSOEVER TO THE COMPANY OR TO ANY THIRD PARTY, WITH THE EXECPTION OF DAMAGES DIRECTLY CAUSED BY YISSUM’S BREACH OF CONTRACT ,FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR DAMAGE, OF ANY KIND OR NATURE WHETHER DIRECT OR INDIRECT, SUSTAINED BY THE COMPANY OR BY ANY THIRD PARTY, FOR ANY DAMAGE ASSESSED OR ASSERTED AGAINST THE COMPANY, OR FOR ANY OTHER LIABILITY INCURRED BY OR IMPOSED UPON THE COMPANY OR ANY OTHER PERSON OR ENTITY, DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN CONNECTION WITH OR RESULTING FROM THIS AGREEMENT AND/OR THE EXERCISE OF THE LICENSE, INCLUDING, (i) THE PRODUCTION, MANUFACTURE, USE, PRACTICE, LEASE, OR SALE OF ANY PRODUCT; (ii) THE USE OF THE LICENSED TECHNOLOGY; OR (iii) ANY ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO ANY OF THE FOREGOING. |
22
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
14.2. | IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OF THEIR AFFILIATES OR TO ANY THIRD PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING, LOST PROFITS, BUSINESS OR GOODWILL) SUFFERED OR INCURRED BY EITHER PARTY OR ITS AFFILIATES OR ANY THIRD PARTY, WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE OR TORT, OR OTHERWISE, ARISING OUT OF THIS AGREEMENT. |
14.3. | The Company shall be liable for any loss, injury or damage whatsoever caused directly or suffered by its employees or any Representatives of Yissum or the University (including the Researcher and his/her team), or to any third party by reason of the Company’s acts or omissions pursuant to this Agreement or by reason of any use made by the Company, its Representatives, Affiliates, Subcontractors, and the Sublicensees and their respective business associates and customers of the Licensed Technology, the Development Results or any Product or exercise of the License. |
14.4. | The Company undertakes to compensate, indemnify, defend and hold harmless Yissum, the University, and any of their respective Representatives (including the Researcher and his/her team) (herein referred to jointly and severally as “Indemnitees”) from and against any claim, investigation or liability including, product liability, damage, loss, costs and expenses, including legal costs, attorneys’ fees and litigation expenses, incurred by or imposed upon the Indemnitees by direct reason of any acts or omissions of the Company, its Representatives, Affiliates, Subcontractors, and the Sublicensees, or which derive from the development, manufacture, marketing, sale, use or other exploitation, or sublicensing (as applicable) of any Product, or Licensed Technology, or the exercise of the License. |
The Company shall ensure that its Sublicensees shall provide undertakings of indemnification which shall also be given also in favor of, and shall be actionable by Yissum, the University and any director, officer or employee of Yissum or of the University, and by the Researcher.
14.5. | As of the date it obtains third party funding for the Research, the Company shall procure and maintain throughout the Territory at all relevant times during the Term of this Agreement insurance of a kind and in an amount customary for companies in the Company’s business that develop and commercialize products similar to the Products.. |
The insurance coverage required above shall not be construed to create a limit of the Company’s liability with respect to its indemnification obligations under this Section 14.
23
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
14.6. | Subject to Section 14.5 above, the Company shall provide Yissum with written evidence of such insurance upon request. The Company shall provide Yissum with written notice at least thirty (30) days prior to the cancellation, non-renewal or material change in such insurance. If the Company does not obtain replacement insurance providing comparable coverage within such thirty (30) day period, Yissum shall have the right to terminate this Agreement effective at the end of such thirty (30) day period without notice or any additional waiting periods. |
14.7. | The Company shall maintain, at its own expense, liability insurance as set forth in Section 14 above, beyond the expiration or termination of this Agreement as long as a Product relating to or developed pursuant to this Agreement is being commercially distributed or sold by the Company, an Affiliate or a Sublicensee, and thereafter as required by applicable laws. |
15. | Termination of the Agreement |
15.1. | Unless otherwise agreed by the Parties in writing, this Agreement shall terminate upon the occurrence of the later of the following: (i) the date of expiry of the last of the Licensed Patents anywhere in the Territory; (ii) the date of expiration of the last exclusivity on a Product granted by a regulatory or government body within the Territory; (iii) the expiry of a continuous period of fifteen (15) years during which there shall not have been a First Commercial Sale of any Product in any country in the Territory; and (iv) if the Company elects to obtain an exclusive license to the Know-How pursuant to Section 4 above - the date of expiry of the period of such exclusive license. |
15.2. | Without prejudice to the Parties’ rights pursuant to this Agreement or at law, either Party may terminate this Agreement by written notice to the other in any of the following cases: |
15.2.1. | immediately upon such written notice, if: (i) the other Party passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within sixty (60) days; or (ii) a receiver or liquidator is appointed for the other Party; or (iii) the other Party enters into winding up or insolvency or bankruptcy proceedings. Each of the Parties undertakes to notify the other within seven (7) days if any of the abovementioned events occur; or |
15.2.2. | upon breach of this Agreement, where such breach has not been remedied within thirty (30) days from the breaching Party’s receipt of written notice from the non-breaching Party requiring such remedy. |
15.3. | In addition to the above, and without prejudice to Yissum’s rights pursuant to this Agreement or at law, Yissum shall be entitled to terminate this Agreement immediately upon written notice to the Company in the following circumstances: |
15.3.1. | failure to meet the requirements of Section 3.3 above; |
15.3.2. | failure to comply with the requirements of Section 5.6 above; |
24
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
15.3.3. | if an attachment is made over the Company’s assets or if execution proceedings are taken against the Company and the same are not set aside within thirty (30) days of the date the attachment is made or the execution proceedings are taken or the Company seeks protection under any laws or regulations, the effect of which is to suspend or impair the rights of any or all of its creditors, or to impose a moratorium on such creditors and such act is not cancelled within thirty (30) days of the performance thereof; |
15.3.4. | uncured lapse of insurance coverage under Section 14 above; |
15.3.5. | failure to defend against third party claims as required under Section 11 above; or |
15.3.6. | if the Company, its Affiliate or a Sublicensee initiates, supports or makes a Challenge Proceeding as detailed in Section 11.2 above; |
15.4. | Upon termination of this Agreement for any reason other than the expiration of its term, the License shall terminate, the Licensed Technology and all rights included therein shall revert to Yissum, and Yissum shall be free to enter into agreements with any other third parties for the granting of a license or to deal in any other manner with such right as it shall see fit at its sole discretion. |
The Company shall return or transfer to Yissum, within fourteen (14) days of termination of the License, all material, in soft or hard copy, relating to the Licensed Technology or Products connected with the License, and it may not make any further use thereof. In case of termination as set out herein, the Company will not be entitled to any reimbursement of any amount paid to Yissum under this Agreement. Yissum shall be entitled to conduct an audit in order to ascertain compliance with this provision and the Company agrees to allow access to Yissum or its representatives for this purpose.
15.5. | The Company will prepare and present all regulatory filings necessary or appropriate in any country and will obtain and maintain any regulatory approval required to market Products in any such country, at all its own expense. Company will solely own all right, title and interest in and to all such regulatory approvals and filings; provided, however, that (a) Company will provide copies thereof to Yissum on an on-going basis; and (b) without derogating from Company’s assignment undertaking in this Section 15.5 below, upon termination of the License, Company agrees that Yissum shall have the right, on its own or via third parties, to reference, cross-reference, review, have access to, incorporate and use all documents and other materials filed by or on behalf of Company and its Affiliates with any regulatory authority in furtherance of applications for regulatory approval in the relevant country with respect to Products. |
25
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
15.6. | Upon the termination of the Agreement for any reason other than the expiration of its term or due to an uncontested, uncured breach by Yissum (as set forth in Section 15.2.2 above), the Company shall transfer and assign to Yissum all of the Development Results and any information and documents, in whatever form, relating thereto, including any data, results, and all data contained in any of the foregoing and files that relate to the Licensed Technology or the Product(s) (collectively, the “Assigned Development Results”). The Company shall fully cooperate with Yissum to effect such transfer and assignment and shall execute any document and perform any acts required to do so. |
Without derogating from the force and effect of the foregoing assignment undertaking, the Parties acknowledge and agree that if under applicable law the aforesaid assignment undertaking will not be fully enforceable, then the part (if any) of such undertaking which is enforceable shall remain in full force and effect, and the part (or whole) which is not enforceable shall be automatically replaced with an irrevocable grant by the Company to Yissum, binding upon all of the Company’s acquirers, successors and assignees, of an unrestricted, perpetual, irrevocable, worldwide, royalty-free, license to use, exploit, transfer and sublicense (on a multi-tier basis) the Assigned Development Results, for any and all purposes and uses. To the extent permitted by applicable law, such license will be exclusive.
In the event that the Development Results transferred and assigned to Yissum as set forth in this sub-Section 15.6 shall be licensed to a third party and shall generate license fees or royalties and/or sublicense fees to Yissum or Yissum’s designate or any assignee, then subject to the Company having complied and continuing to comply with all its obligations under this Agreement which remain in existence following termination of the License as aforesaid, Yissum shall pay to the Company twenty percent (20%) of the Net Proceeds actually received by Yissum or Yissum’s designate or any assignee in respect of such license to such third party, until such time as the Company shall have received, in aggregate, the full amount of the documented capital investment actually expended out-of-pocket by the Company in order to generate the Development Results, less (c) any amounts received or receivable by the Company from third parties in connection with the Licensed Technology or Development Results prior to the transfer and assignment of the Development Results to Yissum; and (d) any amounts received by the Company or an Affiliate as grant from a governmental or non-profit institution (the “Development Reimbursement”). The actual amount of the Development Reimbursement shall be certified by external independent auditors agreed upon by the Parties. Yissum shall pay to the Company amounts, if any, payable under this sub-Section 15.6, within ninety (90) days of receipt of the relevant Net Proceeds.
For the purpose of this sub-Section 15.6, “Net Proceeds” means license fees and/or royalties or sublicense fees actually received by Yissum or Yissum’s designate or any assignee in respect of such license with a third party (excluding funds for research or development at the University, or payments for the supply of services) after deduction of all costs, fees and expenses incurred by Yissum in connection with such license (including, without limitation, unreimbursed patent costs, and all attorney’s fees and expenses and other costs and expenses in connection with the negotiation and conclusion of such license).
26
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Notwithstanding anything to the contrary in Section 11 (Confidentiality) or elsewhere in this Agreement, Yissum (on its own or via third parties) shall be entitled to freely exploit the Assigned Development Results without any obligation of confidentiality to the Company.
15.7. | Notwithstanding the foregoing, neither the termination of this Agreement for any reason nor the expiration of the License shall release the Company from its obligation to carry out any financial or other obligation which it was liable to perform prior to the Agreement’s termination or the License’s expiration. In the event that the Company terminates this Agreement, it shall be required to continue paying all Ongoing Patent Expenses for those Licensed Patents in existence on the date of notice of such termination, including expenses incurred by reason of examinations and extensions, for twelve (12) months following the effective date of such termination. |
In addition, Sections 7, 8, 9, 12, 14, 15, 16 and 18 shall survive the termination of this Agreement to the extent required to effectuate the intent of the Parties as reflected in this Agreement.
16. | Law |
16.1. | The provisions of this Agreement and everything concerning the relationship between the Parties in accordance with this Agreement shall be governed exclusively by laws of England and Wales without application of any conflict of law principles that direct that the laws of another jurisdiction should apply; and jurisdiction shall be granted to the competent court in London, England exclusively. |
16.2. | Each Party agrees that any breach or threatened breach of the terms and conditions of this Agreement governing confidentiality or the exploitation and use of the Licensed Technology may cause irreparable harm, that may be difficult to ascertain and that monetary damages may not afford an adequate remedy. Accordingly, in addition to all other rights and remedies that may be available to the non-breaching Party under this Agreement or by law, such Party shall be entitled to seek, in the courts and under the law mutually agreed to in Section 16.1 above, injunctive relief without proof of damages. |
17. | Miscellaneous |
17.1. | Relationship of the Parties. It is hereby agreed and declared between the Parties that they shall act in all respects relating to this Agreement as independent contractors and there neither is nor shall there be any employer- employee or principal-agent relationship or partnership relationship between the Company (or any of its employees) and Yissum. Each Party will be responsible for payment of all salaries and taxes and social welfare benefits and any other payments of any kind in respect of its employees and officers, regardless of the location of the performance of their duties, or the source of the directions for the performance thereof. |
27
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
17.2. | Assignment. No Party may transfer or assign or endorse its rights, duties or obligations pursuant to this Agreement to another, without the prior written consent of the other Parties, which consent shall not be unreasonably denied, conditioned or delayed. Consent shall not be required if the assignment is made in a sale of all or substantially all of the Company’s assets, provided that the assignee commits to Yissum in writing that it will fulfill all the obligations of the Company pursuant to this Agreement subsequent to such assignment. |
17.3. | No waiver. No waiver by any Party, whether express or implied, of its rights under any provision of this Agreement shall constitute a waiver of such Party’s rights under such provisions at any other time or a waiver of such Party’s rights under any other provision of this Agreement. The failure or delay of a Party to claim the performance of an obligation of another Party shall not be deemed a waiver of the performance of such obligation or of any future obligations of a similar nature. |
17.4. | Representation by Legal Counsel. Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in drafting this Agreement. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions. |
17.5. | Legal Costs. Each Party shall bear its own legal expenses involved in the negotiation and drafting of this Agreement. |
17.6. | Disclosure of Agreements with Researcher. The Company shall disclose to Yissum any existing agreement or arrangement of any kind with the Researcher and or any representative of the Researcher, and shall not enter into any such agreement or arrangement without the prior written consent of Yissum. |
17.7. | Taxes. Monetary amounts mentioned in this agreement do not include value added tax (“VAT”), or any duties or other taxes. |
17.8. | Severability. The provisions of this Agreement are severable and, in the event that any one or more of the provisions or part of a provision contained in this Agreement shall, for any reason, be held by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement; but such provision shall be modified as set out below and the balance of this Agreement shall be interpreted as if such provision were so modified. The Parties shall negotiate in good faith in order to agree on the terms of an alternative provision which complies with applicable law and achieves, to the greatest extent possible, the same effect as would have been achieved by the invalid, illegal or unenforceable provision. In the event that the Parties fail to agree within thirty (30) days, the head of the Israeli Bar Association (on his/her own or via a representative that he/she appoints) (“Deciding Expert”) will determine the text of the alternative provision, and each Party shall bear its own costs and the Parties shall equally bear the fees and expenses of the Deciding Expert. Each Party agrees that the determination of the Deciding Expert will be non-appealable, final and binding. |
28
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
17.9. | Force Majeure. Neither Party shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached the Agreement for failure or delay in fulfilling or performing any term of this Agreement to the extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party and without fault of such Party, including fires, earthquakes, floods, embargoes, wars, acts of war (whether war is declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances (except of such Party’s personnel), acts of God or acts, omissions or delays in acting by any governmental authority 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. The Party affected by such circumstances shall promptly notify the other Party in writing when such circumstances cause a delay or failure in performance and when they cease to do so. |
17.10. | Counterparts. This Agreement may be executed in any number of counterparts (including counterparts transmitted by facsimile and by electronic mail), each of which shall be deemed an original, but all of which taken together shall be deemed to constitute one and the same instrument. |
17.11. | Binding Effect. This Agreement shall be binding upon the Parties once executed by both Parties and shall enter into force and become effective as of the Effective Date. |
17.12. | Entire Agreement. This Agreement constitutes the full and complete agreement between the Parties and supersedes any and all agreements or understandings, whether written or oral, concerning the subject matter of this Agreement, and may only be amended by a document signed by both Parties. |
18. | Notices |
All notices and communications pursuant to this Agreement shall be made in writing and sent by facsimile, electronic mail or by registered mail or served personally at the following addresses:
To Yissum at:
Yissum Research Development
Company
of the Hebrew University of Jerusalem Ltd.
P.O. Box 39135,
Jerusalem 91390
Israel
Facsimile: 972-2-6586689
Email: [**]
29
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
To the Company at:
Virpax Pharmaceuticals, Inc.
IOl Lindenwood Drive, Suite 225
Malvern , PA 19355
USA
Facsimile: - - - - - - -
Email: [**]
or such other address furnished in writing by one Party to the other. Any notice served personally shall be deemed to have been received on the day of service, any notice sent by registered mail as aforesaid shall be deemed to have been received seven (7) days after being posted by prepaid registered mail. Any notice sent by facsimile or electronic mail shall be deemed to have been received by the next business day after receipt of confirmation of transmission (provided that any notice terminating this Agreement which is sent by electronic mail shall be followed by a notice sent in any other manner provided herein).
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS
YISSUM | VIRPAX PHARMACEUTICALS, INC. | |
/s/ Aviv Shoher | /s/ Anthony Mack | |
By: Aviv Shoher | Anthony Mack | |
SVP BD | President CEO |
I the undersigned, Prof. Yechezkel Barenholz, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to cooperate fully with Yissum to ensure its ability to fulfill its obligations hereunder as set forth herein.
/s/ Yechezekal Barenholzz |
Date signed
30
CONFIDENTIAL | EXECUTION COPY |
Appendix A
LICENSED PATENTS
To be completed by Yissum within 60 days of the Effective Date
KNOW-HOW
To be completed by Yissum within 60 days of the Effective Date
YISSUM | VIRPAX PHARMACEUTICALS, INC. |
By: | /s/ Yaron Daniely | By: | /s/ Anthony P. Mack | |
Name: | Yaron Daniely, | Name: | Anthony P. Mack | |
Title: | President & CEO | Title: | CEO & Chairman | |
Date: | Date: | August 9, 2019 | ||
/s/ Aviv T. Shoher | ||||
Aviv T. Shoher | ||||
SVP | ||||
Business Development |
31
CONFIDENTIAL | EXECUTION COPY |
Appendix B
THE RESEARCH PROGRAM
ANTI-OPIATES PROJECT WORKPLAN
1. | Formulation development |
[**]
32
YISSUM | VIRPAX PHARMACEUTICALS, INC. |
By: | /s/ Yaron Daniely | By: | /s/ Anthony P. Mack | |
Name: | Yaron Daniely, | Name: | Anthony P. Mack | |
Title: | President & CEO | Title: | CEO & Chairman | |
Date: | Date: | August 9, 2019 | ||
/s/ Aviv T. Shoher | ||||
Aviv T. Shoher | ||||
SVP | ||||
Business Development |
I the undersigned, Prof. Yechezkel Barenholz, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to cooperate fully with Yissum to ensure its ability to fulfill its obligations hereunder, as set forth herein.
