UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2021 |
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to _____________.
Commission file number 0-20713
CASI PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
58-1959440 |
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(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
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incorporation or organization) |
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9620 Medical Center Drive, Suite 300
Rockville, Maryland
(Address of principal executive offices)
20850
(Zip code)
(240) 864-2600
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of exchange on which registered |
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Common Stock |
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CASI |
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Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES ⌧ NO ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES ⌧ NO ◻
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.
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Large accelerated filer ◻ |
Accelerated filer ◻ |
Non-accelerated filer þ |
Smaller reporting company ☑ |
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Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐ NO ⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date.
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Class |
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Outstanding at April 30, 2021 |
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Common Stock $.01 Par Value |
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139,797,487 |
CASI PHARMACEUTICALS, INC.
Table of Contents
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4 |
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4 |
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Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 |
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4 |
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5 |
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6 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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26 |
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32 |
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32 |
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33 |
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33 |
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33 |
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33 |
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33 |
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33 |
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33 |
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34 |
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35 |
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2
TRADEMARKS AND SERVICE MARKS
We own or have rights to trademarks and trademark applications for use in connection with the operation of our business, including, but not limited to, CASI and CASI PHARMACEUTICALS. All other trademarks appearing in this Quarterly Report on Form 10-Q that are not identified as marks owned by us are the property of their respective owners.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements also may be included in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. These statements can generally be identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “will,” “should,” or “anticipates” or similar terminology. These forward-looking statements include, among others, statements regarding the timing of our clinical trials, our cash position and future expenses, and our future revenues.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor 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.
Actual results could differ materially from those currently anticipated due to a number of factors, including: the risk that we may be unable to continue as a going concern as a result of our inability to raise sufficient capital for our operational needs; the possibility that we may be delisted from trading on The Nasdaq Capital Market; the volatility in the market price of our common stock; the outbreak of the COVID-19 pandemic and its effects on global markets and supply chains; the risk of substantial dilution of existing stockholders in future stock issuances; the difficulty of executing our business strategy in China; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; our lack of experience in manufacturing products and uncertainty about our resources and capabilities to do so on a clinical or commercial scale; risks relating to the commercialization, if any, of our products and proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); our inability to predict when or if our product candidates will be approved for marketing by the U.S. Food and Drug Administration (FDA), National Medical Products Administration (NMPA), or other regulatory authorities; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; the risks relating to the need for additional capital and the uncertainty of securing additional funding on favorable terms; the risks associated with our product candidates, and the risks associated with our other early-stage products under development; the risk that result in preclinical and clinical models are not necessarily indicative of clinical results; uncertainties relating to preclinical and clinical trials, including delays to the commencement of such trials; our ability to protect our intellectual property rights; our ability to design and implement a development plan for our ANDAs held by CASI Wuxi; the lack of success in the clinical development of any of our products; and our dependence on third parties; the risks related to our dependence on Juventas to conduct the clinical development of CNCT19 and to partner with us to co-market CNCT19; risks related to our dependence on Juventas to ensure the patent protection and prosecution for CNCT19; risks relating to the commercialization, if any, of our proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); risks relating to interests of our largest stockholders and our Chairman and CEO that differ from our other stockholders; and risks related to the development of a new manufacturing facility by CASI Wuxi. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition.
We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. Additional information about the factors and risks that could affect our business, financial condition and results of operations, are contained in our filings with the SEC, including, but not limited to, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, each of which is available at www.sec.gov.
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CASI Pharmaceuticals, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
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March 31, 2021 |
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December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
68,117 |
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$ |
57,064 |
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Investment in equity securities, at fair value |
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10,948 |
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9,309 |
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Accounts receivable, net of $0 allowance for doubtful accounts |
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5,838 |
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4,645 |
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Inventories |
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2,994 |
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1,356 |
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Prepaid expenses and other |
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1,117 |
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1,651 |
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Total current assets |
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89,014 |
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74,025 |
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Property, plant and equipment, net |
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1,876 |
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2,062 |
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Intangible assets, net |
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12,834 |
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13,210 |
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Long-term investments |
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34,870 |
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29,442 |
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Right of use assets |
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8,323 |
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8,696 |
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Other assets |
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1,176 |
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299 |
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Total assets |
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$ |
148,093 |
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$ |
127,734 |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
5,741 |
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$ |
3,669 |
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Accrued and other current liabilities |
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2,238 |
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3,015 |
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Bank borrowings |
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1,525 |
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826 |
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Notes payable |
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466 |
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466 |
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Total current liabilities |
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9,970 |
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7,976 |
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Deferred income |
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2,331 |
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2,351 |
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Other liabilities |
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13,596 |
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13,834 |
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Total liabilities |
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25,897 |
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24,161 |
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Commitments and contingencies (Note 19) |
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Redeemable noncontrolling interest, at redemption value (Note 11) |
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22,164 |
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22,033 |
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Stockholders’ equity: |
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Preferred stock, $1.00 par value: 5,000,000 shares authorized and 0 shares issued and |
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— |
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— |
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outstanding |
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Common stock, $0.01 par value: |
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250,000,000 shares authorized at March 31, 2021 and December 31, 2020 |
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139,877,032 shares and 124,023,374 shares issued at March 31, 2021 and December 31, 2020, respectively; |
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139,797,487 shares and 123,943,829 shares outstanding at March 31, 2021 and December 31, 2020, respectively |
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1,399 |
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1,240 |
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Additional paid-in capital |
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690,018 |
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658,246 |
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Treasury stock, at cost: 79,545 shares held at March 31, 2021 and December 31, 2020 |
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(8,034) |
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(8,034) |
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Accumulated other comprehensive income |
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485 |
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589 |
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Accumulated deficit |
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(583,836) |
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(570,501) |
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Total stockholders’ equity |
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100,032 |
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81,540 |
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Total liabilities, redeemable noncontrolling interest and stockholders' equity |
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$ |
148,093 |
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$ |
127,734 |
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See accompanying condensed notes.
4
CASI Pharmaceuticals, Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share data)
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Three Months Ended March 31 |
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2021 |
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2020 |
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Revenues: |
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Product sales |
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$ |
5,700 |
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$ |
3,372 |
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Lease income |
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36 |
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34 |
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Total revenues |
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5,736 |
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3,406 |
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Costs and expenses: |
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Costs of revenues |
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2,358 |
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3,211 |
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Research and development |
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5,258 |
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3,017 |
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General and administrative |
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5,502 |
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4,058 |
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Selling and marketing |
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2,715 |
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1,260 |
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Gain on disposal of intangible assets |
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- |
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(450) |
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Acquired in-process research and development |
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5,500 |
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1,081 |
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Total costs and expenses |
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21,333 |
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12,177 |
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Loss from operations |
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(15,597) |
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(8,771) |
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Non-operating income/(expense): |
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Interest income, net |
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106 |
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190 |
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Other income |
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20 |
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— |
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Foreign exchange gains |
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219 |
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363 |
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Change in fair value of investments |
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1,568 |
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(15) |
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Net loss |
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(13,684) |
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(8,233) |
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Less: loss attributable to redeemable noncontrolling interest |
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(349) |
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(109) |
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Accretion to redeemable noncontrolling interest redemption value |
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548 |
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317 |
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Net loss attributable to CASI Pharmaceuticals, Inc. |
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$ |
(13,883) |
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$ |
(8,441) |
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Net loss per share (basic and diluted) |
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$ |
(0.11) |
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$ |
(0.09) |
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Weighted average number of common shares outstanding (basic and diluted) |
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124,825 |
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98,773 |
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Comprehensive loss: |
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Net loss |
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$ |
(13,684) |
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$ |
(8,233) |
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Foreign currency translation adjustment |
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(172) |
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(826) |
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Total comprehensive loss |
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$ |
(13,856) |
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$ |
(9,059) |
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Less: Comprehensive loss attributable to redeemable noncontrolling interest |
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(417) |
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(109) |
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Comprehensive loss attributable to common stockholders |
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$ |
(13,439) |
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$ |
(8,950) |
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See accompanying condensed notes.
5
CASI Pharmaceuticals, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
See accompanying condensed notes.