/s/ Yechezkel Barenholz | 12.08.2019 | |
Prof. Yechezkel Barenholz | Date signed |
33
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix C
THE DEVELOPMENT PLAN
[To be provided by the Company within sixty (60) days of the Effective Date]
YISSUM | VIRPAX PHARMACEUTICALS, INC. |
By: | /s/ Yaron Daniely | By: | /s/ Anthony P. Mack | |
Name: | Yaron Daniely, | Name: | Anthony P. Mack | |
Title: | President & CEO | Title: | CEO & Chairman | |
Date: | Date: | August 9, 2019 | ||
/s/ Aviv T. Shoher | ||||
Aviv T. Shoher | ||||
SVP | ||||
Business Development |
34
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
Appendix D
JOINT PATENT ASSIGNMENT LETTER
ASSIGNMENT AGREEMENT
Made as a Deed
This ASSIGNMENT AGREEMENT (the “Agreement”) is made this 11th day of August 2019, by and between Yissum Research Development Company of the Hebrew University of Jerusalem Ltd., Hi-Tech Park, Edmond J. Safra Campus, Givat Ram, Jerusalem, Israel on the one hand (“Yissum”) and Virpax Pharmaceuticals, Inc., of 101 Lindenwood Drive, Suite 225, Malvern, PA 19355 USA on the other hand (the “Company”). Yissum and the Company shall be referred each as a “Party”, and together as the “Parties”.
WHEREAS, | on August 11, 2019, the Parties signed a Research and License Agreement (the “R&L Agreement”), according to which the Company received, among other things, a License to the Licensed Patents; and |
WHEREAS, | pursuant to the R&L Agreement, certain inventions have been or shall/may be registered jointly in the name of Yissum and the Company and shall be regarded as Joint Patents; and |
WHEREAS, | the Parties have agreed that, upon the occurrence of certain Events (as defined below), the Company shall assign and transfer to Yissum its title and ownership in and to the Joint Patents and thereafter Yissum shall become the sole and exclusive owner of such Joint Patents; all in accordance with the terms and conditions of this Agreement; |
NOW THEREFORE THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. | Preamble |
1.1 | The recitals hereto constitute an integral part hereof. |
1.2 | The headings of the sections in this Agreement are for the sake of convenience only and shall not serve in the interpretation of the Agreement. |
1.3 | All capitalized terms not defined herein shall have the meaning ascribed to such terms in the R&L Agreement. |
1.4 | In this Agreement the following expressions shall have the meanings appearing alongside them, unless the context otherwise requires: |
“Effective Date” shall mean the date of occurrence of the earliest of the Events.
“Event(s)” shall mean a situation in which: (i) the Company passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within sixty (60) days; or (ii) a receiver or liquidator is appointed for the Company; or (iii) the Company enters into winding up or insolvency or bankruptcy proceedings; or (iv) the Company ceases operations; or (v) a Joint Patent has become a Relinquished Patent.
“Intellectual Property Rights” shall mean any and all rights relating to intellectual property, including without limitation, all inventions, patents and patent applications, including all re-issuances, continuations, continuations-in-part, divisions, revisions, extensions and re-examinations thereof.
“Relinquished Patent” shall mean a Joint Patent for which the Company fails to pay the expenses of the filing, prosecution, maintenance or any activity required by the patent office, relating thereto.
35
Certain identified information has been
excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
2. | Assignment of Joint Patents. |
2.1 | Upon the Effective Date, the Company shall assign, convey and transfer to Yissum, its successors and assigns, the entire right, title and interest in and to any Joint Patent(s), including all Intellectual Property Rights therein, and all rights and benefits under any applicable law, treaty or convention. Notwithstanding the foregoing, in case the Event relates solely to a Relinquished Patent, the aforementioned assignment shall relate only to such Relinquished Patent. |
2.2 | Subsequent to an assignment pursuant to this Agreement, the Company or its successors, legal representatives or assigns shall notify Yissum, its successors, legal representatives and assigns, of any facts known to it regarding said Joint Patents, testify in any legal proceeding, sign all lawful papers, execute all divisional, continuing, reissue and foreign applications, make all rightful oaths, and generally do everything possible to assist Yissum, its successors, legal representatives and assigns, to obtain and enforce proper protection, full ownership and rights of use for said Joint Patents in all countries. |
2.3 | In the event the Company, its successors, legal representatives or assigns fail to execute and deliver such documents and instruments within thirty (30) days of the receipt of Yissum’s request, Yissum is hereby authorized and appointed attorney-in-fact of and for the Company to make, execute and deliver any and all such documents and instruments. |
3. | Governing Law and Jurisdiction. The provisions of this Agreement and everything concerning the relationship between the Parties in accordance with this Agreement shall be governed by the laws of England and Wales and exclusive jurisdiction shall be granted to the appropriate courts in London, England. |
4. | Miscellaneous. This Agreement supersedes any prior understanding, agreement, practice or contract, oral or written, between the Parties with respect to the matters covered by this Agreement. This Agreement may not be modified except by written instrument signed by all Parties hereto. This Agreement may be executed in counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. This Agreement shall be binding upon the Parties’ heirs, executors, administrators, successors, and assigns. The invalidity of any provision of this Agreement shall not result in the invalidity of the entire Agreement. |
AS WITNESS THE HANDS OF THE PARTIES:
Virpax Pharmaceuticals, Inc. 101 Lindenwood Drive, Suite 225 Malvern, PA 19355 USA |
Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. Hi-Tech Park, Edmond J. Safra Campus, Givat Ram, P.O.B 39135, Jerusalem 91390, Israel |
By: | /s/ Anthony P. Mack | By: | /s/ Yaron Daniely | |
Name: | Anthony P. Mack | Name: | Yaron Daniely, | |
Title: | CEO & Chairman | Title: | President & CEO | |
Date: | August 9, 2019 | Date: | ||
/s/ Aviv T. Shoher | ||||
Aviv T. Shoher | ||||
SVP | ||||
Business Development |
36
Exhibit 10.16
Certain identified information has been excluded because it is both not material and would
likely cause competitive harm if publicly disclosed.
FIRST AMENDMENT TO THE
RESEARCH AND LICENSE AGREEMENT
This First Amendment to the Research and License Agreement (the “First Amendment”) is made on this 3rd day of January 2020 (the “Effective Date”) by and between:
YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW UNIVERSITY OF JERUSALEM, LTD., of Hi Tech Park, Edmond J. Safra Campus, Givat Ram, Jerusalem 91390, Israel (“Yissum”) of the first part; and
VIRPAX PHARMACEUTICALS, INC., of 101 Lindenwood Drive, Suite 225, Malvern, PA 19355 USA (the “Company”), of the second part;
(each of Yissum and the Company, a “Party”, and collectively the “Parties”)
WHEREAS: | The Parties signed a Research and License Agreement as of August 11, 2019 (the “Agreement”); and |
WHEREAS: | the Parties wish to amend the Agreement to add new research to be sponsored by the Company in the laboratory of the Researcher (the “Additional Research”), as set forth below. |
NOW THEREFORE THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. | Interpretation and Definitions |
1.1. | The preamble and exhibits annexed to this First Amendment constitute an integral part hereof and shall be read jointly with its terms and conditions. |
1.2. | Capitalized terms set forth in this First Amendment and which are not defined, shall have the meaning ascribed thereto in the Agreement. |
1.3. | Unless otherwise indicated herein, the terms and conditions of the Agreement shall remain without any change and shall continue to be binding and in full force and effect. |
1.4. | The headings of the sections in this First Amendment are for the sake of convenience only and shall not serve in the interpretation of the First Amendment. |
2. | The Additional Research |
2.1. | The Company hereby undertakes to finance performance of the Additional Research in accordance with the program, budget and payment schedule annexed to this Amendment as Appendix Bl (the “Additional Research Program”), or any amendment thereof. For the avoidance of doubt the additional Research Fees shall not be paid until The Company has received grant funding and shall be subject to payment schedule in Appendix B1. |
EXECUTION COPY
2.2. | The results of the Additional Research (the “Additional Research Results”) shall be added to the Licensed Technology. |
2.3. | The terms and conditions of Section 2 of the License Agreement shall apply to the Additional Research and the Additional Research Program, mutatis mutandis. |
3. | Miscellaneous |
3.1. | The Development Plan. In conformance with the requirements of the Agreement, the Company has annexed its Development Report to this First Amendment as Appendix C to the Agreement. |
3.2. | Continuing Effect. Except as specifically provided in and required by this First Amendment, the terms and conditions of the Agreement shall remain in full force and effect. |
3.3. | Counterparts. This First Amendment may be executed in any number of counterparts and by different Parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same First Amendment. Executed copies of the signature pages of this First Amendment sent by facsimile or transmitted electronically in Portable Document Format (“PDF”), or any similar format, shall be treated as originals, fully binding and with full legal force and effect, and the Parties waive any rights they may have to object to such treatment |
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS
YISSUM | VIRPAX PHARMACEUTICALS INC. | |
/s/ Dr. Itzik Goldwaser | /s/ Anthony P. Mack | |
Dr. Itzik Goldwaser | Anthony P. Mack | |
CEO of Yissum | CEO & Chairman | |
/s/ Shani Bullock | ||
Shani Bullock | ||
VP BD, Healthcare Yissum |
2
EXECUTION COPY
Appendix Bl
THE ADDITIONAL RESEARCH PROGRAM
Anti-opiates project- Additional Research Program (to the submitted
NIH grant) {Yirpax RES 202 Project)
[**]
Total Budget:
Staffing | [**] | |||
Equipment, Dissolution Systems | [**] | |||
Disposables (Chemicals, etc.) | [**] | |||
Laboratory Services (e.g. electron microscopy & other services | [**] | |||
Subtotal | [**] | |||
HUJ Overhead (35%) | [**] | |||
Total | [**] |
Additional Research Services Fee Payment Schedule:
Date of Payment | Amount | |||
First Payment | Within fifteen (15) days of receipt of grant funding by Company. | $ [**] (includes all of equipment line) | ||
Second Payment |
Within forty-five (45) days of receipt of grant funding by Company. |
[**] | ||
Third Payment |
Within ninety (90) days of receipt of grant funding by Company. |
[**] | ||
Fourth Payment | Within one hundred and twenty (120) days of receipt of grant funding by Company. | [**] |
YISSUM | VIRPAX PHARMACEUTICALS, INC. | |
/s/ Dr. Itzik Goldwaser | /s/ Anthony P. Mack | |
Dr. Itzik Goldwaser | Anthony P. Mack | |
CEO of Yissum | CEO and Chairman |
/s/ Shani Bullock | |
Shani Bullock | |
VP Business Development and Healthcare Yissum |
I the undersigned, Prof. Yechezkel Barenholz, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to cooperate fully with Yissum in order to ensure its ability to fulfill its obligations hereunder, as set forth herein.
Prof. Yechezkel Barenholz | Date signed |
3
EXECUTION COPY
Second Payment | Within forty-five (45) days ofreceipt of grant funding by Company. | [**] |
Third Payment | Within ninety (90) days of receipt of grant funding by Company. | [**] |
Fourth Payment | Within one hundred and twenty (120) days of receipt of grant funding by Company. | [**] |
YISSUM | VIRPAX PHARMACEUTICALS, INC. | ||
By: | /s/ Anthony P. Mack | ||
Name: | Anthony P. Mack | ||
Title: | CEO and Chairman |
I the undersigned, Prof. Yechezkel Barenholz, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby unde1take to cooperate fully with Yissum in order to ensure its a· 1ity to fulfill its obligations hereunder, as set forth herein.
8/1/2020 | |
Prof. Yechezkel Barenholz | Date signed |
4
EXECUTION COPY
Appendix C
THE DEVELOPMENT PLAN
YISSUM | VIRPAX PHARMACEUTICALS, INC. | |
/s/ Dr. Itzik Goldwaser | /s/ Anthony P. Mack | |
Dr. Itzik Goldwaser | Anthony P. Mack | |
CEO of Yissum | CEO and Chairman |
/s/ Shani Bullock | |
Shani Bullock | |
VP Business Development and Healthcare Yissum |
5
Exhibit 10.17
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Agreement for the Rendering of Research Services
THIS AGREEMENT for the rendering of research services (the “Agreement”) is entered into as of May 12, 2019 (the “Effective Date”) by and between Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. (“Yissum”) with offices at Hi-Tech Park, Edmond J. Safra Campus, Givat Ram , P.O.8 39 1 35 , Jerusalem 91390, Israel and Virpax Pharmaceuticals, In c. (the “Company”) with offices at IO I Linden wood Drive, Suite 225, Malvern, PA 19355 USA.
Yissum and the Company hereby agree to all of the following tern1s and conditions:
1. | The Research Services: The Company hereby requests that the following research services be performed via Yissum: The Formulation, Preparation and Characterization of Liposomal Bupivacaine for Size Zeta Potential, Drug Loading and Rate of Drug Release (the “Research Services”). The objectives and specifications of the Research Services shall be detailed in the protocol attached hereto as Appendix A (the “Research Services Protocol”), which shall constitute an integral part of this Agreement. |
2. | Time Schedule: The Research Services are to be performed in accordance with the following time schedule: the Research Services shall begin on April I, 2019 (the “Start Date”) and shall be completed no later than March 31 , 2020 (the “Completion Date”); (collectively, the “Research Service Period”). |
3. | The Researcher: The Research Services will be performed by Yael Shilo, D.V.S., a doctoral student working under the supervision and responsibility of Professor Yechezkel Barenholz, or such other qualified person as may be determined and appointed from time to time by Yissum (the “Res earcher”). |
4. | The Scientific Report: The scientific report that will be required as a result of the Research Services rendered will be presented directly to the Company by the Researcher within 14 (fourteen) days of the end of the Research Service Period (the “Scientific Report”) . The Company acknowledges that no financial report will be given by Yissum. Such Scientific Report shall include a complete summary of the Research Services carried out including detailed protocol of the Research Services rendered . |
5. | The Consideration: In consideration for provision of the Research Services and the Scientific Report , the Company shall be obligated to pay Yissum the total sum of US$81,000 (inclusive of [**]% overhead), plus any applicable value added tax (the “Research Services Fee”). The specific budget items that make up the Research Services Fee are detailed in Appendix B and constitute an integral part of this Agreement. For the avoidance of doubt, the Researcher may, where reasonably necessary or appropriate during the Research Service Period, reallocate the Research Services Fee among the various expense categories set forth in the Research Services Budget in Appendix B. The Company shall pay the Research Services Fee in equal monthly payments of US $[**] ([**]US dollars). |
The Company shall make the payment for the first three (3) months (April, May and June 2019) of the Research Services Fee (US $[**]) within five (5) days of the execution of this Agreement. Each further monthly payment shall be made by the Company within forty-five (45) days of the presentation of a correct invoice by Yissum. In the event that the Company fails to pay an invoiced amount in a timely manner, Yissum shall be entitled to add to the unpaid invoiced amount an additional amount equal to annualized interest of Prime (as determined by the Bank of Israel) plus 3%, together with exchange rate differentials, if any.
6. | Intellectual Property: It is hereby agreed that the Company retains ownership in its Confidential Information, as defined below, and in all its intellectual property rights related thereto . In addition, any intellectual property belonging to either the Company or Yissum prior to the execution of this Agreement will remain the sole property of either the Company or Yissum, respectively. |
All data generated from the provision of the Research Services, including the Scientific Report , which are specifically required and contemplated under the Research Services Protocol, shall be owned by the Company upon full payment of the Research Services Fee (the “Company Data”).
Notwithstanding the above, all rights, title and interest in all inventions, discoveries , methods, new uses, processes or compounds , whether or not capable of registration, and any patent applications or patents based thereon, discovered or developed by the Researcher or Dr. Shilo during the course of the provision of the Research Services and as a result thereof shall be solely owned by Yissum (the “Yissum Inventions”). Yissum shall include such Yissum Inventions in its license agreement with LipoCureRx Ltd ., dated November 5, 2013, as amended (the “Yissum-LipoCureRx Agreement”), and LipoCureRx, as indicated by its signature at the end of this Agreement, shall include such Yissum Inventions in the sublicense agreement LipoCureRx signed with the Company on March 19, 2018 (the “LipoCureRx-Virpax Agreement”); in both cases upon the same terms and conditions already in place in each of the Yissum-LipoCureRx Agreement and the LipoCureRx-Virpax Agreement. Yissum hereby warrants that (a) the Researcher and the persons working under his supervision have an obligation to assign their rights to any Yissum Inventions to Yissum; and (b) Yissum will perfect all documents necessary to effectuate the assignment of Yissum Inventions from the Researcher and his staff to Yissum.
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
7. | Confidentiality: Yissum and the Researcher agree to maintain the confidentiality of any information disclosed to them by the Company in connection with the Research Services, which the Company identifies as confidential at the time of disclosure (“Confidential Information”), and not to make public any such Confidential Information without the prior written permission of the Company. This undertaking shall not apply to Confidential Information that is in the public domain at the time of disclosure or thereafter enters the public domain through no fault of Yissum or the Researcher; or that the Researcher can show, by contemporaneous written evidence, was already known to him at the time of disclosure; or that is provided to Yissum or the Researcher by a third party having no obligations of confidentiality to the Company; or that is independently developed by an employee of the Hebrew University who is not the Researcher. In addition, Yissum or the Researcher shall be entitled to disclose Confidential information pursuant to a valid judicial or administrative order, provided that they shall provide prompt notice to the Company of their receipt of such an order to allow the Company to seek relief against such order. |
8. | Publications . The Parties shall have the right to publish in writing in scientific journals or orally at scientific conventions the results of their development activities , including clinical trials. Each Party shall have the right to review and comment on any material proposed for disclosure or publication by the other, its Affiliates, such as by oral presentation, manuscript or abstract that includes Confidential Information of a Party. Before any such material is submitted for publication or disclosure (other than oral presentation materials and abstracts , which are addressed below), the publishing Party shall deliver (or cause to be delivered) a complete copy to the other Party at least 30 days prior to submitting the material to a publisher or initiating such other disclosure, and the non-publishing Party shall review any such material and give its comments to the publishing Party within 10 days of the delivery of such material to non-publishing Party which comments shall not be unreasonably rejected. Each Party shall comply with the non-publishing Party’s requests to delete references to the non-publishing Party’s Confidential Information or any other information that could reasonably have a negative effect on the development of commercialization of a product in any such material and, if applicable, agrees to delay any submission for publication or other public disclosure for a period of up to an additional 60 days for the purpose of preparing and filing appropriate patent applications. Yissum and Researcher shall not publish or otherwise disseminate, including, but not limited to, in articles, posters, oral presentations or other forn1ats, any information relating to the Research without the prior written consent of Yirpax. The Parties recognize that Yissum retains comparable rights of publication pursuant to the terms of the Yissum-LipoCureRx Agreement. |
9. | Use of Names: Neither Party shall make any use of any kind of the other Party’s names, the names of the other Party’s employees or affiliates, or the Terms of this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld. |
10. | Relationship of the Parties: The Parties do not stand in a relationship of employer-employee. Such relationship shall be that of an independent contractor. |
11. | Dispute Resolution: This Agreement shall be construed and governed in accordance with the laws of England and Wales. The Parties to this Agreement shall try to come to an amicable settlement of controversies or disputes arising out of this Agreement or about its validity. Should they fail to settle them amicably, the dispute shall be settled by arbitration in accordance with the then existing Rules of Arbitration of the International Chamber of Commerce, by which each Party hereto agrees to be bound. Such arbitration shall be held in London , England. |
12. | Authorized Signatories: Signature by at least two authorized representatives of Yissum on this Agreement shall constitute Yissum ’s approval and agreement to all that is written herein. The Company warrants that the person or persons signing this agreement is/are authorized to bind the Company. |
2
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
13. | Disclaimer of Warranty, Liability and Indemnification: |
(a) | Nothing contained in this Agreement shall be construed as a warranty on the part of Yissum that any results or inventions will be achieved by the Research Services, or that the results of the Research Services, if any, are or will be of commercial or scientific value to the Company. |
(b) | Yissum and the Hebrew University, and their respective parents, affiliates, officers, directors , employee s, agents and contractors, (all such parties collectively: the “Indemnitees”), shall not be liable for any claims, actions, demands, losses, damages , costs and expenses (including without limitation legal fees) (collectively: “Claims”) made , brought or suffered by the Company or by any third parties arising from any exploitation or use of the Research Services provided (including without limitation any Research Services work product and data). |
(c) | In the event of any third-party Claims are brought against any of the Indemnitees as set out above, the Company shall indemnify the relevant Indemnitees and hold them harmless from and against any and all such damages, liability, losses, costs and/or expenses |
(d) | Each Party represents and warrants to the other that it has the legal right and power to enter into this Agreement, to extend the rights granted to the other in this Agreement, and to fully perform its obligations hereunder, and that the performance of such obligations will not conflict with its charter documents , policies or any agreements , contracts, or other arrangements to which it is a Party . |
14. | Termination: |
(a) | Unless terminated in accordance with the provisions of this Agreement, this Agreement shall end upon the presentation of the Scientific Report. |
(b) | Each Party shall be entitled to terminate this Agreement in the event of a breach by the other Party of its obligations under this Agreement, including, but not limited to, any payment failure, which is not remedied by the breaching Party within 30 days of receipt of written notice from the non-breaching Party . |
(c) | If the Agreement is terminated prior to the end of the Research Services Period, all amounts paid under this Agreement up to the date of termination shall be considered as non-refundable. |
(d) | Sections 6, 7, 8, 9, 11 and 13 shall survive termination of this Agreement. |
Virpax Pharmaceuticals, Inc.
IO I Lindenwood
Drive, Suite 225
|
Yissum
Research Development Company
Givat Ram, P.O.B 39135, Jerusalem 91390, Israel |
||
YISSUM | |||
By: | /s/ Anthony P. Mack | /s/ Aviv Shoher | |
Aviv Shoher | |||
Name: | Anthony P. Mack | SVP BD | |
Title: | Chairman and CEO | /s/ Yaron Daniely | |
Yaron Daniely | |||
CEO |
3
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Rese archer’s Agreement:
I the undersigned, Prof. Yechezkel Barenholz of the Hebrew University of Jerusalem, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to fully cooperate with Yissum in order to ensure its ability to fulfil l its obligations hereunder, as set forth herein.
/s/ Prof. Yechezkel Barenholz |
LipoCureRx hereby consents to the provisons of section 6 of this Agreement regarding the inclusion of any Yissum Invention in the sublicense set forth in the LipoCureRx-Virpax Agreement upon the same terms and conditions in such agreement.
Name: | |
Title: | |
Date: |
4
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Appendix A
Description of the Research Services:
The objective of the first year project of the Ph.D. student Yael-Shilo include:
[**]
The first-year study will lead to readiness for 2nd year studies which will focus on animal studies.
This is a very heavy work load for one person and therefore Yael Will be supported by other people of my lab.
5
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
AQ_Qendix B
A budget for the Research, including at least the following categories:
a. | Personnel | 70% |
b. | Materials (Consumables) | 10% |
c. | Equipment | 0% |
d. | Animal studies | 15% |
e. | Any specific expenses that do not fall within one of the previous categories |
6
Exhibit 10.18
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Agreement for the Rendering of Research Services
THIS AGREEMENT for the rendering of research services (the “Agreement”) is entered into as of October 11, 2020 (the “Effective Date”) by and between Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. (“Yissum”) with offices at Hi-Tech Park, Edmond J. Safra Campus, Givat Ram, P.O.B 39135, Jerusalem 91390, Israel and Virpax Pharmaceuticals, Inc. (the “Company”) with offices at 101 Lindenwood Drive, Suite 225, Malvern, PA 19355 USA.
Yissum and the Company hereby agree to all of the following terms and conditions:
1. | The Research Services: The Company hereby requests that the following research services be performed via Yissum: The Formulation, Preparation and Characterization of Liposomal Bupivacaine for Size Zeta Potential, Drug Loading and Rate of Drug Release (the “Research Services”). The objectives and specifications of the Research Services shall be detailed in the protocol attached hereto as Appendix A (the “Research Services Protocol”), which shall constitute an integral part of this Agreement. |
2. | Time Schedule: The Research Services are to be performed in accordance with the following time schedule: the Research Services shall begin on September 15, 2020 (the “Start Date”) and shall be completed no later than September 14, 2021 (the “Completion Date”); (collectively, the “Research Service Period”). |
3. | The Researcher: The Research Services will be performed by Yael Shilo, D.V.S., a doctoral student working under the supervision and responsibility of Professor Yechezkel Barenholz, or such other qualified person as may be determined and appointed from time to time by Yissum (the “Researcher”). |
4. | The Scientific Report: The scientific report that will be required as a result of the Research Services rendered will be presented directly to the Company by the Researcher within 14 (fourteen) days of the end of the Research Service Period (the “Scientific Report”). The Company acknowledges that no financial report will be given by Yissum. Such Scientific Report shall include a complete summary of the Research Services carried out including detailed protocol of the Research Services rendered. |
5. | The Consideration: In consideration for provision of the Research Services and the Scientific Report, the Company shall be obligated to pay Yissum the total sum of US$81,000 (inclusive of [**]% overhead), plus any applicable value added tax (the “Research Services Fee”). The specific budget items that make up the Research Services Fee are detailed in Appendix B and constitute an integral part of this Agreement. For the avoidance of doubt, the Researcher may, where reasonably necessary or appropriate during the Research Service Period, reallocate the Research Services Fee among the various expense categories set forth in the Research Services Budget in Appendix B. The Company shall pay the Research Services Fee in equal monthly payments of US $[**] US dollars). |
The Company shall make the payment for the first month (October 2020) of the Research Services Fee (US $6,750) within five (5) days of the execution of this Agreement. Each further monthly payment shall be made by the Company within forty-five (45) days of the presentation of a correct invoice by Yissum. In the event that the Company fails to pay an invoiced amount in a timely manner, Yissum shall be entitled to add to the unpaid invoiced amount an additional amount equal to annualized interest of Prime (as determined by the Bank of Israel) plus 3%, together with exchange rate differentials, if any. In the event the Company completes a funding event before November 30, 2020, The Company agrees to pay Yissum $40,500 towards the Consideration of US$81,000.
6. | Intellectual Property: It is hereby agreed that the Company retains ownership in its Confidential Information, as defined below, and in all its intellectual property rights related thereto. In addition, any intellectual property belonging to either the Company or Yissum prior to the execution of this Agreement will remain the sole property of either the Company or Yissum, respectively. |
All data generated from the provision of the Research Services, including the Scientific Report, which are specifically required and contemplated under the Research Services Protocol, shall be owned by the Company upon full payment of the Research Services Fee (the “Company Data”).
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Notwithstanding the above, all rights, title and interest in all inventions, discoveries, methods, new uses, processes or compounds, whether or not capable of registration, and any patent applications or patents based thereon, discovered or developed by the Researcher or Dr. Shilo during the course of the provision of the Research Services and as a result thereof shall be solely owned by Yissum (the “Yissum Inventions”).Yissum shall include such Yissum Inventions in its license agreement with LipoCureRx Ltd., dated November 5, 2013, as amended (the “Yissum-LipoCureRx Agreement”), and LipoCureRx, as indicated by its signature at the end of this Agreement, shall include such Yissum Inventions in the sublicense agreement LipoCureRx signed with the Company on March 19, 2018 (the “LipoCureRx-Virpax Agreement”); in both cases upon the same terms and conditions already in place in each of the Yissum-LipoCureRx Agreement and the LipoCureRx-Virpax Agreement. Yissum hereby warrants that (a) the Researcher and the persons working under his supervision have an obligation to assign their rights to any Yissum Inventions to Yissum; and (b) Yissum will perfect all documents necessary to effectuate the assignment of Yissum Inventions from the Researcher and his staff to Yissum.
7. | Confidentiality: Yissum and the Researcher agree to maintain the confidentiality of any information disclosed to them by the Company in connection with the Research Services, which the Company identifies as confidential at the time of disclosure (“Confidential Information”), and not to make public any such Confidential Information without the prior written permission of the Company. This undertaking shall not apply to Confidential Information that is in the public domain at the time of disclosure or thereafter enters the public domain through no fault of Yissum or the Researcher; or that the Researcher can show, by contemporaneous written evidence, was already known to him at the time of disclosure; or that is provided to Yissum or the Researcher by a third party having no obligations of confidentiality to the Company; or that is independently developed by an employee of the Hebrew University who is not the Researcher. In addition, Yissum or the Researcher shall be entitled to disclose Confidential Information pursuant to a valid judicial or administrative order, provided that they shall provide prompt notice to the Company of their receipt of such an order to allow the Company to seek relief against such order. |
8. | Publications. The Parties shall have the right to publish in writing in scientific journals or orally at scientific conventions the results of their development activities, including clinical trials. Each Party shall have the right to review and comment on any material proposed for disclosure or publication by the other, its Affiliates, such as by oral presentation, manuscript or abstract that includes Confidential Information of a Party. Before any such material is submitted for publication or disclosure (other than oral presentation materials and abstracts, which are addressed below), the publishing Party shall deliver (or cause to be delivered) a complete copy to the other Party at least 30 days prior to submitting the material to a publisher or initiating such other disclosure, and the nonpublishing Party shall review any such material and give its comments to the publishing Party within 10 days of the delivery of such material to non-publishing Party which comments shall not be unreasonably rejected. Each Party shall comply with the non-publishing Party’s requests to delete references to the non-publishing Party’s Confidential Information or any other information that could reasonably have a negative effect on the development of commercialization of a product in any such material and, if applicable, agrees to delay any submission for publication or other public disclosure for a period of up to an additional 60 days for the purpose of preparing and filing appropriate patent applications. Yissum and Researcher shall not publish or otherwise disseminate, including, but not limited to, in articles, posters, oral presentations or other formats, any information relating to the Research without the prior written consent of Virpax. The Parties recognize that Yissum retains comparable rights of publication pursuant to the terms of the Yissum-LipoCureRx Agreement. |
9. | Use of Names: Neither Party shall make any use of any kind of the other Party’s names, the names of the other Party’s employees or affiliates, or the Terms of this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld. |
10. | Relationship of the Parties: The Parties do not stand in a relationship of employer-employee. Such relationship shall be that of an independent contractor. |
11. | Dispute Resolution: This Agreement shall be construed and governed in accordance with the laws of England and Wales. The Parties to this Agreement shall try to come to an amicable settlement of controversies or disputes arising out of this Agreement or about its validity. Should they fail to settle them amicably, the dispute shall be settled by arbitration in accordance with the then existing Rules of Arbitration of the International Chamber of Commerce, by which each Party hereto agrees to be bound. Such arbitration shall be held in London, England. |
12. | Authorized Signatories: Signature by at least two authorized representatives of Yissum on this Agreement shall constitute Yissum’s approval and agreement to all that is written herein. The Company warrants that the person or persons signing this agreement is/are authorized to bind the Company. |
2
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
13. | Disclaimer of Warranty, Liability and Indemnification: |
(a) Nothing contained in this Agreement shall be construed as a warranty on the part of Yissum that any results or inventions will be achieved by the Research Services, or that the results of the Research Services, if any, are or will be of commercial or scientific value to the Company.
(b) Yissum and the Hebrew University, and their respective parents, affiliates, officers, directors, employees, agents and contractors, (all such parties collectively: the “Indemnitees”), shall not be liable for any claims, actions, demands, losses, damages, costs and expenses (including without limitation legal fees) (collectively: “Claims”) made, brought or suffered by the Company or by any third parties arising from any exploitation or use of the Research Services provided (including without limitation any Research Services work product and data).
(c) In the event of any third-party Claims are brought against any of the Indemnitees as set out above, the Company shall indemnify the relevant Indemnitees and hold them harmless from and against any and all such damages, liability, losses, costs and/or expenses
(d) Each Party represents and warrants to the other that it has the legal right and power to enter into this Agreement, to extend the rights granted to the other in this Agreement, and to fully perform its obligations hereunder, and that the performance of such obligations will not conflict with its charter documents, policies or any agreements, contracts, or other arrangements to which it is a Party.
14. | Termination: |
(a) | Unless terminated in accordance with the provisions of this Agreement, this Agreement shall end upon the presentation of the Scientific Report. |
(b) | Each Party shall be entitled to terminate this Agreement in the event of a breach by the other Party of its obligations under this Agreement, including, but not limited to, any payment failure, which is not remedied by the breaching Party within 30 days of receipt of written notice from the non-breaching Party. |
(c) | If the Agreement is terminated prior to the end of the Research Services Period, all amounts paid under this Agreement up to the date of termination shall be considered as non-refundable. |
(d) | Sections 6, 7, 8, 9, 11 and 13 shall survive termination of this Agreement. |
Virpax Pharmaceuticals, Inc.
101 Lindenwood Drive, Suite 225 Malvern, PA 19355 USA |
Yissum Research Development Company of the Hebrew University of Jerusalem Ltd.
Hi-Tech Park, Edmond J. Safra Campus, Givat Ram, P.O.B 39135, Jerusalem 91390, Israel |
|
By: /s/ Anthony P. Mack | By: /s/ Dr. Keren-Or Amar and /s/ Itzik Goldwaser | |
Name: Anthony P. Mack | Name: Dr. Keren-Or Amar Itzik Goldwaser, CEO of Yissum | |
Title: Chairman and CEO | Title : VP Business Development Healthcare Yissum |
3
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Researcher’s Agreement: I the undersigned, Prof. Yechezkel Barenholz of the Hebrew University of Jerusalem, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to fully cooperate with Yissum in order to ensure its ability to fulfill its obligations hereunder, as set forth herein.
Signature: /s/ Yechezkel Barenholz
Consent of LipoCureRx Ltd.:
LipoCureRx hereby consents to the provisions of section 6 of this Agreement regarding the inclusion of any Yissum Inventions in the sublicense set forth in the LipoCureRx-Virpax Agreement upon the same terms and conditions in such agreement.
/s/ Liana, Patt | |
Name: Liana Patt | |
Title: CEO | |
Date: |
4
Certain identified information has been excluded because it is both not material and would likely cause competitive harm if publicly disclosed.
Appendix A
Description of the Research Services:
The objective of the second year project of the Ph.D. student Yael-Shilo include:
2nd Year Plan of Operation
[**]
This second year program involves work load too heavy for Yael alone and therefore Yael will be supported from time to
time as needed by other people of my lab.
Appendix B
A budget for the Research, including at least the following categories:
a. | Personnel 100% |
The budget is defined as monthly payment in item 5 of the agreement
5
Exhibit 10.19
Certain identified information has been
excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
COLLABORATION AND LICENSE AGREEMENT
BETWEEN
NANOMERICS Ltd
AND
VIRPAX PHARMACEUTICALS, INC.
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
COLLABORATION AND LICENSE AGREEMENT
This Collaboration and License Agreement (this “Agreement”) is made effective as of the 7th of August 2020 (the “Effective Date”), by and between
(1) | NANOMERICS Ltd., with offices at New Bridge Street House, 6th Floor, 2 London Wall Place, London EC2Y 5AU, UK (“Nanomerics”); and |
(2) | VIRPAX PHARMACEUTICALS, INC., with offices at 1554 Paoli Pike, PMB 279, West Chester, PA 19380, USA (“Virpax”). |
Recitals
(A) | WHEREAS, Nanomerics owns or otherwise Controls, certain rights to the Compound, Device and Product (as these terms are defined below); |
(B) | WHEREAS, Virpax is in the business of acquiring, developing, manufacturing, marketing and selling pharmaceutical products; |
(C) | WHEREAS, the Parties wish to enter into a pre-clinical and clinical collaboration under which Virpax will develop the Products for use in the Field; |
(D) | WHEREAS, in accordance with the terms and conditions set forth herein, Nanomerics desires to grant an exclusive license to Virpax, and Virpax desires to take such a license, to further develop and commercialise Products in the Territory. |
Agreement
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
1. | Definitions |
Unless otherwise specifically provided in this Agreement, the following terms when used with a capital letter at the beginning, shall have the following meanings:
“Affiliate” means, with respect to a Person, any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first Person. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” mean (a) the power to direct the management or policies of a Person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance, resolution, regulation or otherwise, or (b) to own more than 50% of the outstanding voting securities or other ownership interest of such Person.