6
CASI Pharmaceuticals, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
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Three Months Ended |
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March 31, 2021 |
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March 31, 2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
(13,684) |
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$ |
(8,233) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation for property, plant and equipment |
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179 |
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146 |
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Amortization of intangible assets |
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337 |
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377 |
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Reduction in the carrying amount of the right-of-use assets |
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348 |
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314 |
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Gain on disposal of intangible assets |
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— |
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(450) |
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Stock-based compensation expense |
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1,998 |
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1,905 |
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Acquired in-process research and development |
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5,500 |
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1,081 |
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Change in fair value of investments |
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(1,568) |
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15 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(1,193) |
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(579) |
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Inventories |
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(1,638) |
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2,533 |
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Prepaid expenses and other assets |
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637 |
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6 |
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Accounts payable |
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2,073 |
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(729) |
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Accrued liabilities and other liabilities |
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(978) |
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(1,020) |
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Deferred income |
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(12) |
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— |
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Net cash used in operating activities |
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(8,001) |
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(4,634) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Proceeds from disposal of intangible assets |
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— |
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450 |
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Purchases of property, plant and equipment |
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(981) |
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(1) |
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Cash paid to acquire in-process research and development |
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(5,500) |
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— |
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Cash paid to acquire convertible loan in Black Belt Tx Limited |
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(86) |
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— |
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Cash paid to acquire convertible loan in Cleave |
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(5,500) |
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— |
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Net cash (used in) provided by investing activities |
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(12,067) |
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449 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from bank borrowings |
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709 |
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— |
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Stock issuance costs |
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(2,019) |
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(42) |
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Proceeds from sale of common stock |
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32,500 |
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1,399 |
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Proceeds from exercise of stock options |
|
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— |
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3,832 |
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Repurchase of stock options to satisfy tax withholding obligations |
|
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— |
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(251) |
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Net cash provided by financing activities |
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31,190 |
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4,938 |
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Effect of exchange rate change on cash and cash equivalents |
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(69) |
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(489) |
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Net increase in cash and cash equivalents |
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11,053 |
|
|
264 |
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Cash and cash equivalents at beginning of period |
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57,064 |
|
|
53,621 |
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Cash and cash equivalents at end of period |
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$ |
68,117 |
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$ |
53,885 |
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Supplemental disclosure of cash flow information: |
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Interest paid |
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$ |
— |
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$ |
— |
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Income taxes paid |
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$ |
— |
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$ |
— |
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Non-cash investing activity: |
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Accrual for acquisition of in-process research and development |
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$ |
— |
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$ |
1,081 |
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See accompanying condensed notes.
7
CASI Pharmaceuticals, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation, Organization and Principal Activities
Basis of Presentation
CASI Pharmaceuticals, Inc. (“CASI” or the “Company”) (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, in which CASI, directly or indirectly, has a controlling financial interest. These subsidiaries include Miikana Therapeutics, Inc. (“Miikana”), CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”), CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”), and CASI Biopharmaceuticals (WUXI) Co., Ltd. (“CASI Biopharmaceuticals”). CASI China is a non-stock Chinese entity with 100% of its interest owned by CASI. CASI China received approval for a business license from the Beijing Industry and Commercial Administration in August 2012 and has operating facilities in Beijing. CASI Biopharmaceuticals is a wholly owned subsidiary of CASI Wuxi and was established in April 2019. The Company controls CASI Wuxi through 80% voting rights (see Note 11). Accordingly, the financial statements of CASI Wuxi have been consolidated in the Company’s consolidated financial statements since its inception. All inter-company balances and transactions have been eliminated in consolidation. The Company currently operates in one operating segment, which is the development of innovative therapeutics addressing cancer and other unmet medical needs for the global market.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such condensed consolidated financial statements do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying December 31, 2020 financial information was derived from the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2020 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year then ended.
Overview
The Company launched its first commercial product, EVOMELA® (Melphalan for Injection), in China in August 2019. In China, EVOMELA® is approved for use as a conditioning treatment prior to stem cell transplantation and as a palliative treatment for patients with multiple myeloma. The other core hematology/oncology assets in the Company’s pipeline include:
| ● | CNCT19 is an autologous CD19 CAR-T investigative product (CNCT19) being developed by the Company’s partner Juventas Cell Therapy Ltd (“Juventas”) for which the Company has co-commercial and profit-sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies which express CD19 including, B-cell acute lymphoblastic leukemia (“B-ALL”) and B-cell non-Hodgkin lymphoma (“B-NHL”). CNCT19’s Phase 1 studies of B-ALL and B-NHL in China have been substantially completed by Juventas, with the Phase 2 B-NHL registration study and the Phase 2 B-ALL registration study of CNCT19 both currently enrolling in China. |
| ● | BI-1206 is an antibody which has a novel mode-of-action, blocking the inhibitory antibody checkpoint receptor FcγRIIB to unlock anti-cancer immunity in both hematological malignancies and solid tumors for which the Company has licensed exclusive greater China rights from BioInvent International (“BioInvent”). AB BI-1206 is being investigated by BioInvent in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda® (pembrolizumab), in solid tumors, and in a Phase 1/2a trial |
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| in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL). BioInvent International AB, released positive interim results from its Phase 1/2a trial that suggests that novel anti-FcyRIIB antibody BI-1206 restores activity of rituximab in patients with relapsed/refractory non-Hodgkin’s lymphoma. An FDA End of Phase 1 meeting for the NHL development program is planned for the third quarter of 2021. |
| ● | CB-5339 is a novel VCP/p97 inhibitor focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer. The Company entered into an exclusive license on March 21, 2021 with Cleave Therapeutics, Inc. (Cleave”) for the development and commercialization of CB-5339 in Mainland China, Hong Kong, Macau and Taiwan. CB-5339, an oral second-generation, small molecule VCP/p97 inhibitor, is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS) and in a Phase 1 clinical trial of patients with solid tumors and lymphomas. |
| ● | CID-103 is a full human IgG1 anti-CD38 monoclonal antibody recognizing a unique epitope that has demonstrated encouraging preclinical efficacy and safety profile compared to other anti-CD38 monoclonal antibodies for which the Company has exclusive global rights. CID-103 is being developed for the treatment of patients with multiple myeloma. The Company has achieved in May 2021 the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma. |
The Company also has greater China rights to ZEVALIN® (Ibritumomab Tiuxetan), a CD20-directed radiotherapeutic antibody that is approved in the U.S. to treat patients with non-Hodgkin lymphoma (“NHL”) and MARQIBO® (vincristine sulfate LIPOSOME injection) a novel, sphingomyelin/cholesterol liposome-encapsulated, formulation of vincristine sulfate, a microtubule inhibitor, approved by the FDA for the treatment of adult patients with Philadelphia chromosome-negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. However, due to the evolving standard of care environment, the rare and niche indication for these products, and the Company’s commitment to prioritize resources, the Company is currently evaluating its options for these products. In addition, the Company’s assets include a few FDA-approved ANDAs which the Company is evaluating due to generic drug pricing reforms by the Chinese government and its impact on the pricing and competitiveness of these products.
The Company’s business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand its hematology-oncology franchise. In many cases its business development strategy includes direct equity investments in the licensor company. The Company intends for its pipeline to reflect a diversified and risk-balanced set of assets that include (1) late-stage clinical drug candidates in-licensed for China regional rights, (2) proprietary or licensed innovative drug candidates, and (3) select high quality pharmaceuticals that fit its therapeutic focus. The Company uses a market-oriented approach to identify pharmaceutical/biotechnology candidates that the Company believes to have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under the Company’s global drug development strategy. Although oncology with a focus on hematological malignancies is its principal clinical and commercial target, the Company is opportunistic about other therapeutic areas that can address unmet medical needs.
Liquidity Risks and Management’s Plans
Since its inception in 1991, the Company has incurred significant losses from operations and, as of March 31, 2021, has incurred an accumulated deficit of $583.8 million. In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, manufacturing. In 2014, the Company changed its name to “CASI Pharmaceuticals, Inc.” The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of the Company’s operations. The Company’s Beijing office is primarily responsible for the Company’s day-to-day operations and the Company’s commercial team of over 80 hematology and oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support the Company’s future clinical and commercial manufacturing needs, to manage the Company’s supply chain for certain products, and to develop a GMP manufacturing facility in China.
The Company has primarily funded its operations through the proceeds from the sales of common stock and, to a lesser extent, asset sales and government grants. To date, the Company has minimal product revenue and management expects operating losses to continue for the foreseeable future.
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On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI. See Note 12 -- Stockholders’ Equity.
Taking into consideration the cash and cash equivalents balance as of March 31, 2021, the Company believes that it has sufficient resources to fund its operations at least one year beyond the date that the unaudited condensed consolidated financial statements are issued. As of March 31, 2021, the Company had a consolidated cash balance of $68.1 million; $45.4 million was held by the Company (excluding its subsidiaries), and the Company’s subsidiaries held $4.8 million (CASI China), $17.7 million (CASI Wuxi), and $0.2 million (other subsidiaries). The Company intends to continue to exercise tight controls over operating expenditures and will continue to pursue opportunities, as required, to raise additional capital and will also actively pursue non- or less-dilutive capital raising arrangements.
Risks and Uncertainties
The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during the first three months of 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to its EVOMELA® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so.
To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels; there can be no assurance that such restrictions will not be imposed again.
The Company currently relies on a single source for its supply of EVOMELA®. Due to COVID-19, the Company experienced a disruption to its supply chain for EVOMELA®. That disruption, along with a change in 2020 in the manufacturer of EVOMELA® , contributed to a decrease in the Company's revenue for the second quarter of 2020. The Company returned to expected levels of sales in the second half of 2020.
If suppliers refuse or are unable to provide products for any reason (including the occurrence of an event like the COVID-19 pandemic that makes delivery impractical), the Company would be required to negotiate an agreement with a substitute supplier, which would likely interrupt the manufacturing of EVOMELA® , cause delays and increase costs.
The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could affect the Company's ability to continue to commercialize and expand distribution of EVOMELA® (Melphalan For Injection) or other drugs in the Company’s existing product pipeline. The effectiveness of the Company's sales teams may be negatively impacted by the lack of travel and their reduced ability to engage with decision-makers. In addition, economic and other uncertainties may adversely affect other parties' willingness to negotiate and execute product licenses and thus hamper the Company's ability to in-license clinical-stage and late-stage drug candidates in China or elsewhere.
Clinical trials, whether planned or ongoing, may be affected by the COVID-19 pandemic. The Company's partner, Juventas, experienced some delay in conducting the CNCT19 trials due to the COVID-19 pandemic. The COVID-19 pandemic has also impacted the Company's targeted start time of its CID-103 trial due to the lock-down of many medical facilities in Europe. Study procedures (particularly any procedures that may be deemed non-essential), site initiation, participant recruitment and enrollment, participant dosing, shipment of the Company's product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis may be paused or delayed due to changes in hospital or research institution policies, federal, state or local regulations, prioritization of hospital and other medical resources toward COVID-19 efforts, or other reasons related to the pandemic. In addition, there could be a potential effect of COVID-19 on the operations of the health regulatory authorities, which could result in delays of reviews and approvals, including with respect to the Company's product candidates. Any prolongation or de-prioritization of the Company's clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company's product candidates.
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2. License and Distribution Agreements
China Resources Guokang Pharmaceuticals Co., Ltd:
The Company has product rights and perpetual exclusive licenses from Acrotech Biopharma L.L.C. (“Acrotech”) to develop and commercialize its commercial product EVOMELA® in the greater China region (which includes China, Taiwan, Hong Kong and Macau). On December 3, 2018, the Company received NMPA’s approval for importation, marketing and sales in China, and in August 2019 the Company launched EVOMELA® in China. The NMPA required post-marketing study is ongoing and is actively recruiting.
In March 2019, the Company entered into a three-year exclusive distribution agreement with China Resources Guokang Pharmaceuticals Co., Ltd (“CRGK”) to appoint CRGK on an exclusive basis as its distributor to distribute EVOMELA® in the territory of the People’s Republic of China (excluding Hong Kong, Taiwan and Macau), subject to certain terms and conditions. The Company’s internal marketing and sales team will continue to be responsible for commercial activities, including, for example, direct interaction with Key Opinion Leaders (KOL), physicians, hospital centers and the generating of sales. Commercial sales of EVOMELA® were launched in August 2019. For the three months ended March 31, 2021 and 2020, the Company recognized $5.7 million and $3.4 million of revenues, respectively, from sales of EVOMELA® under this arrangement
Juventas Cell Therapy:
In June 2019, the Company entered into a license agreement for exclusive worldwide license to commercialize an autologous anti-CD19 T-cell therapy product (CNCT19) from Juventas Cell Therapy Ltd. (“Juventas”) (the “Juventas license agreement”). Juventas is a China-based company engaged in cell therapy.
In September 2020, Juventas and its shareholders (including CASI Biopharmaceuticals) agreed to certain terms and conditions required by a new third-party investor to facilitate the Series B financing of Juventas, pursuant to which the Company agreed to amend and supplement the original licensing agreement (the "Supplementary Agreement") by agreeing to pay Juventas certain percentage of profits generated from commercial sales of CNCT19. The Supplementary Agreement also specifies a minimum annual target net profit to be distributed to Juventas and certain other terms and obligations. In return, the Company obtained additional equity interests in Juventas (see Note 4).
Under the Supplementary Agreement, Juventas and the Company will jointly market CNCT19, including, but not limited to, establishing medical teams, developing medical strategies, conducting post-marketing clinical studies, establishing Standardized Cell Therapy Centers, establishing and training providers with respect to cell therapy, testing for cell therapy, and monitoring quality controls (cell collection and transfusion, etc.), and patient management (adverse reactions treatment, patients’ follow-up visits, and establishment of a database). The Company also will reimburse Juventas for a portion of Juventas’ marketing expenses as reviewed and approved by a joint commercial committee to be constituted. The Company will continue to be responsible for recruiting and establishing a sales team to commercialize CNCT19.
BioInvent International AB
In October 2020, the Company entered into an exclusive licensing agreement with BioInvent International AB (“BioInvent”) for the development and commercialization of novel anti-FcγRIIB antibody, BI-1206, in mainland China, Taiwan, Hong Kong and Macau. BioInvent is a biotechnology company focused on the discovery and development of first-in-class immune-modulatory antibodies for cancer immunotherapy. BI-1206 is BioInvent’s lead drug candidate and is being investigated in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda® (pembrolizumab), in solid tumors, and in a Phase 1/2a trial in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL).
Under the terms of the agreement, BioInvent and CASI will develop BI-1206 in both hematological malignancies and solid tumors, with CASI responsible for commercialization in China and associated markets. CASI made a $5.9 million upfront payment in November 2020 to BioInvent and will pay up to $83 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of BI-1206. Because BI-1206 underlying the acquired rights has not reached technological feasibility and has no alternative uses, the Company expensed $5.9 million as acquired in-process research and development in the fourth quarter of 2020.
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Black Belt Therapeutics Limited:
In April 2019, the Company entered into a license agreement with Black Belt Therapeutics Limited (“Black Belt”) for exclusive worldwide rights to CID-103, an investigational anti-CD38 monoclonal antibody (Mab) (formerly known as TSK011010). The CID-103 Phase 1 study began in the EU in March 2021. The Company expects that its clinical materials and commercial inventory will be supplied by one or more contract manufacturers with whom the Company is in current discussions. Under the terms of the agreement, CASI obtained global rights to CID-103 for an upfront payment of 5 million euros ($5.7 million) as well as certain milestone and royalty payments. Because CID-103 underlying the acquired rights has not reached technological feasibility and has no alternative uses, the Company expensed 5 million euros as acquired in-process research and development in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.
Cleave Therapeutics, Inc.
In March 2021, the Company entered into an exclusive license with Cleave Therapeutics, Inc. (“Cleave”) for the development and commercialization of CB-5339, an oral novel VCP/p97 inhibitor, in both hematological malignancies and solid tumors, in Mainland China, Hong Kong, Macau and Taiwan. Cleave is a clinical-stage biopharmaceutical company focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer.
CB-5339 is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), while the National Cancer Institute (NCI) is sponsoring and will be evaluating CB-5339 in a future Phase 1 clinical trial of patients with solid tumors and lymphomas. Because CB-5339 has not reached technological feasibility and has no alternative uses, the Company expensed $5.5 million as acquired in-process research and development in the accompanying consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021.
Pharmathen Global BV
On October 29, 2019, the Company entered into an exclusive distribution agreement with Pharmathen Global BV ("Pharmathen") for the development and distribution of octreotide long acting injectable (Octreotide LAI) microsphere in China. Octreotide LAI formulations, which are approved in various European countries, are considered a standard of care for the treatment of acromegaly and the control of symptoms associated with certain neuroendocrine tumors. Subject to regulatory and marketing approvals, the Company intends to advance and commercialize these established products in China.
The terms of the agreement include an upfront payment of 1 million euros which was paid by the Company in 2019, and up to 2 million euros of additional milestone payments, of which 1.5 million euros ($1.7 million) was expensed in the year ended December 31, 2020 as acquired in-process research and development following Pharmathen’s achievement of certain milestones. CASI is responsible for the development, import drug registration, product approval and commercialization in China. CASI has a 10-year non-royalty exclusive distribution period after the product launch at agreed supply costs for the first three years.
Riemser Pharma GmbH
In August 2019, the Company entered into a distribution agreement in China with Riemser Pharma GmbH (“Riemser”) to a novel formulation of thiotepa, a chemotherapeutic agent, which has multiple indications including use as a conditioning treatment for use prior to allogenic hematopoietic stem cell transplantation. Thiotepa has a long history of established use in the hematology/oncology setting. Pursuant to the distribution agreement, CASI obtained the exclusive distribution right of the products in China, and Riemser will be responsible for manufacturing and supplying CASI with clinical materials and commercial inventory. Subject to regulatory and marketing approvals, the Company intends to advance and commercialize these established products in China.