Page 1 of 44
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
“Annual Net Sales” means the Net Sales made during a given Calendar Year.
“Applicable Law” means the applicable laws, rules and regulations, including any rules, regulations, guidelines or other requirements of the Health Authorities that may be in effect from time to time.
“Calendar Quarter” means each successive period of three (3) calendar months commencing on 1st January, 1st April, 1st July and 1st October.
“Calendar Year” means each successive period of twelve (12) calendar months commencing on 1st January.
“Change of Control” shall mean with respect to Virpax, the occurrence of any of the following events from and after the Effective Date: (a) any Person or group of Persons becomes the beneficial owner (directly or indirectly) of more than fifty percent (50%) of the voting shares of Virpax or (b) Virpax consolidates with or merges into or with another Person pursuant to a transaction in which more than fifty percent (50%) of the voting shares of the acquiring or resulting entity outstanding immediately after such consolidation or merger is not held by the holders of the outstanding voting shares of Licensee immediately preceding such consolidation or merger. For clarity, an initial public offering shall not constitute a “Change of Control” for purposes of this Agreement.
“Clinical Development Plan” means the plan attached hereto as SCHEDULE 1: Clinical Development Plan outlining the proposed clinical development of the first Licensed Product up through the end of Phase II Clinical Trials, as may be amended from time to time in accordance with Article 21. In the event that Virpax decides in its sole discretion to pursue development of a Medical Device Product rather than a Drug Product, the Clinical Development Plan will be updated accordingly.
“Compound” means Nanomerics’ NCE proprietary compound known as [**].
“Commercial Milestone” has the meaning set forth in Section 7.3.
“Commercially Reasonable Efforts” means, with respect to the clinical development or Exploitation of the Product, or with respect to any other obligation of a Party hereunder as the case may be, efforts and resources commonly used in research-based pharmaceutical companies of similar standing as the Party (assuming, in the case of Virpax, that Virpax is funded consistent with the Funding Plan) in question to discharge a similar obligation or accomplish a similar objective with respect to compounds or products with similar commercial and scientific potential at a similar stage in their lifecycle or in a similar therapeutic area, taking into consideration their safety and efficacy, their cost to develop, the competitiveness of alternative compounds and products and the nature and extent of their market exclusivity (including Patent coverage and regulatory exclusivity), the likelihood of Health Registration Approval, their expected profitability, including the potential patient population, amounts of marketing and promotional expenditures and all other relevant factors. Commercially Reasonable Efforts shall be determined based on the Territory as a whole and without reference to specific markets or group of markets. Where Funding has not been secured at the Funding Completion Date and Virpax notifies Nanomerics as per section 13.5.1 that it wishes to proceed under the Agreement, Commercially Reasonable Efforts shall be equivalent to efforts that would have been put in place by Virpax if the Funding had been received by the Funding Completion Date.
Page 2 of 44
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
“Confidential Information” means any and all data, results, know-how (including the Licensed Know-How), plans, business information and other Information, whether oral or in writing or in any other form, disclosed before, on or after the Effective Date by one Party to the other Party, including the terms of this Agreement.
“Control” means, with respect to any item of information, Patent or other IP Protection Right, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such information, Patent or other IP Protection Right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party, or the rights of any Third Party in or to such information, Patent or other IP Protection Right.
“COVID-19 Pandemic” means the pandemic of coronavirus disease 2019 (COVID 19) caused by severe acute respiratory syndrome coronavirus 2 (SARS CoV 2), declared by the World Health Organization as a pandemic on 11 March 2020.
“Defending Party” has the meaning set forth in Section 10.9.
“Device” means the drug delivery [**].
“Device Condition Date” means the date upon which the parties determine in accordance with Section 4.8, that the Device is the chosen device for use in the Licensed Product.
“Disclosing Party” has the meaning set forth in Section 9.2.
“Distributor” has the meaning set forth in Section 3.2.
“Drug Product” means any Products assessed by a relevant Health Authority to meet the definition of a drug, including by the FDA in accordance Section 201(g) of the Food, Drug, and Cosmetic Act (21 USC 321(g)).
“Effective Date” means the date as set forth in the preamble to this Agreement.
“Exploit” means to make, have made, import, use, sell, or offer for sale, including to research, develop, apply for and hold Health Registration Approval, register, modify, enhance, improve, Manufacture, have Manufactured, hold/keep (whether for disposal or otherwise), formulate, optimise, have used, export, transport, distribute, promote, market or have sold or otherwise dispose or offer to dispose of, a product or process.
Page 3 of 44
Certain identified information has been excluded because it is both not material and would likely cause
competitive harm if publicly disclosed.
“Exploitation” means the act of Exploiting a product or process.
“Field” means use of the Product for local administration to nose and/or throat as an anti-viral barrier to prevent or reduce the risk or the intensity of viral infections in humans.
“First Commercial Sale” means the first sale for monetary value for use or consumption by the general public of a Licensed Product in any country of the Territory after Health Registration Approval for such Licensed Product has been obtained in such country in the Territory. For the avoidance of doubt, sales prior to receipt of all Health Registration Approvals necessary to commence regular commercial sales, such as so-called “treatment IND sales,” “named patient sales” and “compassionate use sales,” shall not be a First Commercial Sale.
“Force Majeure” means an event that is beyond a Party’s reasonable control, including acts of God, strikes, lock-outs or other industrial/labour disputes (including shortages of labor or materials but not confined to the workforce of the affected Party), war, riot, civil commotion, terrorist act, malicious damage, epidemics, pandemics (other than the COVID-19 Pandemic), quarantines, fire, flood, storm, or natural disaster, governmental laws, rules or any other similar cause. For the avoidance of doubt, any of the foregoing or similar circumstances arising in connection with or as a consequence of COVID-19 or the COVID-19 Pandemic shall not be regarded as, and shall be deemed not to be, an event of Force Majeure.
“Funding” means funding in cash or in kind to be raised or acquired by Virpax from one or more Third Parties for use in the Program as described and in the amounts specified in SCHEDULE 3: FUNDING PLAN hereto (the “Funding Plan”).
“Funding Completion Date” means the date being the earlier of: (a) the date upon which the Funding has been fully received by Virpax; and (b) the Funding Waiver Date as specified in Section 13.5.1.
“Funding Expiry Date” means the date (if any) specified as such in the Funding Plan and as defined in Section 13.5.1 or if no such date is specified the [**].
“Generic Product” means product (other than Licensed Products) comprising Compound as the active ingredient delivered intranasally, the marketing approval for which has been obtained by reference to data comprised in any Health Registration Approval for the Licensed Product.
“Health Authority” means the US Food and Drug Administration (“FDA”), Health Canada, and any applicable supra-national, federal, national, regional, state, provincial or local regulatory agencies, departments, bureaus, commissions, councils or other government entities regulating or otherwise exercising authority with respect to the Exploitation of the Product in the Territory.
“Health Registration Approval” means, with respect to a country in the Territory, any and all approvals, licenses, registrations or authorisations of any Health Authority necessary to commercially distribute, sell or market a Licensed Product in such country, including, where applicable, (a) pricing or reimbursement approval in such country, (b) pre- and post-approval marketing authorisations (including any prerequisite manufacturing approval or authorisation related thereto), and (c) labelling approval.
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“IDE” means an investigational device exemption allowing a medical device to be used in a clinical study in order to generate safety and effectiveness clinical data to support a PMA.
“Improvement” means any improvement, adaptation, modification or upgrading relating to the Compound, the Device, or the Licensed Products arising during the Term, and any IP Protection Rights relating thereto.
“In-licensed Patents” has the meaning set forth in Section 11.2.2.
“IND” means an Investigational New Drug application in the US, or any equivalent application in any other jurisdiction.
“Indemnified Party” means a Party, its Affiliates or its or their respective directors, officers, employees, agents, partners and shareholders seeking to recover a Loss under Section 12.1 or 12.2.
“Indemnifying Party” means a Party from whom recovery of a Loss is sought under Section 12.1 or 12.2.
“Indirect Taxes” means value added taxes, sales taxes, consumption taxes and other similar taxes.
“Information” means all technical, scientific and other know-how and information, trade secrets, knowledge, technology, means, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results, laboratory notes and notebooks, and other material, including: high- throughput screening, gene expression, genomics, proteomics and other drug discovery and development technology; biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre- clinical, clinical, safety, manufacturing and quality control data and information, including study designs and protocols; assays and biological methodology; Manufacturing and quality control procedures and data, including test procedures; and synthesis, purification and isolation techniques, (whether or not confidential, proprietary, patented or patentable) in written, electronic or any other form now known or hereafter developed, but excluding the Regulatory Documentation.
“Infringement Suit” has the meaning set forth in Section 10.8.2.
“IP Protection Rights” means any and all legal means of establishing rights in and to ideas, inventions, discoveries, know-how, data, databases, documentation, reports, materials, writings, designs, computer software, processes, principles, methods, techniques and other information, including Patents, trade secrets, trademarks, service marks, trade names, registered designs, design rights, copyrights (including rights in computer software and database rights), domain names and any rights or property similar to any of the foregoing in any part of the world, whether registered or not, together with the right to apply for the registration of any such rights.
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“Joint Research Committee” or “JRC” means the joint committee established by the Parties pursuant to Article 5 to manage and steer the Program.
“Knowledge” means the good faith understanding of any given facts and information of a senior qualified person of Nanomerics as of the Effective Date after having used Commercially Reasonable Efforts to perform a reasonable investigation with respect to such facts and information immediately prior to the Effective Date.
“Licensed Know-How” means the Licensed Compound Know-How and the Licensed Device Know-How.
“Licensed Compound Know-How” means all Information (other than the Licensed Device Know-How) which is in the possession of Nanomerics or its Affiliates and that Nanomerics or its Affiliates own or otherwise Control, as of the Effective Date or at any time during the Term that is necessary or useful for the Exploitation of the Product.
“Licensed Device Know-How” means all Information which is in the possession of Nanomerics or its Affiliates and that Nanomerics or its Affiliates Control, as of the Effective Date or at any time during the Term that is necessary or useful for the Exploitation of the Device as part of the Product.
“Licensed Improvement” means any Improvement to the Licensed Know-How that comes under the Control of Nanomerics at any time during the Term.
“Licensed Patents” means the Patents set out in SCHEDULE 4: LICENSED PATENTS hereto, and any Patents owned or Controlled by Nanomerics or its Affiliates after the Effective Date. Part A of Schedule 4 lists the Licensed Patents for the Compound, Part B of Schedule 4 lists the Licensed Patents for the Device.
“Licensed Products” means any Drug Products and any Medical Device Products.
“Losses” means any and all direct or indirect liabilities, damages, losses or expenses, including interest, penalties, and reasonable lawyers’ fees and disbursements. In calculating Losses, the legal duty to mitigate on the part of the Party suffering the Loss shall be taken into account.
“Manufacture” and “Manufacturing” means, with respect to the Compound, Device or Licensed Product the synthesis, manufacturing, processing, formulating, packaging, labelling, holding and quality control testing thereof.
“Major Markets” means the USA, Canada, and Mexico.
“Medical Device Products” means any Products assessed by a relevant Health Authority to meet the definition of a medical device, including by the FDA in accordance with Section 201(h) of the Food, Drug, and Cosmetic Act (21 USC 321(h)).
“Nanomerics Results” means all Results specific to: (a) the Device, its manufacture or use; and, (b) the Compound, but excluding any Results relating to the Licensed Products, including the development, manufacture and commercialization of such Licensed Products.
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“NDA” means a New Drug Application filed in accordance with Section 505(b)(1) or 505(b)(2) of the US Food Drug & Cosmetic Act (“the Act”) and applicable regulations and requirements of the United States Food and Drug Administration and any successor agency thereto (“FDA”) as from time to time amended and in effect, or any equivalent application in any other jurisdiction.
“Net Sales” means the gross amounts received for sales of Licensed Products by or on behalf of Virpax, its Affiliates and its and their Sublicensees to Third Parties, after deduction of, to the extent actually paid, allowed or levied on Virpax, and not otherwise recovered:
a) | normal and customary trade, quantity or prompt settlement discounts (including rebates, chargebacks and allowances) actually allowed, price adjustments; and purchasing group, wholesaler and distributor administration fees, commissions and services fees actually paid; |
b) | amounts repaid or credited because of rejections, returns or recalls of goods, including amounts paid or refunded for wastage and outdated products; |
c) | rebates and similar payments made with respect to sales paid for by any governmental or regulatory authority such as, by way of illustration and not in limitation of the Parties’ rights hereunder, Federal or state Medicaid, Medicare or similar state program in the United States or equivalent governmental program in any other country; |
d) | excise taxes, Indirect Taxes, customs duties, customs levies and import fees imposed on the sale, importation, use or distribution of the Products; |
e) | other customary deductions consistent with Generally Accepted Accounting Principles, or in the case of non-United States sales, other applicable accounting standards; and |
f) | charges made and received for storage, handling, transportation, packaging, postage, insurance and other distribution expenses. |
Net Sales shall be calculated using Virpax’ audited systems used to report such sales as adjusted for any of items (a) to (f) above not taken into account in such systems.
“Owned Patents” has the meaning set forth in Section 11.2.2
“Parties” means Virpax and Nanomerics and “Party” means either of Virpax or Nanomerics.
“Patents” means (a) all national, regional and international patents and patent applications, including provisional patent applications, (b) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from either of these, including divisionals, continuations, continuations-in-part, provisionals, converted provisionals, and continued prosecution applications, (c) any and all patents that have issued or in the future issue from the foregoing patent applications ((a) and (b)), including utility models, petty patents and design patents and certificates of invention, (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re- examinations and extensions (including any supplementary protection certificates and the like) of the foregoing patents or patent applications ((a), (b) and (c)), and (e) any similar rights, including so-called pipeline protection, or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any such foregoing patent applications and patents.
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“Payments” has the meaning set forth in Section 8.1.
“Person” shall mean any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency or other entities not specifically listed herein.
“Phase I Clinical Trial” means a human clinical trial of a product that would satisfy the requirements of U.S. 21 C.F.R. Part 312.21(a) (as amended), and is intended to (a) determine the safety, pharmacokinetics and pharmacodynamics parameters in healthy individuals or patients, and (b) following the foregoing clause (a), further evaluate safety and pharmacokinetics (including exploration of trends of a biomarker-based or clinical endpoint-based efficacy relationship to dose which are not designed to be statistically significant) of the product, whether or not in combination with concomitant treatment and which provides sufficient evidence of safety to be included in filings for a Phase II Clinical Trial or a Phase III Clinical Trial with Health Authorities. A Phase I Clinical Trial shall be deemed to have commenced when the first subject is dosed in such Phase I Clinical Trial.
“Phase II Clinical Trial” means a human clinical trial of a product that would satisfy the requirements of U.S. 21 C.F.R. Part 312.21(c), as amended, and is intended to (a) establish that the product is safe and efficacious for its intended use (define contraindications, warnings, precautions and adverse reactions that are associated with the product in the dosage range to be prescribed, and (c) support Health Registration Approval for such product. A Phase II Clinical Trial shall be deemed to have commenced when the first patient is dosed in such Phase II Clinical Trial.
“Pivotal Trials” means, for Medical Device Products only (and not for Drug Products) an IDE which is intended as the primary clinical investigation to generate the data to support a marketing approval application (“PMA”)
“Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.
“Pre-clinical Development Plan” means SCHEDULE 5: PRE-CLINICAL DEVELOPMENT PLAN hereto outlining pre-clinical work remaining as of the Effective Date in order to file an IND with the FDA for the first Licensed Product in the United States. In the event that Virpax decides in its sole discretion to file an IDE rather than an IND for the Licensed Product, the Pre-clinical Development Plan will be updated accordingly.
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“Product” means an anti-viral nasal and/or throat spray applied as a barrier to prevent, or reduce the risk of infection, such spray containing Compound as the only pharmaceutically active ingredient, in finished form for human use and that may, at Virpax’s discretion, incorporate the Device.
“Program” means the activities to be undertaken by the Parties under the Funding Plan, the Pre-clinical Development Plan and the Clinical Development Plan.
“Program Milestone” has the meaning set forth in Section 7.2.
“Prosecuting Party” has the meaning set forth in Section 10.5.
“Receiving Party” has the meaning set forth in Section 9.2.
“Regulatory Documentation” means all regulatory filings and supporting documents created or submitted to the FDA or any equivalent agency or Health Authority outside of the United States (including any supra-national agency such as in the European Union) and all data contained therein including, without limitation, the contents of any IND(s), NDA(s), IDEs, PMAs, drug master file(s),Health Registration Approvals, correspondence to and from the FDA or any equivalent agency or Health Authority outside of the United States, minutes from meetings (whether in person or by audioconference or videoconference) with regulatory authorities, registrations and licenses, regulatory drug lists, advertising and promotion documents shared with regulatory authorities, adverse event files, complaint files, annual and safety reports, manufacturing records, and, inspection reports, and all supporting documents and all clinical studies and tests, relating to the Product, and all data contained in any of the foregoing.
“Results” means ideas, inventions, discoveries, know-how, data, documentation, reports, materials, writings, designs, computer software, processes, principles, methods, techniques and other information, recorded in any form, that are discovered, conceived, reduced to practice or otherwise generated through work performed under or in connection with the Program by or on behalf of either Party or by the Parties jointly, including any IP Protection Rights pertaining to any of the foregoing,.
“Sublicensee” has the meaning set forth in Section 3.2.
“Term” means the period beginning on the Effective Date and continuing until the earlier of the date upon which this Agreement expires by its terms or is terminated in accordance with Article 13.
“Territory” means North America including US, Canada, and Mexico.
“Third Party” means any Person not including the Parties and the Parties’ respective Affiliates.
“Third Party Claim” has the meaning set forth in Section 12.1.
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“Third Party Sublicense Payment” means any cash consideration (upfront, “license fee”, regulatory milestone payments or payments for the first commercial sale of sublicensed products) or any non- cash consideration (to be valued at any relevant open market price for such or, if an open market price is not ascertainable, at a reasonable value determined at an arms-length basis), received by Virpax net of any Indirect Taxes in return for any sublicense granted to a Third Party pursuant to Section 3.1 below. Third Party Sublicense Payment shall not include (i) royalties or commercial milestones payments (other than payments for the first commercial sale of sublicensed products) (ii) the value of any purchase of Virpax’s stock to the extent such stock is purchased for fair market value (iii) direct research and development expenses incurred by Virpax and required to incurred by Virpax under any non-Affiliate sublicense agreement (iv) the value of any debt at arm’s length and (v) any amounts received by Virpax as reimbursement for any out of pocket expenses.