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3. Summary of Significant Accounting Policies
Revenue Recognition
Product sales recognized in the consolidated statements of operations are considered revenue from contracts with customers and, accordingly, the Company recognizes revenue using the following steps:
| ● | Identification of the contract, or contracts, with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price, including the identification and estimation of variable consideration; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when the Company satisfies a performance obligation. |
The Company recognizes revenue on sales of EVOMELA® when the control of the product is transferred to the distributor, which occurs upon delivery of the product to the carrier appointed by the distributor, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the product, excluding amounts collected on behalf of third parties (e.g. value-added taxes). Payment terms for these sales are due within 90 days. The arrangement does not include any variable consideration.
The costs of assurance type warranties that provide the customer the right to exchange purchased product that does not meet appropriate quality standards are recognized when they are probable and are reasonably estimable. As of March 31, 2021, the Company did not incur, and therefore did not defer, any material costs to obtain or fulfill contracts. The Company did not have any contract assets or contract liabilities as of March 31, 2021.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s significant accounting estimates relate to recoverability of operating lease right-of-use assets, intangible assets and long-term investments, net realizable value and obsolescence allowance for inventory, deferred tax assets and valuation allowance, allowance for doubtful accounts, stock-based arrangements and fair value of investments. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements.
4. Investment in equity securities, at fair value and long-term investments
Investment in equity securities, at fair value
MaxCyte Inc.
The Company has an equity investment in the common stock of MaxCyte, a publicly traded company. The Company’s investment in this equity security is carried at its fair value, with changes in fair value reported in the statement of operations each reporting period.
The fair value of this security was measured using its quoted market price, a Level 1 input, and was $4.6 million as of March 31, 2021 and $2.7 million as of December 31, 2020 (see Note 16).
BioInvent International AB
In October 2020, in conjunction with its license agreement entered into with BioInvent (see Note 2), a publicly traded company, CASI made a $6.3 million investment (equivalent to SEK 53.8 million) to acquire 1.2 million new shares (after 25:1 reverse stock split) of BioInvent, and 14,700,000 warrants, each warrant with a right to subscribe for 0.04 shares (after 25:1 reverse stock split) in BioInvent within a period of five years.
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The investments in the ordinary shares and warrants of BioInvent are carried at fair value, with changes in fair value reported in the statement of operations each reporting period. The fair value of the ordinary shares was measured using its quoted market price, a Level 1 input, and was $6.4 million as of March 31, 2021 and $6.6 million as of December 31, 2020 (see Note 16).
The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. The fair value of the warrants was $769,000 as of March 31, 2021 and $840,000 as of December 31, 2020 (see Note 16), with assumptions including an expected life of 4.66 years, an assumed volatility of 47.2%, and a risk-free interest rate of -0.14 %.
The following table summarizes the Company’s investment in equity securities at Fair Value as of March 31, 2021:
Unrealized gains or (losses) on the Company’s equity investment for the three months ended March 31, 2021 and 2020 were $1,568,000 and $(15,000), respectively. Unrealized gains or (losses) on the Company’s equity investment are recognized as change in fair value of investment in equity securities in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
Long-term investments
Long-term investments consisted of the following:
Black Belt Tx Limited
In April 2019, in conjunction with its license agreement the Company entered into with Black Belt (see Note 2), the Company made a 2 million euros ($2,249,600) equity investment in the ordinary shares of a newly established, privately held UK Company, Black Belt Tx Limited ("Black Belt Tx"), representing a 14.1% equity interest with the right to appoint a non-voting board observer.
As the Company does not have significant influence over operating and financial policies of Black Belt Tx, and the equity interests do not have readily determinable fair value, the investment in Black Belt Tx is stated at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. The Company did not record any adjustments or impairments during the three months ended March 31, 2021 related to this investment.
In July 2020, the Company entered into a three-year convertible loan agreement with Black Belt Tx (the "Black Belt Tx Loan") in the amount of 211,800 euros ($250,000) with a non-compounding annual interest rate of 6% payable, together with the principal balance, at maturity.
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The loan principal will be disbursed in three equal installments of 70,600 euros. The first tranche of 70,600 euros ($83,000) was disbursed upon execution of the loan agreement in August 2020. The second tranche of 70,600 euros ($86,000) was disbursed in February 2021. In the first quarter of 2021, Black Belt Tx reached certain operational targets as stipulated in the loan agreement, and Black Belt Tx’s Board of Directors met in February 2021 to approve disbursement of the second tranche. The third tranche will be disbursed if Black Belt Tx reaches certain additional operational targets as stipulated in the loan agreement, subject to approval by Black Belt Tx's Board of Directors.
In the event that Black Belt Tx, on or prior to the maturity date, completes an equity financing round of at least 5,000,000 euros ($5.9 million), then the outstanding principal amount shall be automatically converted into such shares at 80% of the price per share issued divided by a compensating factor based on the number of years that the Black Belt Tx Loan has been outstanding. The investment in convertible loan is accounted for as investment in debt securities as available-for-sale instrument.
Juventas Cell Therapy Ltd
In June 2019, in conjunction with its license agreement entered into with Juventas (see Note 2), the Company, through CASI Biopharmaceuticals, made an RMB 80 million ($11,788,000) investment in Juventas, a privately held, China-based company, in Juventas’ Series A plus equity, which represented a 16.327% equity interest on a fully diluted basis, and the right to appoint a non-voting board observer. The Company is entitled to substantive liquidation preference over the founding shareholder of Juventas. In addition, the Juventas’ founding shareholder provided a put option to the Company pursuant to which the Company can put the equity investment to the founding shareholder at a fixed return of 8% per annum upon occurrence of certain events. The investment in the equity interests of the Juventas and the investment in put option to the founding shareholder were accounted for as investments in equity securities using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair value of the equity securities of Juventas is not readily determinable. The consideration of RMB 80 million ($11,788,000) was allocated into investment in equity interests and investment in put option based on their relative fair value on the transaction date.
In September 2020, in conjunction with the Supplementary Agreement entered into with Juventas (see Note 2), the Company obtained additional Series A plus equity interest in Juventas with substantive liquidation preference over Juventas' founding shareholder, resulting in the Company's equity ownership increasing to 16.45% (post-Juventas Series B financing) on a fully diluted basis. CASI Biopharmaceuticals is also entitled to appoint a director to Juventas’ board of directors. Juventas’ founding shareholder also provided a put option to the Company pursuant to which the Company can put the additional equity investment to the founding shareholder at RMB 70 million plus a fixed return of 8% per annum upon occurrence of certain events. The transaction closed on September 29, 2020. The fair value of the Company’s additional equity interest in Juventas and the new put option was RMB 83.7 million ($12.3 million) and RMB 0.4 million ($64,000) on September 29, 2020, respectively, which was estimated using significant estimates and assumptions, including multiples of selected comparable companies in applying the market approach model.
Since the equity interest with substantive liquidation preference is not in-substance common stock, the investment in the additional equity interests of Juventas was accounted for as an investment in equity securities at transaction date fair value with a corresponding credit to Other Liabilities. The profit-sharing liability represents the Company’s obligation to pay an increased share of future profits pursuant to the Supplementary Agreement (see Note 2) which was conveyed by the Company in exchange for the additional equity interests in Juventas. The Company views this as a payment from a vendor that should reduce cost of revenues over the period of royalty payments. The long-term liability will be derecognized as payments are made on a systematic and rational basis representing the pattern in which the Company expects to settle the profit-sharing payment during the commercialization period of CNCT19.
The investments are measured using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair value of the equity securities of Juventas is not readily determinable. The Company did not record any adjustments or impairments during the three months ended March 31, 2021 related to this investment.
In June 2020, the Company entered into a one-year loan agreement with Juventas in the amount of RMB 30,000,000 ($4,243,000) with an annual interest rate of 20%. In August 2020, the Company entered into another one-year loan with Juventas in the amount of RMB 40 million ($5,790,000) for one year with an annual interest rate of 20%. In September 2020, the Company received early repayments for both principals and accrued interest from Juventas.
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Cleave Therapeutics, Inc.
In March 2021, Cleave and the Company entered into a license agreement. Cleave and the Company will develop CB-5339 in both hematological malignancies and solid tumors, with CASI responsible for development and commercialization in China and associated markets. Cleave received a $5.5 million upfront payment and is eligible to receive up to $74 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of CB-5339. In addition to the upfront cash payment, CASI made a $5.5 million investment in Cleave through a three-year convertible note with a non-compounding annual interest rate of 3% payable at maturity. The principal balance is also due at maturity. The proceeds will support and advance Cleave’s programs and general operations.
In the event that Cleave, on or prior to the maturity date, completes an equity financing round of preferred stock of at least $10.0 million, then the outstanding principal amount and accrued interest shall be automatically converted into such shares at 80% of the price per share issued. The investment in the convertible loan is designated an investment measured at fair value through profit or loss.
5. Inventories
Inventories at March 31, 2021 and December 31, 2020 consisted of the following:
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
March 31, 2021 |
|
December 31, 2020 |
|
||
|
Finished goods |
|
$ |
2,994 |
|
$ |
1,356 |
|
|
Raw materials |
|
|
— |
|
|
— |
|
|
Total |
|
$ |
2,994 |
|
$ |
1,356 |
|
No provisions to write down the carrying amount of inventory have been recorded in the three months ended March 31, 2021 and 2020.
6. Leases
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.
Operating lease liabilities (see below) are included in accrued liabilities and other liabilities (noncurrent) in the unaudited condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.
All of the Company’s existing leases as of March 31, 2021 are classified as operating leases. For the quarter ended March 31, 2021, the Company had seven material operating leases for land, facilities and office equipment with remaining terms expiring from 2021 through 2069 and a weighted average remaining lease term of 38.12 years. The Company has fair value renewal options for many of the Company’s existing leases, none of which are considered reasonably certain of being exercised or included in the minimum lease term. Weighted average discount rates used in the calculation of the lease liability is 3.55%. The discount rates reflect the estimated incremental borrowing rate, which includes an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment.
In November 2019, CASI Wuxi entered into a fifty-year lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. The land parcel is 74,028.40 square meters. The Company classifies this lease as an operating lease. The Company prepaid all of the lease payments for the land use right in 2019 in the amount of RMB 45 million (equivalent to $6.5 million).
In the first quarter of 2021, one operating lease expired. Since the office space was no longer needed, it was not renewed.
Rent expense for the three months ended March 31, 2021 and 2020 was $400,000 and $377,000, respectively. There were no variable lease costs or sublease income for leased assets for the three months ended March 31, 2021 and 2020.
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Right of use assets and liabilities as of March 31, 2021 and December 31, 2020 in the condensed consolidated balance sheets were as follows:
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
||||
|
(In thousands) |
|
2021 |
|
2020 |
||
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
Operating cash flows |
|
$ |
370 |
|
$ |
377 |
A maturity analysis of the Company’s operating leases as of March 31, 2021 follows:
Future undiscounted cash flows:
7. Intangible Assets
Intangible assets include ANDAs that were acquired as part of 2018 asset acquisitions of U.S. marketed generic products and capitalized costs related to a cloud computing arrangement (CCA). These intangible assets were originally recorded at relative estimated fair values based on the purchase price for the asset acquisitions and are stated net of accumulated amortization and impairment, if any.
The ANDAs are amortized over their estimated useful lives of 13 years, using the straight-line method. The CCA is being amortized over its useful life of 5 years.
In February 2020, the Company entered into an agreement with Chartwell Rx Sciences, LLC (“Chartwell”) in which the Company sold and transferred the control of seven U.S. FDA-approved ANDAs to Chartwell in exchange for $450,000 in cash, which the Company received in March 2020. These ANDAs had a net book value of $0 at the time of sale. The Company is entitled to an additional $1 million, contingent upon Chartwell receiving certain FDA approvals relating to certain of these ANDAs. The Company recognized a gain on disposal of intangible assets in the amount of $450,000 in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2020. The additional $1 million is treated as variable consideration. Because the amount of variable consideration is highly susceptible to factors outside the Company's influence and the Company’s experience with similar types of contracts is limited, the Company did not include the amount of variable consideration in recognition of gain on disposal of intangible assets for the three months ended March 31, 2020. The Company will recognize the variable consideration and additional gain on disposal of intangible assets when the constraint on variable consideration
17
is resolved, i.e., Chartwell receives relevant FDA approvals. As of March 31, 2021, no FDA approvals has been made to Chartwell on those products.
Intangible assets at March 31, 2021 consists of the following:
The changes in intangible assets for three months ended March 31, 2021 are as follows:
|
|
|
|
|
|
(In thousands) |
|
|
|
|
Balance as of December 31, 2020 |
|
$ |
13,210 |
|
Amortization expense |
|
|
(337) |
|
Foreign currency translation adjustment |
|
|
(39) |
|
Balance as of March 31, 2021 |
|
$ |
12,834 |
Expected future amortization expense, is as follows:
|
|
|
|
|
|
(In thousands) |
|
|
|
|
2021 (remaining nine months) |
|
$ |
987 |
|
2022 |
|
|
1,316 |
|
2023 |
|
|
1,316 |
|
2024 |
|
|
1,284 |
|
2025 |
|
|
1,284 |
|
2026 and thereafter |
|
|
6,647 |
8. Grants
In April 2020, CASI Wuxi received RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as a government grant for this development project which was recorded as deferred income in April 2020. The grant will be amortized over the term of the lease of the land. Since April 2020, the Company has recognized RMB 321,000 in deferred income as of March 31, 2021, and therefore, RMB 15.6 million (equivalent to $2.4 million) remain as deferred income in the unaudited condensed balance sheet as of March 31, 2021. The Company recognized $12,000 and $0 of other income during the three months ended March 31, 2021 and 2020, respectively.
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9. Bank Borrowings
On November 3, 2020, Beijing Branch of China CITIC Bank Corporation Limited approved a guaranteed line of Credit (“Bank Borrowings) to the Company with maximum borrowings of RMB 10.0 million ($1.5 million). The joint and several liability guarantee was provided by Beijing Capital Financing Guarantee Co, Ltd. At December 31, 2020, the Company had outstanding borrowings under the Bank Borrowings of RMB 5.4 million ($826,000), which matures on November 7, 2021, and bears interest at a fixed rate of 3.35% per annum.
On February 3, 2021, the Company had additional bank borrowings of RMB 4.6 million ($0.7 million), of which RMB 3.0 million ($0.5 million) matures on September 2, 2021 and the remainder balance matures on November 7, 2021. These additional bank borrowings bear interest at a fixed rate of 3.72% per annum.
Interest expense of $11,000 was recorded in the three months ended March 31, 2021.
10. Notes Payable
On April 27, 2020, M&T Bank approved a $465,595 loan to the Company under the Paycheck Protection Program (PPP) pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act that was signed into law on March 27, 2020. The loan, evidenced by a promissory note to M&T Bank as lender and dated April 29, 2020, has a term of two years, is unsecured, and is guaranteed by the Small Business Administration (SBA). The loan bears interest at a fixed rate of one percent per annum. Some or all of the loan may be forgiven if the Company complies with certain relevant conditions. In June 2020, the PPP was amended through enactment of the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). Under the new act, the Company’s payments of principal and interest are deferred until October 2021. The Company has until August 2021 to apply for loan forgiveness before potential loan payments would begin.
Interest expense of $1,000 was recorded in the three months ended March 31, 2021.
11. Redeemable Noncontrolling Interest
On December 26, 2018, the Company, together with Wuxi Jintou Huicun Investment Enterprise, a limited partnership organized under Chinese law (“Wuxi LP”) established CASI Wuxi to build and operate a manufacturing facility in the Wuxi Huishan Economic Development Zone in Jiangsu Province, China. The Company holds 80% of the equity interests in CASI Wuxi and will invest, over time, $80 million in CASI Wuxi. The Company’s investment will consist of (i) $21 million in cash (paid in February 2019), (ii) a transfer of selected ANDAs valued at $30 million (transferred in May 2019), and (iii) an additional $29 million cash payment within three years from the date of establishment of CASI Wuxi. Wuxi LP holds 20% of the equity interest in CASI Wuxi through its investment in RMB of $20 million in cash (paid in March 2019). As the transfer of ANDAs valued at $30 million was to the Company’s consolidated subsidiary (CASI Wuxi), the Company recognized the transfer of the ANDAs at their carrying value and did not recognize a gain on the transfer.
Pursuant to the investment contract between the Company and Wuxi LP and Articles of Association of CASI Wuxi, the Company has the call option to purchase the 20% equity interest in CASI Wuxi held by Wuxi LP at any time within 5 years from the date of establishment of CASI Wuxi (i.e. up to December 26, 2023). Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at any time after December 26, 2023. The redemption value under both the Company’s embedded put option and Wuxi LP’s embedded call option is equal to $20 million plus interest at the bank loan interest rate issued by the People's Bank of China for the period beginning with the initial capital contribution by Wuxi LP to the date of redemption. In addition, Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at $20 million upon the occurrence of any of the following conditions: (i) the Company fails to fulfill its investment obligation to CASI Wuxi; (ii) CASI Wuxi suffers serious losses, discontinued operation, dissolution, goes into process of bankruptcy liquidation; or (iii) the Company substantially violates the investment contract and Articles of Association of CASI Wuxi.
The investment of Wuxi LP in CASI Wuxi is treated as redeemable noncontrolling interest and is classified outside of permanent equity on the consolidated balance sheets because (1) the noncontrolling interest is not mandatorily redeemable financial instruments, and (2) it is redeemable at the option of the holder, or upon the occurrence of an event that is not solely within the control of the Company. The Company initially recorded the redeemable noncontrolling interest at its fair value of $20 million. The carrying
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amount of the redeemable noncontrolling interest is subsequently recorded at the greater of the amount of (1) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income or loss in CASI Wuxi or (2) the redemption value, assuming the noncontrolling interest is redeemable at the balance sheet date. Accretion of the carrying amount of redeemable noncontrolling interest to the redemption value is recorded in additional paid-in capital.