“Trademark” means any word, name, symbol, colour, designation or device or any combination thereof for use in the course of trade, including any domain name, trademark, trade dress, brand mark, trade name, brand name, logo or business symbol used by Virpax in connection with the Compound or Licensed Products.
“Valid Claim” means, with respect to a Licensed Product in a particular country, either:
(i) | any claim of a granted and unexpired Licensed Patent in such country that (a) has not been held permanently revoked, unenforceable or invalid 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, and (b) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise; or |
(ii) | a claim of a pending Licensed Patent application, which claim was filed and is being prosecuted in good faith and has not been abandoned or finally disallowed without the possibility of appeal or re-filing of the application, provided that such claim has not been pending for more than five (5) years. |
“Virpax Information” has the meaning set forth in Section 9.1.
“Virpax Results” means all Results other than the Nanomerics Results.
2. | Construction |
Except where the context requires otherwise, whenever used the singular includes the plural, the plural includes the singular, the use of any gender is applicable to all genders and the word “or” has the inclusive meaning represented by the phrase “and/or.” Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The headings of this Agreement are for convenience of reference only and do not define, describe, extend or limit the scope or intent of this Agreement or the scope or intent of any provision contained in this Agreement. The term “including” or “includes” as used in this Agreement means including, without limiting the generality of any description preceding such term. The wording of this Agreement shall be deemed to be the wording mutually chosen by the Parties and no rule of strict construction shall be applied against any Party.
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3. | Grant of Rights |
3.1 | License Grants to Virpax. Subject to the terms and conditions of this Agreement, Nanomerics hereby grants to Virpax: |
3.1.1. | as from the Effective Date, an exclusive (including with regard to Nanomerics and its Affiliates) right and license in the Territory, with the right to grant sublicenses pursuant to Section 3.2, under Nanomerics’ and its Affiliates’ rights, titles, and interests in and to the Licensed Patents for the Compound, the Licensed Compound Know-How, the Licensed Improvements to the Compound, and Nanomerics Results to Exploit the Licensed Products solely in the Field; and, |
3.1.2. | as from the Device Condition Date, an exclusive (as between Nanomerics and its Affiliates and Virpax) right and license in the Territory, with the right to grant sublicenses pursuant to Section 3.2, under Nanomerics’ and its Affiliates’ non-exclusive rights, titles, and interests in and to the Licensed Patents for the Device, the Licensed Device Know-How, and the Licensed Improvements to the Device to Exploit the Licensed Products solely in the Field. |
3.2 | Sublicenses. Virpax shall have the right to grant sublicenses, through multiple tiers of sublicenses, under the licenses granted in Section 3.1, to its Affiliates and to any other Person provided that: |
3.2.1. | the sub-license is in writing and contains like obligations and undertakings by the sub-licensee as are contained in this Agreement including in particular (but not limited to) clause 9 (confidentiality), and Virpax ensures that all sub-licensees duly observe and perform the same; and; |
3.2.2. | Virpax shall remain primarily responsible for all acts and omissions of such sub-licensees as though they were by Virpax and shall indemnify, keep indemnified and hold harmless Nanomerics from and against all such costs, expenses and liabilities, which Nanomerics incurs or suffers as a result of the default or negligence of any sub-licensee; |
3.2.3. | the sub-license will terminate automatically on the expiration or termination of this Agreement for any reason; |
3.2.4. | Virpax shall notify Nanomerics in writing of any sub-license granted pursuant to this clause and shall at the same time provide Nanomerics with a copy of such sub-license, redacted as to any commercially sensitive or confidential provisions. |
3.2.5. | Virpax shall otherwise ensure that all Persons to which it grants sublicenses comply with all terms and conditions of this Agreement. |
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Where Virpax grants a sublicense to a Person that is not an Affiliate of Virpax, and such Person is not a Distributor, such Person shall be a “Sublicensee” for purposes of this Agreement.
Virpax shall have the right, in its sole discretion, to appoint its Affiliates, and Virpax and its Affiliates shall have the right, in their sole discretion, to appoint any other Persons, in the Territory or in any country of the Territory, to distribute, market and sell Licensed Product (with or without packaging rights), in circumstances where the Person purchases on its own account its requirements of Licensed Product from Virpax or its Affiliates for on- sale to such Person’s customers. Such Person shall be identifiable in the pharmaceutical industry, and would usually be designated as a wholesaler or a distributor, and such Person shall not otherwise make any royalty or other payment to Virpax with respect to its sale of Licensed Products. Where Virpax or its Affiliates appoints such a Person and such Person is not an Affiliate of Virpax, that Person shall be a “Distributor” for purposes of this Agreement.
3.3 | Covenants |
3.3.1. | Publication To the extent Nanomerics and its Affiliates conduct research and development activities with respect to Licensed Products outside the Territory or outside the Field and consistent with the exclusive license grants to Virpax under Section 3.1, Nanomerics agrees that neither it nor its Affiliates will publish or present any material with respect to such activities without the prior written consent of Virpax in each case, which consent will not be unreasonably withheld or delayed. For the avoidance of doubt, the Parties acknowledge that University College London (“UCL”) retains a research license with respect to patents underlying the Compound which allows UCL’s employees and students to conduct bona fide academic research or teaching without infringing such patents, and that UCL its employees or students together with its research collaborators may make publications or presentations complying with such research license, and may make related patent applications, over which Nanomerics has no control. |
3.3.2. | Non-Compete. During the Term, Nanomerics covenants that it and its Affiliates shall not alone or with any Third Party (including through licensing or sublicensing any Third Party), directly or indirectly, develop, Manufacture, or commercialize in the Territory any product, (other than a Licensed Product in accordance with this Agreement) comprising, containing or incorporating the Compound as the sole active ingredient for any use in prevention or reduction of the risk of any viral infection. |
3.3.3. | The Parties acknowledge that all restrictions contained in Section 3.3.2 are reasonable, valid and necessary for the adequate protection of the Licensed Product business and that Virpax would not have entered into this Agreement without the protection afforded it by Section 3.3.2. The Parties also acknowledge that Nanomerics’ entire business is based on development of the Compound for various uses, including its combination with at least one other pharmaceutical compound or active ingredient to generate new or improved medicinal products, and therefore nothing in these restrictions, nor in any other provision of this Agreement shall act as or be construed as any restriction on Nanomerics’ right to, either itself or through licensees, Exploit and/or otherwise research, develop and commercialize products containing the Compound, provided that such products also contain at least one other pharmaceutical compound or active ingredient or are for any purpose outside the Field. |
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3.3.4. | No Encumbrance. Nanomerics shall not assign, transfer, convey or otherwise encumber its rights to the Licensed Patents, Licensed Know-How, Licensed Improvements or Health Registration Approvals in any way that is detrimentally inconsistent with the exclusive licenses or other rights granted to Virpax under this Agreement. |
3.4 | Exclusivity Term. Virpax’s exclusive position granted by Section 3.1 shall expire with respect to each separate Licensed Product, on a country-by-country basis, on the date when Virpax’s obligation to pay royalties with respect to such Licensed Product pursuant to Section 7.9 expires. Upon expiry of Virpax’s exclusive position with respect to a Licensed Product in a country, Virpax’s license with respect to such Licensed Product in such country shall become non-exclusive, fully paid-up, perpetual and irrevocable and the Net Sales of such Licensed Product in such country shall be excluded from all Net Sales calculations in Article 7 (including the calculation of royalties, thresholds and ceilings). In such circumstances (but not in any circumstance where this Agreement has been terminated by Nanomerics for breach by Virpax, or by Virpax at will) Virpax, its Affiliates and Sub-licensees shall be allowed to continue Exploiting such Licensed Product and using all Licensed Know-How and Joint Know-How in connection therewith on a non-exclusive basis in such country with no further consideration to Nanomerics. |
4. | Delivering the Program |
4.1 | Information Disclosure; Assistance. Nanomerics shall, and shall cause its Affiliates to, at Virpax’s cost but without additional compensation, disclose and make available to Virpax, in whatever form Virpax may reasonably request, for the purposes of technology transfer, Regulatory Documentation, Licensed Know-How, Licensed Improvements and any other Information claimed or covered by any Licensed Patent or otherwise relating, directly or substantially, to the Compound or Licensed Products, as soon as reasonably practical after the Effective Date (and thereafter during the Term as may be reasonably requested by Virpax from time to time) to the extent not done so already and thereafter promptly after the earlier of the development, making, conception or reduction to practice of each such item of Regulatory Documentation, Licensed Know-How, Licensed Improvement or other Information. |
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4.2 | Diligence Obligations. Effective from the Funding Completion Date, Virpax undertakes to (i) use Commercially Reasonable Efforts at its own cost and expense to develop at least one Licensed Product and to conduct all development necessary to obtain Health Registration Approvals for a Licensed Product in each of the Major Markets in the Territory, and (ii) use Commercially Reasonable Efforts to Exploit such Licensed Product in each of the Major Markets in the Territory, provided, however, that the performance of such obligations including any Exploitation by Virpax, are not hindered or affected by any act or omission of Nanomerics.. For the avoidance of doubt, Virpax shall not be obligated to obtain Health Registration Approval for, or commercialise, more than one Licensed Product in any Major Market. In the event that Virpax, in consultation with Nanomerics, decides to discontinue the development or commercialisation of a Licensed Product in favour of another Licensed Product, its obligations under this Section 4.2 shall cease with respect to such initial Licensed Product in favour of such other Licensed Product. Virpax shall perform its obligation under this Section 4.2 in good scientific manner and in compliance in all material respects with all Applicable Law. Virpax shall have no other obligations towards Nanomerics, express or implied, to Exploit Licensed Products in the Territory. Notwithstanding anything herein to the contrary, Virpax shall be deemed not to have met the diligence obligations in this Section 4.2 should it have failed to dose the first subject in (and thereafter diligently pursue in good faith) a Phase I Clinical Trial of a Drug Product or equivalent formal clinical study, dependent on the appropriate regulatory pathway, within twelve (12) months of the Funding Completion Date. |
4.3 | Reporting Virpax shall provide Nanomerics (through JRC or otherwise) with quarterly progress reports on the clinical development of Licensed Products in the Territory. Such report shall cover general information on Virpax’s clinical development activities in the previous Calendar Quarter, a summary of the activities planned in the next twelve (12) months, and a timetable of planned and actual submissions for Health Registration Approvals. Virpax shall keep Nanomerics updated in reasonable detail with respect to submissions for Health Registration Approvals, and progress therewith. In any event, if and when a Health Registration Approval is obtained in any country of the Territory, Virpax shall promptly inform Nanomerics of such Health Registration Approval. |
4.4 | Conduct of the Program. The Program shall be performed by Virpax in the Territory. Under the direction and supervision of the JRC, Virpax shall (a) perform or cause to be performed its obligations under the Program in good scientific manner and in compliance in all material respects with all Applicable Law, including good laboratory practices and good clinical practices, and (b) allocate sufficient time, effort, equipment and skilled personnel to complete such activities successfully and promptly. Following the Effective Date, Virpax shall promptly commence the Program, provided, however, that Virpax shall not be obligated to initiate any activities under the Clinical Development Plan until the Funding has been fully received by Virpax or Virpax has notified Nanomerics in accordance with section 13.5.1.1 that it has secured equal or greater funding from a Third Party source which is available and intended for the Program. |
4.5 | Cooperation. Each Party shall cooperate with any and all reasonable requests for assistance from the other Party with respect to the activities under the Program, including by making its employees, consultants and other scientific staff available upon reasonable notice during normal business hours at their respective places of employment to consult with such other Party on issues arising in connection with the Program. |
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4.6 | Regulatory Records. Nanomerics and Virpax each shall maintain, or cause to be maintained, records of its respective activities under the Program in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of its respective activities under the Program, which shall record only such activities and shall not include or be co-mingled with records of activities outside the scope of this Agreement, and which shall be retained by such Party for at least five (5) years after the termination of this Agreement, or for such longer period as may be required by Applicable Law. Each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records. |
4.7 | Regulatory Pathway. The Parties expressly acknowledge and agree that as of the Effective Date, Virpax intends to develop a Drug Product and does not intend to develop a Medical Device Product. Nanomerics expressly acknowledges and agrees that the decision to change regulatory pathways is solely within Virpax’s discretion and, notwithstanding anything to the contrary hereunder, Virpax is under no obligation to develop a Medical Device Product. |
4.8 | Device Selection. The decision regarding which device Virpax will use for the delivery of the Licensed Product is solely within Virpax’s discretion. If, however, Virpax would like to use the Device for delivery of the Licensed Product, at any time after Virpax makes the Payment specified in Section 7.3 (a), Virpax may provide written notice to Nanomerics that it would like to use the Device for delivery of the Licensed Product. If Nanomerics approves of such use, which approval it will not unreasonably withhold, condition or delay, Nanomerics will grant to Virpax the right to use such Device. The date that Nanomerics provides to Virpax its written approval shall be the “Device Condition Date”. |
5. | Management of the Program |
5.1 | Responsibilities of JRC. The Parties shall establish a Joint Research Committee (the “JRC”) to oversee the initiation, planning and performance of the activities under the Program. In particular, the responsibilities of the JRC shall include: (a) establishing prioritization criteria for specific components under the Program; (b) determining within thirty (30) days of the completion of each stage of the Program whether the completion thereof has been successful and deciding whether or not to continue the Program into the next stage (i.e., making “stop/go decisions”); (c) monitoring workflow and overall Program progress; (d) ensuring timely and appropriate collaboration in the filing of Patent applications; (e) assigning tasks and responsibilities taking into account each Party’s respective specific capabilities and expertise in order to avoid duplication and enhance efficiency and synergies; (f) monitoring timely execution of the Program; and (g) reviewing and proposing to the Parties any amendments to Program. |
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5.2 | Formation of JRC. The JRC shall consist of up to six (6) members with the requisite experience and seniority to enable them to make decisions on behalf of the Parties with respect to the Program, with equal numbers appointed by each Party, which shall include a Co-Chair to be designated by each Party. Each Party shall have the right to replace its respective JRC representatives upon written notice to the other Party, provided that any such substitute representative shall have substantially the equivalent experience and seniority as the representative that such person replaces. |
5.3 | Disputes. The JRC shall endeavour to reach consensus on all matters brought before it with each Party having a single vote, irrespective of the number of representatives actually in attendance at a meeting; provided, however, that in the event the JRC is unable to resolve an outstanding matter before it, such matter shall be resolved in good faith by the Parties’ CEOs. Any final decision mutually agreed to by the CEOs of the Parties shall be in writing and shall be conclusive and binding on the Parties. If such resolution is not achieved by the CEOs within thirty (30) days from the date the matter in dispute is first brought to their attention, and this occurs after start of clinical trials hereunder in regard of a Licensed Product, the dispute shall be resolved in accordance with Virpax’s position (except in the case of disputes relating to whether payment is due Nanomerics under this Agreement, which shall be resolved in accordance with Article 17). Any such dispute not resolved by the CEOs prior to start of such clinical trials shall be resolved in accordance with Article 17. |
5.4 | Meetings. The JRC shall meet quarterly and more frequently when required. The meetings will be held in person or by teleconference or videoconference. A quorum of the JRC shall exist whenever there is present at a meeting each of the Co-Chairs or their respective designees. In addition, the JRC may act without a formal meeting by a written memorandum signed by the Co-Chairs of the JRC. Whenever any action by the JRC is required hereunder during a time period in which the JRC is not scheduled to meet, either Co-Chair shall have the right to call a special meeting or the Co-Chairs may cause the JRC to take the action without a meeting in the applicable time period. Any such additional meetings shall be held at places and on dates selected by the Co-Chairs. |
5.5 | Expenses. Nanomerics and Virpax each shall bear their respective expenses of its JRC members related to such members’ participation on the JRC and attendance at JRC meetings. |
5.6 | Minutes. The JRC shall keep accurate minutes of its deliberations, which minutes shall record all proposed decisions and all actions recommended or taken and confirmation of any Program Milestones that have been reached. The Parties, on an alternating basis, shall prepare and circulate the draft minutes. Draft minutes shall be edited by the Co-Chairs and shall be issued in final form only with the approval and agreement of the Co- Chairs. |
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5.7 | Dissolution of JRC. Following the completion of the Program the JRC shall be dissolved and Nanomerics shall provide Virpax with consultation services as Virpax may reasonably request during the remainder of the Term, including by making Nanomerics’ employees, consultants and other scientific staff available upon reasonable notice during normal business hours to consult with Virpax, its Affiliates or Sub- licensees on issues arising in connection with Exploitation of the Licensed Products. Such services shall be provided on reasonable commercial terms agreed in good faith by the Parties. |
6. | Ownership of Results from the Program |
6.1 | Virpax shall exclusively own all the Virpax Results, and Nanomerics shall exclusively own all the Nanomerics Results which Nanomerics Results shall be included in the licenses granted to Virpax pursuant to Section 3.1. |
6.2 | Each Party shall promptly disclose to the other in writing the development, making, conception or reduction to practice of any Results, and provide each other with reasonable assistance, where relevant, with respect to any efforts of the owning party to secure intellectual property protection for any of the Results. |
6.3 | Virpax hereby grants to Nanomerics the non-exclusive, perpetual, royalty free right and license to use those Virpax Results referable specifically to the Products for regulatory purposes and uses which comply with Nanomerics’ non-compete obligations as specified in Section 3.3.2 and not in violation of the license granted to Virpax hereunder. |
6.4 | Nanomerics shall, and does hereby, assign, and shall cause its Affiliates and its and their employees and agents, as applicable, to so assign, to Virpax, without additional compensation, such right, title and interest in and to any Virpax Results. Virpax shall, and does hereby, assign, and shall cause its Affiliates and its and their employees and agents, as applicable, to so assign, to Nanomerics, without compensation, such right, title and interest in and to any Nanomerics Results. |
6.5 | Should this Agreement be terminated for any reason prior to the Funding Completion Date, ownership of the Virpax Results shall be transferred to Nanomerics and Virpax shall assign, and shall cause its Affiliates and its and their employees and agents, as applicable, to so assign, to Nanomerics, without compensation, such right, title and interest in and to any Virpax Results. |
6.6 | Assignment and transfer of Ownership of all such Results shall occur instantly and automatically and shall not require any further deeds or documents to be exchanged between the Parties, except as required by the party taking assignment. |
7. | Consideration |
7.1 | Total Obligation. The milestone and royalty payments payable by Virpax to Nanomerics pursuant to this Article 7 represent all of Virpax’s financial obligations to Nanomerics under this Agreement. The Parties agree to act in good faith towards each other and their respective obligations regarding the consideration and Payments, including with respect to the assessment of whether Payments are payable. |
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7.2 | Payment in the Event of a Change of Control. In the event of a Virpax Change of Control that occurs prior to the dosing of the first subject in the first Phase II Clinical Trial for the first Licensed Product, Virpax shall pay to Nanomerics the following one-time payment based on the value received by Virpax as a result of the Change of Control within thirty (30) days following the closing date of the Change of Control: |
(a) | If the value received by Virpax is equal to or below [**], Virpax does not owe any payment to Nanomerics; |
(b) | If the value received by Virpax is more than [**] but equal to or less than [**], Virpax shall pay Nanomerics [**]; or |
(c) | If the value received by Virpax is more than [**], Virpax shall pay Nanomerics [**]. |
7.3 | Program Milestones. Upon achievement of each milestone specified below (each a “Program Milestone”), Virpax shall, within the timescale specified, make the corresponding non-refundable payment to Nanomerics, as follows: |
(a) | a payment of U.S.$[**] within thirty (30) days following the Funding Completion Date; |
(b) | a payment of U.S.$ [**] within thirty (30) days following successful completion of the first Phase II or Pivotal Clinical Trial, as the case may be, with respect to a Licensed Product in the Territory; and |
(c) | a payment of U.S.$ [**] within thirty (30) days following first receipt by Virpax of an NDA approval or a PMA approval, as the case may be, for a Licensed Product in the United States. |
7.4 | Grant of Rights outside the Territory. Upon first submission by Virpax of an application for NDA approval or a PMA approval, as the case may be, for a Licensed Product in the United States, Nanomerics may elect, at its sole discretion by providing written notice to Virpax, to forego certain portions of milestone payments (as set forth below) in consideration of Virpax providing to Nanomerics: |
[**]
In the event that Nanomerics exercises its rights under this Section 7.4, Nanomerics will forego the following portions of the following milestone payments, which Virpax may choose in its sole discretion:
(a) | $[**] of the $[**] NDA approval milestone in Section 7.3(c) (i.e. reducing it to $[**]), or |
(b) | $[**] of the first commercial milestone payment in Section 7.6(a) of $[**] (i.e. reducing it to $[**]). |
7.5 | Supply of Compound. Upon achievement of the Program Milestone specified in Section 7.3(a), Nanomerics may elect, at is sole discretion by providing written notice to Virpax, to forego $[**] of the $1,000,000 milestone payable on completion of the first Phase II /Pivotal Clinical Trial in Section 7.3(b) in consideration of Virpax providing to Nanomerics, on or before a date reasonably specified by Nanomerics, [**]. |
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7.6 | Commercial Milestones. Upon achievement of each milestone specified below (each a “Commercial Milestone”), Virpax shall, within the timescale specified, make the corresponding non-refundable payment to Nanomerics, as follows: |
(a) | a payment of US$ [**] within thirty (30) days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales for all Licensed Products exceeds US$ fifty million (50,000,000); |
(b) | a payment of US$ [**] within thirty (30) days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales for all Licensed Products exceeds US$ one hundred million (100,000,000); and |
(c) | a payment of US$ [**] within thirty (30) days of the end of the Calendar Year in which occurs the first occasion when the Annual Net Sales for all Licensed Products exceeds US$ three hundred million (300,000,000). |
While each Program Milestone and Commercial Milestone is payable once only, more than one Commercial Milestone may be payable with respect to Annual Net Sales achieved in the same Calendar Year. For example, if in Calendar Year “A” Annual Net Sales exceed US$ three hundred million (300,000,000) and in all previous Calendar Years, Annual Net Sales had been less than US$ fifty million (50,000,000) and so no Commercial Milestones had previously been paid, in Calendar Year A, all three Commercial Milestones pursuant to Sections 7.6.(a), 7.6(b) and 7.6(c) totaling US$ [**] would be payable, with Annual Net Sales of US$ 50,000,000, US$ 100,000,000 and US$ 300,000,000 all having been first exceeded in that Calendar Year A.