Changes in redeemable noncontrolling interest during the three month period ended March 31, 2021 and 2020 are as follows:
12. Stockholders’ Equity
March 2021 Underwritten Public Offering
On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.
Pursuant to the underwriting agreement, the Company’s directors and executive officers entered into agreements in substantially the form agreed to by the Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions.
As a result of the Company’s failure to timely file a periodic report with the SEC in connection with the adoption of its amended and restated bylaws, the Company is ineligible to use the current shelf registration or file new short form registration statements on Form S-3 until October 1, 2021, assuming the Company continues to timely file the Company’s required Exchange Act reports. In the interim, however, the Company may raise capital pursuant to a registration statement on Form S-1 or on a private placement basis.
The Company is using the net proceeds of this offering for working capital and general corporate purposes, which include, but are not limited to advancing the Company’s product portfolio, acquiring the rights to new product candidates and general and administrative expenses.
Common Stock Sales Agreements
The Company has a Common Stock Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”). On July 19, 2019, the Company entered into an amendment to the Sales Agreement reducing the maximum amount that may be sold under the Sales Agreement to $20 million. As of March 31, 2021, subject to complying with its terms and conditions, $19.5 million remained available under the Sales Agreement.
On July 19, 2019, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC (the “Open Market Agreement”) in which the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, through Jefferies LLC, as sales agent. As of March 31, 2021, subject to complying with its terms and conditions, $28.4 million remained available under the Open Market Agreement.
The Offering is being made by means of a written prospectus supplement and accompanying prospectus forming part of a shelf registration statement on Form S-3, previously filed with the SEC on November 20, 2020, which was declared effective on December 2, 2020. We have filed a final prospectus supplement, dated March 24, 2021, with the SEC relating to the Offering. Pursuant to the Underwriting Agreement, our directors and executive officers entered into agreements in substantially the form agreed to by the
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Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions. For the three months ended March 31, 2021, no shares were issued under either the Sales Agreement or the Open Market Agreement.
Stock purchase warrants activity for the three months ended March 31, 2021 is as follows:
All outstanding warrants are equity classified.
13. Net Loss Per Share
The following table sets forth the basic and diluted net loss per share computation and provides a reconciliation of the numerator and denominator for the periods presented:
As of March 31, 2021, and 2020, outstanding stock options totaling 15,989,238 and 15,815,052, respectively, and outstanding warrants totaling 8,271,709 and 9,761,416, respectively, were anti-dilutive, and therefore, were not included in the computation of weighted average shares used in computing diluted loss per share.
14. Stock-Based Compensation
As of March 31, 2021, a total of 10,722,923 shares remained available for grant under the Company’s 2011 Long-Term Incentive Plan.
The Company’s net loss for the three months ended March 31, 2021 and 2020 includes $2.0 million and $1.9 million, respectively, of non-cash compensation expense related to the Company’s share-based compensation awards. The compensation expense related to the Company’s share-based compensation arrangements is recorded as components of general and administrative expense, selling and marketing expense, and research and development expense, as follows:
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Compensation expense related to stock options is recognized over the requisite service period, which is generally the option vesting term of up to five years. Awards with performance conditions are expensed when it is probable that the performance condition will be achieved. For the three month periods ended March 31, 2021 and 2020, $26,000 and $21,000 was expensed for stock option awards with performance conditions that were probable during the period, respectively.
The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of service based and performance-based stock options granted to employees. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free interest rate, expected dividend yield, expected volatility, and the expected life of the award.
Following are the weighted-average assumptions used in valuing the stock options granted to employees during the three month periods ended March 31, 2021 and 2020:
The weighted average fair value of stock options granted during the three month periods ended March 31, 2021 and 2020 were $2.45 and $2.10, respectively.
A summary of changes in options under the Company’s stock option plans during the three month period ended March 31, 2021 is as follows:
Cash received from option exercises under all share-based payment arrangements for the three month periods ended March 31, 2021 and 2020 was $0 million and $3.8 million, respectively.
15. Income Taxes
At December 31, 2020, the Company had a $2.1 million unrecognized tax benefit. The Company recorded a full valuation allowance on the deferred tax asset after offsetting unrecognized tax benefit recognized in the consolidated financial statements as of December 31, 2020.
During the three months ended March 31, 2021, there were no material changes to the measurement of unrecognized tax benefits in various tax jurisdictions.
16. Fair Value Measurements
The majority of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, notes payable and bank borrowings) are carried at cost which approximates their fair values due to the
22
short-term nature of the instruments. The Company’s investments in equity securities are carried at fair value, and investments in convertible loans are carried at fair value (see Note 4).
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:
| ● | Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
| ● | Level 2—Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities. |
| ● | Level 3—Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.
The Company has equity investments in the common stock of two publicly traded companies. The Company’s investments in these equity securities are carried at their estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the common stock is based on quoted market price for the investees’ common stock, a Level 1 input.
The Company has an equity investment in the warrants of a publicly traded company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value determination of a warrant.
The Company has an investment in the convertible debt of a privately held UK Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.
The Company has an investment in the convertible debt of a privately held California Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.
The following tables present the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, by level within the fair value hierarchy:
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Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company has no financial assets and liabilities that are measured at fair value on a non- recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company has no non-financial assets and liabilities that are measured at fair value on a non- recurring basis.
17. Related Party Transactions
Juventas. On July 1, 2019 the Company entered into a one-year equipment lease with Juventas in the amount of RMB 80,000 ($15,000) a month, which is classified as an operating lease. Transactions with Juventas are considered to be related party transactions as the Company’s CEO and Chairman is the chairman and one of the founding shareholders of Juventas. In August 2020, the lease was renewed for another year retroactive to July 1, 2020 with the same monthly lease income. During the three months ended March 31, 2021, the Company recognized lease income of RMB 240,000 and expects to recognize RMB 240,000 of additional lease income related to this lease through June 30, 2021, at which time the lease expires. The lease can be extended for one more year.
Spectrum/Acrotech. In 2018, the Company entered into commercial purchase obligation commitments for EVOMELA® from Spectrum Pharmaceuticals, Inc. (“Spectrum”), a 6.8% stockholder of the Company, totaling $9.2 million under a short-term supply agreement for EVOMELA®. The amount due to Spectrum was $0.2 million as of December 31, 2019 which was paid in 2020. There have been no transactions with Spectrum during the three months ended March 31, 2021. The Company also accrued $2.6 million for material costs related to EVOMELA® during the year ended December 31, 2019. As of March 31, 2021, all amounts due to Spectrum have been settled.
BioCheck. In June 2019, the Company entered into a one-year agreement primarily for the sublease of certain office and lab space with BioCheck Inc. (“BioCheck”) in the amount of $60,000 ($5,000 a month), which is classified as an operating lease. Transactions with BioCheck are considered to be related party transactions because the Company’s Chairman and CEO is also the Chairman of BioCheck. Transactions with ETP, parent of BioCheck, and a more than 5% shareholder of the Company, are also considered to be related party transactions because Dr. Wei-Wu He is also the chairman of ETP.
Since the Company required additional office space, in January 2020, the agreement was amended for annualized rents in the amount of $144,000 ($12,000 a month) with a stipulation that the new rent was retroactive to October 1, 2019. The lease expires on June 9, 2021. The Company has provided BioCheck a notification of non-renewal as per the lease agreement. During the three months ended March 31, 2021, the Company recognized rent expense of $36,000 and expects to recognize $27,000 of additional rent expense in 2021 related to the remainder of this lease.
March 2021 Underwritten Public Offering Transactions. On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.
24
ETP Global Fund L.P. (“ETP Global”), whose founding and managing member is CASI's Chairman and CEO, purchased shares of common stock in the Offering at the public offering price and on the same terms as the other purchasers in the Offering. ETP Global, which is a current shareholder of CASI, purchased 3,000,000 shares at the public offering price of $2.05 per share for a total of $6.15 million.
18. Commitments
In conjunction with the Cleave agreement entered into during 2021 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.
In conjunction with the BioInvent agreement entered into during 2020 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.
In conjunction with the Black Belt agreement entered into during 2019 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of March 31, 2021, no milestones have been achieved.
In conjunction with the Pharmathen agreement entered into during 2019 (see Note 2), the Company is responsible for one remaining milestone payment. As of March 31, 2021, the remaining milestone has not been achieved.
In conjunction with the Laurus Labs agreement entered into during 2018, the Company is responsible for certain remaining milestone payments. As of March 31, 2021, the remaining milestones have not been met.
In November 2019, CASI Wuxi entered into a lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. On August 27, 2020, CASI Wuxi entered into a Construction Project Contract (the "Construction Contract") with China Electronic System Engineering No. 2 Construction Co., Ltd. ("China Engineering"). Pursuant to the Construction Contract, CASI Wuxi will pay a contract price of RMB 74,588,000 (equivalent to $10,923,000) to retain China Engineering to complete the phase 1 project of CASI Wuxi's research and development production base, consisting of construction and installation of a combined factory building, warehouse, guard house and public works. The estimated completion date is October 2023.
The Company is subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
CASI Pharmaceuticals, Inc. (“CASI,” the “Company,” or “we” or "our") (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market, leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.
The Company launched its first commercial product, EVOMELA® (Melphalan for Injection), in China in August 2019. In China, EVOMELA® is approved for use as a conditioning treatment prior to stem cell transplantation and as a palliative treatment for patients with multiple myeloma. The other core hematology/oncology assets in the Company’s pipeline include:
| ● | CNCT19 is an autologous CD19 CAR-T investigative product (CNCT19) being developed by the Company’s partner Juventas Cell Therapy Ltd (“Juventas”) for which the Company has co-commercial and profit-sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies which express CD19 including, B-cell acute lymphoblastic leukemia (“B-ALL”) and B-cell non-Hodgkin lymphoma (“B-NHL”). CNCT19’s Phase 1 studies of B-ALL and B-NHL in China have been substantially completed by Juventas, with the Phase 2 B-NHL registration study and the Phase 2 B-ALL registration study of CNCT19 both currently enrolling in China. |
| ● | BI-1206 is an antibody which has a novel mode-of-action, blocking the inhibitory antibody checkpoint receptor FcγRIIB to unlock anti-cancer immunity in both hematological malignancies and solid tumors for which the Company has licensed exclusive greater China rights from BioInvent International (“BioInvent”). AB BI-1206 is being investigated by BioInvent in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda® (pembrolizumab), in solid tumors, and in a Phase 1/2a trial in combination with MabThera® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL). BioInvent International AB, released positive interim results from its Phase 1/2a trial that suggests that novel anti-FcyRIIB antibody BI-1206 restores activity of rituximab in patients with relapsed/refractory non-Hodgkin’s lymphoma. An FDA End of Phase 1 meeting for the NHL development program is planned for the third quarter of 2021. |
| ● | CB-5339 is a novel VCP/p97 inhibitor focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer. The Company entered into an exclusive license in March 21, 2021 with Cleave Therapeutics, Inc. (Cleave”) for the development and commercialization of CB-5339 in Mainland China, Hong Kong, Macau and Taiwan. CB-5339, an oral second-generation, small molecule VCP/p97 inhibitor, is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), and in a Phase 1 clinical trial of patients with solid tumors and lymphomas. |
| ● | CID-103 is a full human IgG1 anti-CD38 monoclonal antibody recognizing a unique epitope that has demonstrated encouraging preclinical efficacy and safety profile compared to other anti-CD38 monoclonal antibodies for which the Company has exclusive global rights. CID-103 is being developed for the treatment of patients with multiple myeloma. The Company has achieved in May 2021 the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma. |
The Company also has greater China rights to ZEVALIN® (Ibritumomab Tiuxetan), a CD20-directed radiotherapeutic antibody that is approved in the U.S. to treat patients with non-Hodgkin lymphoma (“NHL”) and MARQIBO® (vincristine sulfate LIPOSOME injection) a novel, sphingomyelin/cholesterol liposome-encapsulated, formulation of vincristine sulfate, a microtubule inhibitor, approved by the FDA for the treatment of adult patients with Philadelphia chromosome-negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. However, due to the evolving standard of care environment, the rare and niche indication for these products, and the Company’s commitment to prioritize resources, the Company is currently evaluating its options for these products. In addition, the Company’s assets include a few FDA-approved ANDAs which the Company is evaluating due to generic drug pricing reforms by the Chinese government and its impact on the pricing and competitiveness of these products.
26
The Company’s business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand its hematology-oncology franchise. In many cases its business development strategy includes direct equity investments in the licensor company. The Company intends for its pipeline to reflect a diversified and risk-balanced set of assets that include (1) late-stage clinical drug candidates in-licensed for China regional rights, (2) proprietary or licensed innovative drug candidates, and (3) select high quality pharmaceuticals that fit its therapeutic focus. The Company uses a market-oriented approach to identify pharmaceutical/biotechnology candidates that the Company believes to have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under the Company’s global drug development strategy. Although oncology with a focus on hematological malignancies is its principal clinical and commercial target, the Company is opportunistic about other therapeutic areas that can address unmet medical needs.
CASI has built a fully integrated biopharmaceutical company dedicated to the successful development and commercialization of innovative and other therapeutic products. The Company will continue to pursue building a robust pipeline of drug candidates for development and commercialization in China as our primary market, and if rights are available for the rest of the world. For in-licensed products, we use a market-oriented approach to identify pharmaceutical/biotechnology candidates that we believe have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under our drug development strategy. We have focused on US/EU approved product candidates, and product candidates with proven targets or product candidates that have reduced clinical risk with a greater emphasis on innovative therapeutics. Our business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand our hematology-oncology franchise. In many cases our business development strategy includes direct equity investments in the licensor company.
We believe our China operations offer a significant market and growth potential due to the extraordinary increase in demand for high quality medicines coupled with regulatory reforms in China that facilitate the entry of new pharmaceutical products into the country. We will continue to in-license clinical-stage and late-stage drug candidates, and leverage our cross-border operations and expertise, and hope to be the partner of choice to provide access to the China market. We expect the implementation of our plans will include leveraging our resources and expertise in both the U.S. and China so that we can maximize regulatory, development and clinical strategies in both countries.
Since its inception in 1991, the Company has incurred significant losses from operations and, as of March 31, 2021, has incurred an accumulated deficit of $583.8 million. In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, manufacturing. In 2014, the Company changed its name to “CASI Pharmaceuticals, Inc.” The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of our operations. Our operations in China are conducted primarily through two of our subsidiaries, CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”) and CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”). Our Beijing office is primarily responsible for our day-to-day operations and our commercial team of over 80 hematology and oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support our future clinical and commercial manufacturing needs, to manage our supply chain for certain products, and to develop a GMP manufacturing facility in China.
Taking into consideration the cash and cash equivalents balance as of March 31, 2021, the Company believes that it has sufficient resources to fund its operations at least one year beyond the date that the unaudited condensed consolidated financial statements are issued. As of March 31, 2021, the Company had a consolidated cash balance of $68.1 million; $45.4 million was held by the Company (excluding its subsidiaries), and the Company’s subsidiaries held $4.8 million (CASI China), $17.7 million (CASI Wuxi), and $0.2 million (other subsidiaries). The Company intends to continue to exercise tight controls over operating expenditures and will continue to pursue opportunities, as required, to raise additional capital and will also actively pursue non- or less-dilutive capital raising arrangements.
Impact of COVID-19
The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during the first six months of 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so or that there will not be a renewed outbreak of COVID-
27
19 due to new variants of the virus or other significant contagious diseases in China or elsewhere. To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels.
The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could affect the Company's ability to continue to commercialize and expand distribution of EVOMELA® (Melphalan For Injection) or other drugs in the Company’s existing product pipeline. The effectiveness of the Company's sales teams may be negatively impacted by the lack of travel and their reduced ability to engage with decision-makers. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to their EVOMELA® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. During the variants of remainder of 2020, operations have returned to expected levels; however, there can be no assurance that such restrictions will not be imposed again. In addition, economic and other uncertainties may adversely affect other parties' willingness to negotiate and execute product licenses and thus hamper the Company's ability to in-license clinical-stage and late-stage drug candidates in China or elsewhere.
The Company currently relies on a single source for its supply of EVOMELA® . Due to COVID-19, the Company experienced a disruption to its supply chain for EVOMELA® . That disruption, along with a change in 2020 in the manufacturer of EVOMELA® , contributed to a decrease in the Company's revenue for the second quarter of 2020. The Company has returned to expected levels of sales as indicated by the increase in sales in the second half of 2020.
If suppliers refuse or are unable to provide products for any reason (including the occurrence of an event like the COVID-19 pandemic that makes delivery impractical), the Company would be required to negotiate an agreement with a substitute supplier, which would likely interrupt the manufacturing of EVOMELA® , cause delays and increase costs.
Clinical trials, whether planned or ongoing, may be affected by the COVID-19 pandemic. The Company's partner, Juventas, experienced some delay in conducting the CNCT19 trials due to the COVID-19 pandemic. The COVID-19 pandemic has also impacted the Company's targeted start time of its CID-103 trial due to the lock-down of many medical facilities in Europe. Study procedures (particularly any procedures that may be deemed non-essential), site initiation, participant recruitment and enrollment, participant dosing, shipment of the Company's product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis may be paused or delayed due to changes in hospital or research institution policies, federal, state or local regulations, prioritization of hospital and other medical resources toward COVID-19 efforts, or other reasons related to the pandemic. In addition, there could be a potential effect of COVID-19 on the operations of the health regulatory authorities, which could result in delays of reviews and approvals, including with respect to the Company's product candidates. Any prolongation or de-prioritization of the Company's clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company's product candidates.