7.7 | Upfront and Milestone Payments by Sublicensee. Within thirty (30) days of receipt by Virpax of any Third Party Sublicense Payment, Virpax shall pay to Nanomerics a non- refundable amount, equal to either: |
(a) [**] of such Third Party Sublicense Payment (if such Third Party Sublicense Payment is received prior to dosing of the first subject in any Phase I Clinical Trial); or
(b) [**] of such Third Party Sublicense Payment (if such Third Party Sublicense Payment is received after dosing of the first subject in any Phase I Clinical Trial).
7.8 | Each of the Program Milestones and Commercial Milestones set forth in this Article 7 shall be payable only once under this Agreement. Further, in the event that Virpax discontinues the Exploitation of a given Licensed Product in favour of another Licensed Product, any milestones paid to Nanomerics with respect to such first Licensed Product shall be credited against the equivalent milestones, if any, due with respect to such subsequent Licensed Product. |
7.9 | Royalties. In addition to the foregoing payments, Virpax shall, subject to Section 7.10, pay Nanomerics a royalty of [**] of the [**] of Licensed Products in the Territory throughout the Royalty Term. |
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7.10 | Reduction of Royalty. |
(a) | Royalty Stacking. If, during the Term, Virpax enters into an agreement with a Third Party in order to obtain a license under a patent right of a Third Party that is necessary for Virpax, its Affiliates or any sublicensee to Exploit any Licensed Product (other than with respect to the use as part of a Licensed Product of a delivery device other than the Device, for which the cost shall be solely Virpax’s responsibility), then, upon entry into any such agreement and thereafter during the remainder of the period during which Virpax owes royalties to Nanomerics hereunder, the amounts payable under Article 7.9 hereof shall be reduced by [**] of all amounts payable by or on behalf of Virpax to such Third Party in connection with obtaining such rights; provided however, that in no event shall such amounts payable to Nanomerics be reduced as a result of this Section by more than [**] of the royalties under Article 7.9 otherwise due to Nanomerics in a particular Calendar Quarter. For the purposes of this Section 7.10, the Parties’ respective alliance managers shall endeavour to agree in good faith whether a Third Party license is “necessary”. A Third Party license which results in an objectively demonstrable and material (relative to the existing value) increase in commercial value of the Product, the Compound, and/or its or their Exploitation, and which does not have a demonstrable materially adverse effect on either of the Parties, shall be deemed necessary. Should the Parties fail to agree whether any Third Party license: (a) meets the criteria for being deemed necessary; or (b) is in fact necessary; such failure to agree shall be referred for resolution in accordance with Article 17. |
(b) | Maximum Amount of Royalty Reduction. In no event shall the royalties payable to Nanomerics under Section 7.9 be reduced by more than [**] in any Calendar Quarter as a result of the reductions set forth in this Section 7.10. |
7.11 | Royalty Term. Virpax’s obligation to pay royalties shall commence, on a country-by-country basis, with respect to each separate Licensed Product, on the date of First Commercial Sale of such Licensed Product in such country. The obligation shall expire, on a country-by-country basis, with respect to each separate Licensed Product, on the latest to occur of (a) the tenth (10th) anniversary of the First Commercial Sale of the first Licensed Product in such country; (b) the expiration date in such country of the last to expire of any Valid Claim; and, (c) the date upon which a Generic Product has been on the market in such country for a period of no fewer than [**] days. |
7.12 | Sales Subject to Royalties. Sales between Virpax and its Affiliates shall not be subject to royalties hereunder. Royalties shall be calculated on Virpax’s and its Affiliates’ and it and their Sub-licensees’ sale of the Licensed Products to a Third Party. Royalties shall be payable only once for any given batch of the Licensed Products. For purposes of determining [**], the Licensed Product shall be deemed to be sold upon Virpax, its Affiliates or Sub-licensees receipt of payment for the Licensed Product and a “[**]” shall not include, and no royalties shall be payable on, transfers by Virpax, its Affiliates or Sublicensees of free samples of Licensed Products or clinical trial materials containing Compound or transfers of Licensed Products to patients under any Virpax, Affiliate or Sub-licensee’s patient assistance programme or other transfers or dispositions for charitable, promotional, pre-clinical, clinical, manufacturing, testing or qualification, regulatory or governmental purposes. |
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7.13 | Royalty Payments. The royalties shall be calculated quarterly as of the last day of March, June, September and December respectively, for the Calendar Quarter ending on that date. Virpax shall pay the royalties in conjunction with the delivery of a written report to Nanomerics within forty-five (45) days after the end of each Calendar Quarter that shows, with respect to each country and each Licensed Product, the [**] during such Calendar Quarter. |
7.14 | Currency; Mode of Payment. |
(a) | Currency. All payments required under this Agreement shall be made in U.S. Dollars. For the purpose of computing the Net Sales of Products sold in a currency other than U.S. Dollars, such currency shall be converted from local currency to U.S. Dollars by Virpax in accordance with the rates of exchange for the relevant month for converting such other currency into U.S. Dollars used by Virpax’s internal accounting systems, which are independently audited on an annual basis. |
(b) | Mode of Payment. All payments set forth in this Article 7 shall be remitted by wire transfer to the following bank account of Nanomerics or such other account as Nanomerics may designate in writing to Virpax: |
BANK ACCOUNT
[**]
7.15 | Records Retention; Audit. |
(a) | Until the sixth (6th) anniversary of January 31 of the Calendar Year in which a Product is sold, Virpax shall keep or cause to be kept accurate records or books of account in accordance with applicable generally accepted accounting principles showing the information that is necessary for the accurate determination of the royalties due hereunder with respect to the sale of such Product. |
(b) | Upon the written request of Nanomerics, Virpax shall permit a certified public accountant or a person possessing similar professional status and associated with an independent accounting firm acceptable to the Parties to inspect during regular business hours and no more than once a year and going back no more than three (3) years preceding the current year, all or any part of Virpax’s records and books necessary to check the accuracy of the royalties paid. The accounting firm shall enter into appropriate obligations with Virpax to treat all information it receives during its inspection in confidence, except for the purposes of presenting the findings of its audit. The accounting firm shall disclose to Nanomerics and Virpax only whether the royalty reports are correct and details concerning any discrepancies, but no other information shall be disclosed to Nanomerics. The charges of the accounting firm shall be paid by Nanomerics, except that if the royalties have been understated by [**] or more, the charges shall be paid by Virpax. Virpax shall make good any underpayment of royalties within forty-five (45) days of the disclosure of the accounting firm’s report. |
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8. | Taxes |
8.1 | General The royalties, milestones and other amounts payable by Virpax to Nanomerics pursuant to this Agreement (“Payments”) shall not be reduced on account of any taxes unless required by Applicable Law. Nanomerics alone shall be responsible for paying any and all taxes (other than withholding taxes required by Applicable Law to be paid by Virpax) levied on account of, or measured in whole or in part by reference to, any Payments it receives hereunder. Virpax shall deduct or withhold from the Payments any taxes that it is required by Applicable Law to deduct or withhold. Notwithstanding the foregoing, if Nanomerics is entitled under any applicable tax treaty to a reduction of rate of, or the elimination of, applicable withholding tax, it may deliver to Virpax or the appropriate governmental authority (with the assistance of Virpax to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve Virpax of its obligation to withhold tax, and Virpax shall apply the reduced rate of withholding, or dispense with withholding, as the case may be, provided that Virpax has received evidence, in a form satisfactory to Virpax, of Nanomerics’ delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least fifteen (15) days prior to the time that the Payments are due. If, in accordance with the foregoing, Virpax withholds any amount, it shall pay to Nanomerics the balance when due, make timely payment to the proper taxing authority of the withheld amount, and send to Nanomerics proof of such payment within sixty (60) days following that payment. For purposes of this Agreement, the stated amount of the Payments payable by Virpax shall include any sales tax that Nanomerics may be required to collect. |
8.2 | Indirect Taxes. All Payments are inclusive of Indirect Taxes. If any Indirect Taxes are chargeable in respect of any Payments, Virpax shall pay such Indirect Taxes at the applicable rate in respect of any such Payments following the receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by Nanomerics in respect of those Payments, such Indirect Taxes to be payable on the due date of the payment of the Payments to which such Indirect Taxes relate. |
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9. | Confidentiality and Non-Disclosure |
9.1 | Virpax Information. Nanomerics recognises that by reason of, inter alia, Virpax’s status as an exclusive licensee or owner of the Virpax Results pursuant to Article 6, Virpax has an interest in Nanomerics’ retention in confidence of certain information, including proprietary information of Virpax, that is known to Nanomerics and without regard to whether such information was originally discovered, generated, or recorded by Virpax or Nanomerics. Accordingly, until the expiration of Virpax’s exclusive position with respect to a Product under Section 7.9, Nanomerics shall, and shall cause its Affiliates and their respective officers, directors, employees and agents to, keep completely confidential, and not publish or otherwise disclose, and not use directly or indirectly for any purpose (a) the Results and (b) any other Information, including any Confidential Information of Nanomerics or Virpax, relating to (i) any Licensed Product, including the Compound, any IP Protection Rights with respect thereto, and any Regulatory Documentation, including Health Registration Approvals, with respect thereto or (ii) the Exploitation of such Product, including development, sales or marketing plans therefor (collectively the “Virpax Information”); except to the extent (w) the Virpax Information is in the public domain through no fault of Nanomerics, its Affiliates or any of their respective officers, directors, employees and agents, (x) such disclosure or use would be expressly permitted under Section 9.3, or (y) such disclosure or use is otherwise expressly permitted by the terms of this Agreement. For clarification, the disclosure by Nanomerics to Virpax or by Virpax to Nanomerics of Virpax Information shall not cause such information to cease to be subject to the provisions of this Section 9.1. In the event this Agreement is terminated in its entirety by Virpax pursuant to Section 13.3 or by Nanomerics pursuant to Section 13.4, this Section 9.1 shall have no continuing force or effect and Virpax Information shall be deemed to be Confidential Information of Virpax or Nanomerics, as applicable, for purposes of the surviving provisions of this Agreement. |
9.2 | Confidentiality Generally. Subject to Section 9.1, at all times during the term of this Agreement and for a period of 5 years following termination or expiration hereof, each Party (the “Receiving Party”) shall, and shall cause its officers, directors, employees, agents, Affiliates and Sublicensees to, keep confidential and not publish or otherwise disclose and not use, directly or indirectly, for any purpose, any Confidential Information provided to it by the other Party (the “Disclosing Party”), except to the extent such disclosure or use is otherwise expressly permitted by the terms of this Agreement or is reasonably necessary for the performance of this Agreement. For the avoidance of doubt, the treatment of Confidential Information that is also Virpax Information is governed by the terms of Section 9.1, while the treatment of Confidential Information that is not also Virpax Information is governed by this Section 9.2. |
9.3 | Permitted Disclosures. Nanomerics may disclose Virpax Information and each Party may disclose Confidential Information (other than Virpax Information) to the extent that such disclosure is: |
9.3.1. | made in response to a valid order of a court of competent jurisdiction or other competent authority; provided, however, that the Receiving Party shall first have given notice to the Disclosing Party and given the Disclosing Party a reasonable opportunity to quash any such order or obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or authority or, if disclosed, be used only for the purpose for which the order was issued; and provided further that if such order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information that is legally required to be disclosed in response to such court or governmental order; |
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9.3.2. | made by or on behalf of by Virpax, its Affiliates or sublicensees to a Health Authority as may be necessary or useful in connection with any filing, application or request for a Health Registration Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available; |
9.3.3. | made by a Party to a patent authority as may be necessary or useful for purposes of obtaining or enforcing a Patent (consistent with the terms and conditions of Article 10); provided, however, that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available; or |
9.3.4. | otherwise required by law; provided, however, that if Nanomerics is required to disclose Virpax Information, or either Party is required to disclose Confidential Information of the other Party, the Party required to make the disclosure shall (a) provide to the other Party reasonable advance notice of and an opportunity to comment on any such required disclosure, (b) if requested by the other Party, seek confidential treatment with respect to any such disclosure to the extent available, and (c) use good faith efforts to incorporate the comments of the other Party in any such disclosure or request for confidential treatment; or |
9.3.5. | made by Virpax or its Affiliates to Third Parties as may be necessary or useful in connection with the Exploitation of the Compound or Licensed Products as contemplated by this Agreement, including subcontracting or sublicensing transactions in connection therewith. |
Notwithstanding the foregoing, in the event that either Party is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body to disclose this Agreement, in whole or in part, the Parties shall reasonably agree on a redacted version of this Agreement as necessary to protect the Confidential Information of the Parties prior to making such disclosure.
9.4 | Exclusions. Notwithstanding the foregoing, Confidential Information shall not include any information that: |
9.4.1. | is or hereafter becomes part of the public domain by public use, publication, general knowledge or the like through no wrongful act, fault or negligence on the part of the Receiving Party; |
9.4.2. | can be demonstrated by documentation or other competent proof to have been in the Receiving Party’s or its Affiliates’ possession prior to disclosure by the Disclosing Party; |
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9.4.3. | is subsequently received by the Receiving Party or its Affiliates from a Third Party or a Sublicensee who is not bound by any obligation of confidentiality with respect to said information; |
9.4.4. | is generally made available to Third Parties by the Disclosing Party without restriction on disclosure; or |
9.4.5. | is independently developed by or for the Receiving Party or its Affiliates without reference to the Disclosing Party’s Confidential Information. |
9.5 | Publications and Presentations. The Parties acknowledge that scientific publications must be strictly monitored to prevent any adverse effect from premature publication of results of the research and development activities hereunder. Accordingly, no fewer than thirty days prior to the expected date of publication or presentation, Nanomerics shall provide to Virpax, any material related to the Program, the Virpax Results or the Exploitation of Licensed Products that Nanomerics wishes to publish or present, and Nanomerics shall not publish, present or otherwise disclose any such material without the prior written consent of Virpax, which shall not be unreasonably withheld nor delayed. Each Party’s contribution to such Results shall be duly recognised in such publications or presentations. |
9.6 | Use of Name/Publicity. |
9.6.1. | Neither Party shall mention or otherwise use the name, insignia, symbol, trademark, trade name or logotype of the other Party or its Affiliates in any publication, press release, promotional material or other form of publicity without the prior written consent of the other Party. The restrictions imposed by this Section 9.6.1 shall not prohibit either Party from making any disclosure identifying the other Party that is required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body, provided that any such disclosure shall be governed by this |
Article 9. Further, the restrictions imposed on each Party under this Section 9.6.1 are not intended, and shall not be construed, to prohibit a Party from identifying the other Party in its internal business communications, provided that any Confidential Information or Virpax Information in such communications remains subject to this Article 9.
9.6.2. | Notwithstanding the foregoing, Virpax, its Affiliates and Sublicensees shall have the right to use the name of Nanomerics and its Affiliates to the extent necessary or useful in connection with the Exploitation of the Compound and Products as contemplated by this Agreement, including subcontracting and sublicensing transactions in connection therewith. |
9.6.3. | Neither Party shall issue any press release or make any other public announcement or statement concerning this Agreement or the transactions covered by it without the prior written approval of the other Party, except that each Party (after consultation with counsel) may make such announcements and disclosures, if any, as may be required by Applicable Law or the requirements of a national securities exchange or another similar regulatory body, or in connection with a public offering of securities or any filing with the U.S. Securities and Exchange Commission or a foreign equivalent. |
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10. | Licensed Patents; Patent Prosecution and Defence; Trademarks |
10.1 | Licensed Patents Should at any time during the Term, Nanomerics or its Affiliates own or otherwise Control any Patents that are necessary or useful for the Exploitation of the Compound, the Device, or the Product, such Patents shall be deemed Licensed Patents for the purposes of this Agreement and shall be added to Schedule 4. |
10.2 | Prosecution. Each Party shall appoint a patent coordinator for the purposes of coordinating their activities under this Section 10. Nanomerics shall have the first right, but not the obligation, at its sole cost and expense, through counsel of its choosing, to obtain, prosecute (including any interferences, reissue proceedings and re- examinations) and maintain all Licensed Patents throughout the world. |
10.3 | Nanomerics shall obtain, prosecute and maintain the Licensed Patents in those countries listed in Schedule 4 (which in any event shall include the Major Markets) and shall have the first right to determine (in consultation with Virpax) in which other countries to obtain, prosecute and maintain the Licensed Patents. If Nanomerics declines, or otherwise fails to diligently pursue such action, to obtain prosecute or maintain any Licensed Patent in any country of the Territory, Virpax shall have the right, providing that to do so would not result in a demonstrably material adverse effect on the Exploitation of Licensed Products, but not the obligation, to take such action through counsel of its choosing, with respect to such Licensed Patent in such country. The reasonable cost and expense of such action shall be borne equally by the Parties, and Nanomerics’ contribution to such cost and expense shall be deducted by Virpax from any Royalties payable with respect to such Licensed Patent in such country. |
10.4 | Virpax shall have the right to request that Nanomerics obtain, prosecute and maintain a Licensed Patent in a particular country of the Territory. If Nanomerics declines, or otherwise fails, to initiate any such requested action with respect to a Licensed Patent within sixty (60) days (or, if after initiating any requested action, Nanomerics at any time thereafter fails to diligently pursue such action), Virpax shall have the right, providing that to do so would not result in a demonstrably material adverse effect on the Exploitation of Licensed Products, but not the obligation, to take such action, through counsel of its choosing, with respect to such Licensed Patent. The reasonable cost and expense of such action shall be borne equally by the Parties, and Nanomerics’ contribution to such cost and expense shall be deducted by Virpax from any Royalties payable with respect to such Licensed Patent in such country. |
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10.5 | Obtaining, Prosecuting and Maintaining Patents. |
10.5.1. | The Party obtaining, prosecuting or maintaining Licensed Patents pursuant to Section 10.1 (the “Prosecuting Party”) shall keep the other Party (the “Non-Prosecuting Party”) advised as to material developments and all steps to be taken with respect to such Patents and shall furnish the Non-Prosecuting Party with copies of such applications for Patents, amendments thereto and other related correspondence to and from patent offices, and, to the extent reasonably practicable, permit the Non-Prosecuting Party an opportunity to offer its comments thereon before the Prosecuting Party makes a submission to a patent office which could materially affect the scope or validity of the patent coverage that may result. The Non-Prosecuting Party shall offer its comments, if any, promptly, but in no event shall the Prosecuting Party be required to delay any such submission. The Non-Prosecuting Party shall, and shall cause its Affiliates to, reasonably assist and cooperate with the Prosecuting Party in obtaining, prosecuting and maintaining Licensed Patents. |
10.5.2. | Nanomerics shall (a) provide to Virpax all Information, including a correct and complete list of Licensed Patents covering the Licensed Product(s) or otherwise necessary or reasonably useful to enable Virpax make filings with Health Authorities with respect to the Licensed Patents, including as required or allowed in connection with (i) in the United States, the FDA’s Orange Book and (ii) outside the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 or other international equivalents and (b) cooperate with Virpax’s reasonable requests in connection therewith, including meeting any submission deadlines, in each case, to extent required or permitted by Applicable Law. |
10.6 | Enforcement. In the event that either Party has cause to believe that a Third Party may be infringing any of the Licensed Patents, such Party shall promptly notify the other Party in writing, identifying the alleged infringer and the alleged infringement complained of and furnishing the information upon which such determination is based. Other than with respect to a Third Party’s Abbreviated New Drug Application (ANDA) making a Paragraph IV filing in its certification against any of the Licensed Patents as may be listed in the Orange Book as contemplated by Section 10.5.2 (“Paragraph IV Filing”), Nanomerics shall have the first right, in its sole discretion, but after notifying Virpax (if time permits), through counsel of its choosing, to take any measures it deems appropriate to stop such infringing activities by such Third Party or to grant to the infringing Third Party adequate rights and licenses necessary for continuing such activities. Upon reasonable request by Nanomerics, Virpax shall give Nanomerics all reasonable information and assistance, at Nanomerics expense, including allowing Nanomerics access to Virpax’s files and documents and to Virpax’s personnel who may have possession of relevant information and, if necessary for Nanomerics to prosecute any legal action, joining in the legal action as a party and Nanomerics shall reimburse Virpax for reasonable costs and expenses incurred by Virpax with respect to such joinder. Virpax shall use its reasonable best efforts to obtain any consents required by Third Parties owning Patents licensed to Virpax in order for Nanomerics to remove such infringement. Should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing, to take any measures it deems appropriate to stop such infringing activities by such Third Party or to grant to the infringing Third Party adequate rights and licenses necessary for continuing such activities. With respect to any Paragraph IV Filing, Virpax shall be entitled, in its sole discretion, through counsel of its choosing, to take any measures it deems appropriate to challenge such action. Upon reasonable request by Virpax, Nanomerics shall give Virpax all reasonable information and assistance, including allowing Virpax access to Nanomerics’ files and documents and to Nanomerics’ personnel who may have possession of relevant information and, if necessary for Virpax to prosecute any legal action, joining in the legal action as a party and Virpax shall reimburse Nanomerics for reasonable costs and expenses incurred by Nanomerics with respect to such joinder. Nanomerics shall use its best efforts to obtain any consents required by Third Parties owning Patents licensed to Nanomerics in order for Virpax to remove such infringement. |
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10.7 | Costs and Recovery. The Party pursing any action under Section 10.6 shall bear its own costs and expenses related thereto. Any amounts recovered by either Party pursuant to Section 10.6, whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by or paid to Virpax and, to the extent attributable to lost sales of Licensed Products, being deemed “Net Sales” for which Virpax shall pay Nanomerics any Royalties that may be owed with respect to such Net Sales under Sections 7.6 or 7.7. |
10.8 | Third Party Rights, Third Party Litigation. |
10.8.1. | Third Party Rights. If, in the opinion of Virpax, the Exploitation of Licensed Products by Virpax, its Affiliates or any of its sublicensees infringes or misappropriates any Patent or any Intellectual Property Right of a Third Party in any country, such that Virpax or any of its Affiliates, Distributors, customers or Sublicensees cannot Exploit the Licensed Products in such country without infringing the Patent or Intellectual Property Right of such Third Party, then, Nanomerics shall have the first right, but not the obligation, through counsel of its choosing, to negotiate and obtain a license from such Third Party as necessary for Virpax and its Affiliates or sublicensees to Exploit the Licensed Products in such country. Should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing to negotiate and obtain a license from such Third Party as necessary for Virpax and its Affiliates or sublicensees to Exploit the Licensed Products in such country. |
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10.8.2. | Third Party Litigation. Subject to Section 12.2, in the event of any actual or threatened suit against Nanomerics, Virpax or its Affiliates, Sublicensees or customers alleging that the Exploitation of Licensed Products, or that the Exploitation of a Licensed Patent or Licensed Know-How or any part thereof by or on behalf of Virpax under this Agreement, infringes the Patent or other intellectual property rights of any Person (an “Infringement Suit”), the Party first becoming aware of such Infringement Suit shall promptly give written notice to the other Party. Nanomerics shall have the first right, but not the obligation, through counsel of its choosing, to assume direction and control of the defence of claims arising therefrom (including the right to settle such claims in its sole discretion). Without limiting Nanomerics obligation to Virpax as contemplated in Section 12.2, should Nanomerics decline to take any action, it shall immediately notify Virpax, and Virpax shall be entitled, in its sole discretion, through counsel of its choosing to assume direction and control of the defence of claims arising therefrom (including the right to settle such claims in its sole discretion). |
10.9 | Third Party Litigation Cooperation. The Party not defending an action or claim pursuant to Section 10.6 (the “Non-Defending Party”) shall provide to the other Party (the “Defending Party”) all reasonable assistance requested by the Defending Party in connection with any action, claim or suit under Section 10.6, including allowing the Defending Party access to the Non-Defending Party’s files and documents and to the Non-Defending Party’s personnel who may have possession of relevant information. In particular the Non-Defending Party will promptly make available to the Defending Party, free of charge, all information in its possession or control that it is aware will assist the Defending Party in responding to any such action, claim or suit. |
10.10 | Prosecution Cooperation. Nanomerics shall keep Virpax’s patent co-ordinator reasonably well updated on any material aspects regarding the prosecution of, and infringement of or by the Licensed Patents. The Parties shall strive to achieve consensus, through their respective patent co-ordinators, as to the jurisdictions in which prosecution is pursued, and the actions taken or to be taken with respect to infringement. Failing a consensus, any disagreements to be handled as if they are disputes of the JRC, and shall be dealt with in accordance with Section 5.3. |
10.11 | Trademarks. Virpax shall have the sole right to select the Trademarks for the marketing and sale of the Licensed Products in the Territory. Virpax shall own such Trademarks and all IP Protection Rights and other rights and goodwill with respect thereto. Nanomerics shall not, and shall not permit its Affiliates to, use any trademark that is the same as or confusingly similar to, the Trademarks. |
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11. | Representations and Warranties |
11.1 | Each Party represents and warrants to the other that: |
11.1.1. | it has full legal power to extend the rights and licenses granted to the other under this Agreement and perform its obligations hereunder; |
11.1.2. | it has full power and authority to enter into this Agreement and has taken all necessary action on its part required to authorise the execution and delivery of this Agreement; |
11.1.3. | neither it nor any researcher engaged by it, in any capacity, in the Program has been debarred or is subject to debarment or has otherwise been disqualified or suspended from performing scientific or clinical investigations or otherwise subjected to any restrictions or sanctions by the FDA or any other governmental or regulatory authority or professional body with respect to the performance of scientific or clinical investigations. |
11.2 | Nanomerics represents and warrants that: |
11.2.1. | the execution, delivery and performance of this Agreement will not result in a violation of, or be in material conflict with, or constitute a material default, under any agreement in existence as of the Effective Date between Nanomerics and Third Parties and that it is not party to any other agreements that limits Virpax’s rights under this Agreement. Nanomerics will not assign, transfer, convey or otherwise encumber its rights to the Licensed Patents or Licensed Know-How and shall not use the Licensed Patents, Licensed Know-How or Licensed Improvements itself or grant any right, title or interest to any Person that is inconsistent with the exclusive license granted herein or Virpax’s other rights under this Agreement. |
11.2.2. | Nanomerics is the sole and exclusive owner of the entire right, title and interest in the Patents listed on Schedule 4(A) (the “Owned Patents”) and the Licensed Compound and Licensed Know-How, and is entitled to grant the licenses specified herein. |
11.2.3. | Nanomerics is the licensee of the Device listed on Schedule 4(B) (the “In-Licensed Patents”) and the Licensed Device Know-How and is entitled to grant the licenses specified herein. Except as provided in Schedule 4(B), Nanomerics has no Knowledge that such rights are subject to any encumbrance lien or claim of ownership by any Third Party. A list of the Owned Patents and the In-Licensed Patents and a copy of all license and other agreements regarding the In-Licensed Patents (the “In- License Agreements”) (redacted as to commercially sensitive or confidential provisions), as amended to the date hereof, have been provided to Virpax prior to the Effective Date. The Owned Patents and the In-Licensed Patents constitute all of the Licensed Patents as of the Effective Date. The In-License Agreements are in full force and effect and Nanomerics is not in default of any of its obligations thereunder. Nanomerics shall maintain the In-License Agreements in full force during the Term and pay any royalties or other payments as and when due thereunder. Nanomerics shall promptly provide Virpax with notice of any alleged, threatened or actual breach of any In-License Agreement. As of the Effective Date, none of Nanomerics, its Affiliates and, to their Knowledge, any Third Party is in breach of any In-License Agreement. |
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11.2.4. | To Nanomerics’ and its Affiliates’ Knowledge, the Licensed Patents: (i) comprise all of the Patents that Nanomerics or its Affiliates own or otherwise Control, as of the Effective Date that are necessary for the Exploitation of the Compound, the Device or the Product, (ii) are being diligently procured from the respective Patent Offices in accordance with all Applicable Law; and (iii) have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for payment. |
11.2.5. | As of the Effective Date, to Nanomerics’ and its Affiliates’ Knowledge, there is no actual infringement or threatened infringement of the Licensed Patents, Licensed Know-How or the Regulatory Documentation by any Person. |
11.2.6. | To Nanomerics’ and its Affiliates’ Knowledge, Virpax’s Exploitation of the Regulatory Documentation, the Licensed Patents or the Licensed Know-How hereunder, so far as Nanomerics is aware of any such intended Exploitation, will not infringe any Patent or other intellectual property or proprietary right of any Person. |
11.2.7. | The Licensed Patents existing as of the Effective Date are subsisting and are not invalid or unenforceable, in whole or in part. The Licensed Know-How existing as of the Effective Date is subsisting. The conception, development and reduction to practice of the Regulatory Documentation, the Licensed Patents and Licensed Know-How existing as of the Effective Date have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person. There are no claims, judgments or settlements against or amounts with respect thereto owed by Nanomerics or any of its Affiliates relating to the Regulatory Documentation, the Licensed Patents or the Licensed Know-How. No claim or litigation has been brought or threatened by any Person alleging, and Nanomerics has no notice of any possible claim, whether or not asserted, that (a) the Licensed Patents or the Licensed Know-How are invalid or unenforceable or (b) the Regulatory Documentation, the Licensed Patents or the Licensed Know-How or the disclosing, copying, making, assigning, licensing or Exploiting of the Regulatory Documentation, the Licensed Patents or the Licensed Know-How, or products and services embodying the Regulatory Documentation, or the Compound, Licensed Products violates, infringes or otherwise conflicts or interferes with any intellectual property or proprietary right of any Person. |
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12. | Indemnification and Insurance |
12.1 | Indemnification of Nanomerics. In addition to any other remedy available to Nanomerics, Virpax shall indemnify, defend and hold harmless Nanomerics, its Affiliates and its and their respective directors, officers, agents and employees in full and on demand, from and against any and all Losses incurred by them to the extent resulting from or arising out or in connection with any claims made or demands, causes of action, suits brought by a Sublicensee or Third Party (collectively, “Third Party Claims”) against Nanomerics, its Affiliates or their respective directors, officers, agents or employees (a) that arise or result from any intentional misconduct or gross negligence on the part of Virpax or its Affiliates in performing any activity contemplated by this Agreement or the breach of any provision of this Agreement by Virpax except for any Loss for which Nanomerics has an obligation to indemnify Virpax and its Affiliates pursuant to Section 12.2, as to which Loss each Party shall indemnify the other to the extent of their respective liability for such Loss, or (b) that allege that the claimant has suffered personal injury or death as a result of use of the Products, except to the extent such Losses arise as a result of the negligence, fraud, willful misconduct or wrongful act of the Indemnified Party, its Affiliates or its or their respective officers, directors, partners, shareholders, employees or agents. |
12.2 | Indemnification of Virpax. In addition to any other remedy available to Virpax, Nanomerics shall indemnify, defend and hold harmless Virpax, its Affiliates, Sub-licensees and its and their respective directors, officers, agents and employees in full and on demand, from and against any and all Losses incurred by them to the extent resulting from or arising out of or in connection with any Third Party Claims against Virpax, its Affiliates or their respective directors, officers, agents or employees that (a) arise or result from any intentional misconduct or gross negligence on the part of Nanomerics or its Affiliates in performing any activity contemplated by this Agreement, or the breach of any provision of this Agreement by Nanomerics, except for any Losses for which Virpax has an obligation to indemnify Nanomerics and its Affiliates pursuant to Section 12.1, as to which Losses each Party shall indemnify the other to the extent of their respective liability for such Losses or (b) that allege that the claimant has suffered personal injury or death as a result of the Exploitation of any Products by Nanomerics, its Affiliates or licensees prior to or after the Term. |
12.3 | Indemnification Procedure. Should the Indemnified Party intend to claim indemnification hereunder from the Indemnifying Party, the Indemnified Party shall promptly notify the Indemnifying Party in writing of any Losses in respect of which the Indemnified Party intends to claim such indemnification and the Indemnifying Party shall be entitled, but not obligated, to assume the defence of any Third Party Claims thereof with counsel selected by it. The Indemnified Party, including its Affiliates, directors, officers and employees, shall co-operate fully, at the Indemnifying Party’s expense, with the Indemnifying Party and its legal representatives in the investigation and defence of any Third Party Claim covered by this indemnification. The indemnification shall not apply to amounts paid in settlement of any Third-Party Claim if such settlement is affected without the consent of the Indemnifying Party. |
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12.4 | LIMITATION ON DAMAGES. Except in circumstances of gross negligence or intentional misconduct by a Party or its affiliates, or with respect to third party claims under section 12.1 or 12.2, or with respect to milestones royalties or other payments accrued or owed but unpaid, no party or any of its affiliates shall be liable for special, indirect, incidental or consequential damages, or for lost profits, milestones or royalties, whether in contract, warranty, negligence, tort, strict liability or otherwise, arising out of (a) the development, manufacture, use or sale of any product or collaboration compound developed, manufactured or marketed hereunder, or (b) any breach of or failure to perform any of the provisions of this agreement. |
12.5 | Insurance. Each Party shall have and maintain such type and amounts of liability insurance programs as is normal and customary in the pharmaceutical industry generally for Persons similarly situated, and shall upon request provide the other Party with a copy of its policies of insurance in that regard, along with any amendments and revisions thereto. |
13. | Term and Termination |
13.1 | Term. This Agreement shall become effective on the Effective Date and shall continue in full force and effect, unless earlier terminated pursuant to this Article 13 or as elsewhere explicitly set forth in this Agreement, for as long as Virpax is developing or otherwise Exploiting Licensed Products for which royalties will be or are owed to Nanomerics pursuant to Article 7. |
13.2 | [Intentionally Left Blank] |
13.3 | Termination by Virpax. Virpax shall have the right in its sole discretion to terminate this Agreement in its entirety for any reason upon sixty (60) days’ prior written notice to Nanomerics. Upon termination, Virpax shall assign to Nanomerics all its right title and interest in Virpax Results. |
13.4 | [Intentionally Left Blank] |
13.5 | Termination by either Party. |
13.5.1. | Failure to Raise Funding. Either Party may terminate this Agreement by giving the other Party sixty ((60) days prior written notice if Virpax has not secured the Funding by the Funding Expiry Date. Should Nanomerics be the Party giving such notice, Virpax may: |
13.5.1.1 | respond in writing to Nanomerics on a date (the “Funding Waiver Date”) prior to the expiry of said 60 days period that it wishes to proceed under the Agreement and that it has secured sufficient funding equal or greater to the Total Funding Amount identified as such in the Funding Plan from sources other than those identified in the Funding Plan, and that such alternative funding is freely available to be used as required to proceed with the Program, in which case Virpax shall be deemed to have fully received the Funding and Nanomerics shall not be entitled to terminate the Agreement pursuant to this Section 13.5.1; or, |
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13.5.1.2 | respond in writing to Nanomerics prior to the expiry of said 60 days period that it has in place written commitments which support its reasonable opinion that the Funding will be fully received by Virpax after the Funding Expiry Date. With such written response Virpax shall provide Nanomerics with such information as is required for Nanomerics to assess the reasonableness or otherwise of Virpax’s opinion. The Parties shall meet promptly following such written response by Virpax to negotiate in good faith whether or not there should be an extension to the Funding Expiry Date, and if so, how long. During such good faith negotiations, Nanomerics’ notice to terminate shall be suspended. Ten days following the commencement of such good faith negotiations, Nanomerics’ notice to terminate shall be reactivated, or, at Nanomerics’ discretion, withdrawn. |
13.5.2. | Material Breach. In the event of a material breach of this Agreement by a Party where such breach is capable of cure and such breach remains uncured for ninety (90) days after notice by the non- breaching Party specifying the breach and requiring its remedy, the non-breaching Party may terminate this Agreement immediately. If Virpax commences an action in which it challenges the validity, enforceability or scope of any of the Licensed Patents, it shall be deemed a material breach of this Agreement. |
13.5.3. | Bankruptcy. Either Party may terminate this Agreement immediately upon written notice to the other Party in the event that the other Party shall file in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an the appointment of a receiver or trustee of such other Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, or if the other Party shall propose or be a party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors. |
13.6 | Consequences of Termination. |
13.6.1. | The expiration or termination of this Agreement shall be without prejudice to any rights or obligations of the Parties that may have accrued prior to such expiration or termination and, except as otherwise expressly provided herein, shall not limit any rights or remedies which may be available at law or otherwise. |
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13.6.2. | Upon the termination or expiration of this Agreement, each Party shall, at its sole expense, promptly return to the other Party all Confidential Information and, at such other Party’s option, either destroy or return to such other Party all Provided Materials received from such other Party. Notwithstanding the foregoing, the General Counsel of each Party may retain one copy of each business document generated by such Party in connection with this Agreement for archival purposes only, and all such retained documents shall be subject to the confidentiality obligations of this Agreement. |
13.6.3. | In the event of termination by Virpax pursuant to Section 13.3 or 13.5.3 or by Nanomerics pursuant to Section 13.4, 13.5.1, 13.5.2 or 13.5.3 Virpax shall transfer and assign to Nanomerics (a) all of its ownership in any Results specifically referable to the Compound or Licensed Products; (b) all Regulatory Documentation; and, (c) any Health Registration Approval, all free of charge. |
13.7 | Survival. The termination of this Agreement shall not relieve the Parties from performing any obligations accrued prior to the date this Agreement terminates. The provisions of this Agreement that by their nature constitute continuing obligations shall survive expiration or termination of this Agreement (including each Party’s obligations under Sections 3.5,13.4 through 13.7 and Articles 1, 2, 6, 9, 12, 17 and 24). |
14. | Force Majeure |
No liability shall result from delay in performance or non-performance, in whole or in part, by either of the Parties to this Agreement to the extent that such delay or non-performance is caused by an event of Force Majeure.
The Force Majeure Party shall within five (5) business days of becoming aware of the Force Majeure event, give written notice to the other Party stating the nature of the Force Majeure event, its anticipated duration and any action being taken to avoid or minimize its effect. Any suspension of performance shall be of no greater scope and of no longer duration than is reasonably required and the Force Majeure Party shall take all commercially reasonable steps to remedy its inability to perform.
15. | Assignment |
Except as expressly provided in this Agreement, neither Party may assign its rights or delegate its obligations under this Agreement, whether by operation of law or otherwise, in whole or in part without the prior written consent of the other Party, except that (a) either Party shall always have the right, without such consent, to perform any or all of its obligations and exercise any or all of its rights under this Agreement through any of its Affiliates, and (b) on written notice to the other Party may assign any or all of its rights and delegate any or all of its obligations hereunder to any of its Affiliates or to any successor in interest (whether by merger, acquisition, asset purchase or otherwise) to all or substantially all of the business to which this Agreement relates. Any permitted successor of a Party or any permitted assignee of all of a Party’s rights under this Agreement that has also assumed all of such Party’s obligations hereunder in writing shall, upon any such succession or assignment and assumption, be deemed to be a party to this Agreement as though named herein in substitution for the assigning Party, whereupon the assigning Party shall cease to be a party to this Agreement and shall cease to have any rights or obligations under this Agreement. All validly assigned rights of a Party shall inure to the benefit of and be enforceable by, and all validly delegated obligations of such Party shall be binding on and be enforceable against, the permitted successors and assigns of such Party. Any attempted assignment or delegation in violation of this Article 15 shall be void.
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16. | Severability |
To the fullest extent permitted by Applicable Law, the Parties waive any provision of law that would render any provision of this Agreement invalid, illegal or unenforceable in any respect. If any provision of this Agreement is held to be invalid, illegal or unenforceable, in any respect, then such provision will be given no effect by the Parties and shall not form part of this Agreement. To the fullest extent permitted by Applicable Law and if the rights or obligations of any Party will not be materially and adversely affected, all other provisions of this Agreement shall remain in full force and effect, and the Parties shall use their best efforts to negotiate a provision in replacement of the provision held invalid, illegal or unenforceable that is consistent with Applicable Law and achieves, as nearly as possible, the original intention of the Parties.
17. | Governing Law and Dispute Resolution |
This Agreement shall in all respects be governed by the laws of New York, USA, without reference to the conflict of law provisions. Any controversy arising out of this Agreement shall finally be settled by the rules of the Arbitration Institute of the International Chamber of Commerce. The proceedings shall take place in New York, USA, if brought by Nanomerics, and in London, England if brought by Virpax, and shall be conducted in the English language.
18. | Notices |
Any notice, request, or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement, and shall be deemed given only if hand delivered or sent by an internationally recognised overnight delivery service, costs prepaid, or by fax (with transmission confirmed), to the Party to whom notice is to be given at the following address (or at such other address such Party may have provided to the other Party in writing referencing this Article 18):
If to Nanomerics:
Address: | 6th Floor, 2 London Wall Place, London EC2T 5AU | |
For the attention of: | Dr. Andreas Schatzlein |
With a copy to:
Address: | Nanomerics, 14 Approach Road, St Albans AL1 1SR |
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If to Virpax:
Address: | 1554 Paoli Pike, PMB 279, West Chester, PA 19380, USA | |
For the attention of: | Chairman & Chief Executive Officer, Anthony P. Mack | |
With a copy to: | Michael Lerner, Esq. | |
Address: | Lowenstein Sandler LLP, One Lowenstein Drive, Roseland, New Jersey 07068 USA |
19. | Relationship of the Parties |
The status of a Party under this Agreement shall be that of an independent contractor. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture or agency relationship between the Parties or, except as otherwise expressly provided in this Agreement, as granting either Party the authority to bind or contract any obligation in the name of or on the account of the other Party or to make any statements, representations, warranties or commitments on behalf of the other Party. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.
20. | Entire Agreement |
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement. This Agreement supersedes all prior agreements, whether written or oral, with respect to the subject matter of this Agreement. Each Party confirms that it is not relying on any statements, representations, warranties or covenants of any person (whether a Party to this Agreement or not) except as specifically set out in this Agreement. Nothing in this Agreement is intended to limit or exclude any liability for fraud. All Schedules and Exhibits referred to in this Agreement are intended to be and are hereby specifically incorporated into and made a part of this Agreement. In the event of any inconsistency between any such Schedules or Exhibits and this Agreement, the terms of this Agreement shall govern.
21. | Amendment |
Any amendment or modification of this Agreement must be in writing and signed by authorised representatives of both Parties.
22. | Waiver and Non-Exclusion of Remedies |
A Party’s failure to enforce, at any time or for any period of time, any provision of this Agreement, or to exercise any right or remedy shall not constitute a waiver of that provision, right or remedy or prevent such Party from enforcing any or all provisions of this Agreement and exercising any rights or remedies. To be effective any waiver must be in writing. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by law or otherwise available except as expressly set forth herein.
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23. | No Benefit to Third Parties |
Except for any rights and immunities granted in this Agreement to any Virpax or Nanomerics Affiliates, the provisions of this Agreement are for the sole benefit of the Parties and their successors and permitted assigns, and they shall not be construed as conferring any rights in any other Persons except as otherwise expressly provided Article 15.
24. | Equitable Relief |
In the event of a breach or threatened breach of any provision of Section 3.4.2 or Article 9, Virpax shall be authorised and entitled to seek from any court of competent jurisdiction equitable relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which Virpax may be entitled in law or equity. Nothing in this Article 24 is intended, or should be construed, to limit Virpax’s right to equitable relief or any other remedy for a breach of any other provision of this Agreement.
In the event of a breach or threatened breach of any provision of Article 9, Nanomerics shall be authorised and entitled to seek from any court of competent jurisdiction equitable relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which Nanomerics may be entitled in law or equity. Nothing in this Article 24 is intended, or should be construed, to limit Nanomerics’ right to equitable relief or any other remedy for a breach of any other provision of this Agreement.
25. | Further Assurance |
Each Party shall perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Agreement.
26. | Expenses |
Except as otherwise expressly provided in this Agreement, each Party shall pay the fees and expenses of its respective lawyers and other experts and all other expenses and costs incurred by such Party incidental to the negotiation, preparation, execution and delivery of this Agreement.
27. | Counterparts |
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument.
[Remainder of Page Was Intentionally Left Blank]
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28. | Execution |
THIS AGREEMENT IS EXECUTED by the authorised representatives of the Parties on the dates indicated below but effective as of the Effective Date.
SIGNED for and on behalf of | Signed for and on behalf of | |
NANOMERICS LTD | VIRPAX PHARMACEUTICALS, INC |
/s/ Andreas G. Schätzlein | /s/ Anthony P. Mack | |||
Name: | Andreas G. Schätzlein | Name: | Anthony P. Mack | |
Title: | Chief Executive Officer | Title: | Chairman & Chief Executive Officer | |
Date: | Date: | August 7, 2020 |
29. | Schedules: |
1 | Clinical Development Plan |
2 | The Device |
3 | Funding Plan |
4 | Licensed Patents |
5 | Pre-Clinical Development Plan |
Page 39 of 44
SCHEDULE 1: Clinical Development Plan
Studies | Population | # of Patients | Arms | PEP |
Duration of
treatment |
|||||||
Ph 1 | Double-blind, Crossover, Randomized, Controlled Study to Assess Safety and Tolerability | Healthy Volunteers | [**] | [**][**][**] | ||||||||
Ph 2 |
Double-blind, Parallel Arms, Randomized Control POC study | Volunteers community setting/ frontline healthcare wro w | [**] | [**] |
Page 40 of 44
SCHEDULE 2: THE DEVICE
[**]
Page 41 of 44
SCHEDULE 3: FUNDING PLAN
The Company plans to raise funds through grants, an initial public offering in the fall of 2020, and other third party sources to help supplement the research and development activities.
Item Cost (US$)
Aim 1 (method validation & transfer, manufacture &
Final testing) $[**]
Aim 2 (IND filing and Phase I clinical trial) $[**]
Aim 3 (Phase II clinical trial) $[**]
Indirect costs (estimated at [**] TDC) $[**]
Total Funding Amount $[**]
Page 42 of 44
SCHEDULE 4: LICENSED PATENTS
[**]
Page 43 of 44
SCHEDULE 5: PRE-CLINICAL DEVELOPMENT PLAN
[**]
Page 44 of 44
Exhibit 10.30
SECOND AMENDMENT TO THE PROMISSORY NOTE BETWEEN VIRPAX PHARMACEUTICALS, INC. AND ANTHONY P. MACK
This Second Amendment to the Promissory Note dated October 1, 2018 (the “Second Amendment”) is entered into as of October 28, 2020 (the “Effective Date”) between Virpax Pharmaceuticals, Inc., (“Virpax”) and Anthony P. Mack (“AM”). Virpax and AM may be collectively referred to herein as the “Parties.”
W I T N E S S E T H:
WHEREAS, the Parties entered into that certain Promissory Note dated October 1, 2018 (the “Note”) which described the terms under which AM would loan certain amounts to Virpax the terms under which Virpax would repay such amounts; and
WHEREAS, the Parties entered into that certain first amendment to the Note dated April 6, 2020 (the “First Amendment”) which extended the maturity date of the payment of the principal and provides for the payment of all interest accrued up to October 1, 2020; and
WHEREAS, the Parties desire to further amend the Note, as amended, in order to extend the Maturity Date of the payment of the principal and provide for the payment of all interest accrued up to December 31, 2023.
NOW THEREFORE, the Parties in consideration of the mutual covenants and agreements hereinafter set forth agree as follows:
1. The Note is hereby amended as follows:
1. | Amend Article 1 to extend the Maturity Date of the payment of the principal to December 31, 2023 |
2. | Amend Article 2 to provide for the payment of all interest accrued up to December 31, 2023. |
Except as amended hereby, all of the terms and conditions of the Note are hereby ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives as of the Effective Date.
By: | /s/ Jeffrey Gudin | |
Name: | Jeffrey Gudin, EVP, Chief Medical Officer |
By the Holder: | /s/ Anthony P. Mack | |
Name: | Anthony P. Mack, Chairman & CEO |
Exhibit 10.31
SECOND AMENDMENT TO THE PROMISSORY NOTE BETWEEN VIRPAX PHARMACEUTICALS, INC. AND ANTHONY P. MACK
This Second Amendment to the Promissory Note dated January 15, 2019 (“Second Amendment”) is entered into as of October 28, 2020 (the “Effective Date”) between Virpax Pharmaceuticals, Inc., (“Virpax”) and Anthony P. Mack (“AM”). Virpax and AM may be collectively referred to herein as the “Parties.”
W I T N E S S E T H:
WHEREAS, the Parties entered into that certain Promissory Note dated January 15, 2019 (the “Note”) which described the terms under which AM would loan certain amounts to Virpax the terms under which Virpax would repay such amounts; and
WHEREAS, the Parties entered into that certain first amendment to the Note dated April 6, 2020 which extended the Maturity Date of the payment of the principal and provides for the payment of all interest accrued up to October 1, 2020; and
WHEREAS, the Parties desire to amend the Note, as amended, in order to extend the Maturity Date of the payment of the principal and provide for the payment of all interest accrued up to December 31, 2023.
NOW THEREFORE, the Parties in consideration of the mutual covenants and agreements hereinafter set forth agree as follows:
1. The Note is hereby amended as follows:
1. | Amend Article 1 to extend the Maturity Date of the payment of the principal to December 31, 2023. |
2. | Amend Article 2 to provide for the payment of all interest accrued up to December 31, 2023. |
Except as amended hereby, all of the terms and conditions of the Note are hereby ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives as of the Effective Date.
By: | /s/ Jeffrey Gudin | |
Name: | Jeffrey Gudin, EVP, Chief Medical Officer |
By the Holder: | /s/ Anthony P. Mack | |
Name: | Anthony P. Mack, Chairman & CEO |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the inclusion in this Registration Statement of Virpax Pharmaceuticals, Inc. on Form S-1/A to be filed on or about November 20, 2020 of our report dated August 10, 2020, except with respect to Note 13, as to which the date is November 19, 2020, on our audits of the financial statements as of December 31, 2019 and 2018 and for each of the years then ended. Our report includes an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern. We also consent to the reference to our firm under the caption “Experts” in this Registration Statement.
/s/ EisnerAmper LLP
EISNERAMPER LLP
Philadelphia, Pennsylvania
November 20, 2020