During the second quarter of 2020, the Company completed the plan to change the manufacturing site for EVOMELA® to an alternative manufacturer that has significantly reduced the cost of revenue for the third quarter of 2020. Due to the manufacturer change, and to the effects of COVID-19 to our marketing and sales activities and supply chain, revenues for the second quarter of 2020 experienced an expected temporary decrease. We have returned to expected levels of sales as indicated by the increases in sales in the second half of 2020, and first quarter of 2021.
Our partner, Juventas, experienced some delay in the start of the CNCT19 clinical trials in the first quarter of 2020 but the Juventas CNCT-19 clinical trials program was back on track with both clinical trials underway in the second half of 2020. The COVID-19 pandemic impacted our targeted start time of our CID-103 trial due to the lock down of many medical facilities in Europe. Nevertheless, the Company has achieved in May 2021, the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma. The study is designed to assess the safety, tolerability, pharmacology and clinical activity of CID-103. As the pandemic continues to unfold, the extent of the pandemic’s effect on our operations will depend in large part on future developments, which cannot be predicted with confidence at this time.
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RESULTS OF OPERATIONS
Three months ended March 31, 2021 Compared with Three months ended March 31, 2020
Operating Items
Revenues
Product Sales
Revenues consist of product sales of EVOMELA® that launched during August 2019. Revenue was $5.7 million for the three months ended March 31, 2021 compared to $3.4 million for the three months ended March 31, 2020. Revenues increased in the first quarter of 2021 as compared to same quarter in 2020 due to the continued growth in EVOMELA® sales. The increase in the first quarter of 2021 as compared to the same quarter in 2020 was also partially due to product sales which during the first quarter of 2020 were adversely affected by restrictions imposed by Chinese authorities in response to COVID-19.
Lease Income
Lease income consists primarily of an equipment lease with Juventas (a related party). Lease income was $36,000 for the three months ended March 31, 2021 compared to $34,000 for the three months period ended March 31, 2020.
Operating Expenses
Cost of Revenues
Cost of revenues consists primarily of the cost of inventories of EVOMELA® and sales-based royalties related to the sale of EVOMELA®.
Costs of revenues were $2.4 million for the three months ended March 31, 2021 compared to $3.2 million for the three months ended March 31, 2020. The decrease in cost of revenues is due to the new alternate manufacturer now in place, resulting in a considerable decrease in the unit cost of inventories of EVOMELA®. The decrease was partially offset by the continued growth in EVOMELA® sales.
Research and Development Expenses
Research and development (R&D) expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with internal and contract preclinical testing and clinical trials of our product candidates, including the costs of manufacturing drug substance and drug product, regulatory maintenance costs, facilities expenses, and amortization expense of acquired ANDAs.
Research and development expenses for the three months ended March 31, 2021 were $5.3 million, compared with $3.0 million for the three months ended March 31, 2020. The increases in R&D expenses are primarily due to an increase in R&D expenses incurred related to the development of CID-103.
Included in our research and development expenses for the three months ended March 31, 2021 are direct project costs of $3.5 million for preclinical development activities, primarily related to our CID-103 program, $0.5 million related to our ANDAs acquired in 2018, and $0.4 million for drugs in-licensed from Acrotech (previously Spectrum).
Included in our research and development expenses for the three months ended March 31, 2020 are direct project costs of $1.3 million for preclinical development activities primarily related to our CID-103 program, $0.5 million related to our ANDAs acquired in 2018, and $0.5 million for drugs in-licensed from Acrotech (previously Spectrum).
29
General and Administrative Expenses
General and administrative expenses include compensation and other expenses related to executive, finance, business development and administrative personnel, professional services, investor relations and facilities.
General and administrative expenses for the three months ended March 31, 2021 were $5.5 million, compared with $4.1 million for the three months ended March 31, 2020. The increase in general and administrative expenses was primarily due to an increase in headcount and payroll expenses as the Company continues to build its sales and marketing force.
Selling and Marketing Expenses
Selling and marketing expenses are the direct costs related to the sales of EVOMELA® that was launched in China in August 2019, such as sales force salaries, commissions, advertising, and other marketing efforts.
Selling and marketing expenses for the three months ended March 31, 2021 were $2.7 million, compared with $1.3 million for the three months ended March 31, 2020.
Gain on disposal of intangible assets
There was no gain (loss) on disposal of intangible assets for the three months ended March 31, 2021.
Gain on disposal of intangible assets for the three months ended March 31, 2020 was $0.5 million. The gain on disposal is due to the $0.5 million gain on the sale of seven ANDAs during the first quarter of 2020.
Acquired in-process Research and Development
Acquired in-process R&D expenses for the three months ended March 31, 2021 was $5.5 million, compared to $1.1 million for the three months ended March 31, 2020. The amount reported for the three months ended March 31, 2021 was the upfront payment to Cleave for the development of CB-5339. The three months ended March 31, 2020 amount relates to milestone fees paid to Pharmathen’s due to the first submission to the National Medical Products Administration in China for Octreotide which was achieved in the first quarter of 2020.
Non-Operating Items
Interest income, net
Interest income, net for the three months ended March 31, 2021 was $106,000 compared with $190,000 for the three months ended March 31, 2020. The decrease in interest income, net, is mainly due to the decrease in rates of return from available cash management strategies due to the current economic environment.
Other income
Other income for the three months ended March 31, 2021 was $20,000 compared with $0 for the three months ended March 31, 2020. Other income of $12,000 recorded relates to the April 2020 CASI Wuxi’s receipt of RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as government grant for the development of leased state-owned land in China for the construction of a manufacturing facility. The grant was recorded as deferred income in April 2020. The grant is been amortized over the term of the lease of the land.
Foreign exchange gains
Foreign exchange gains for the three months ended March 31, 2021 were $219,000 compared with gains of $363,000 for the three months ended March 31, 2020. The foreign exchange losses and gains are primarily due to USD denominated cash accounts that are held by our Chinese subsidiaries.
30
Change in fair value of investment in equity securities
The changes in fair value of investments in equity securities for the three months ended March 31, 2021 and 2020 were gains of $1,568,000 and losses of $15,000, respectively. The changes represent unrealized gains and losses on the Company’s equity investment securities.
LIQUIDITY AND CAPITAL RESOURCES
To date, we have been engaged primarily in research and development activities. As a result, we have incurred and expect to continue to incur operating losses for the foreseeable future. Based on our current plans, we expect our current available cash and cash equivalents to meet our cash requirements for at least through May 13, 2022.
We will require significant additional funding to fund operations until such time, if ever, we become profitable. We intend to augment our cash balances by pursuing other forms of capital infusion, including strategic alliances or collaborative development opportunities with organizations that have capabilities and/or products that are complementary to our capabilities and products in order to continue the development of our potential product candidates that we intend to pursue to commercialization. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, to raise further financing, we may need to relinquish rights to certain of our existing product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our product candidates on terms that are not favorable to us.
We will continue to seek to raise additional capital to fund our commercialization efforts, expansion of our operations, research and development, and for the acquisition of new product candidates, if any. We intend to explore one or more of the following alternatives to raise additional capital:
| ● | selling additional equity securities; |
| ● | out-licensing product candidates to one or more corporate partners; |
| ● | completing an outright sale of non-priority assets; and/or |
| ● | engaging in one or more strategic transactions. |
We also will continue to manage our cash resources prudently and cost-effectively.
There can be no assurance that adequate additional financing under such arrangements will be available to us on terms that we deem acceptable, if at all. If additional funds are raised by issuing equity securities, dilution to existing stockholders may result, or the equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock. If we fail to obtain additional capital when needed, we may be required to delay or scale back our commercialization efforts, our advancement of the Spectrum products, and the ANDA products, or plans for other product candidates, if any.
At March 31, 2021, we had cash and cash equivalents of $68.1 million, with working capital of $79.0 million. As of March 31, 2021, the Company had a consolidated cash balance of $68.1 million; $45.4 million was held by the Company (excluding its subsidiaries), and the Company’s subsidiaries held $4.8 million (CASI China), $17.7 million (CASI Wuxi), and $0.2 million (other subsidiaries).
FINANCING ACTIVITIES
March 2021 Underwritten Public Offering
On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.
31
Pursuant to the underwriting agreement, the Company’s directors and executive officers entered into agreements in substantially the form agreed to by the Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions.
As a result of the Company’s failure to timely file a periodic report with the SEC in connection with the adoption of its amended and restated bylaws, the Company is ineligible to use the current shelf registration or file new short form registration statements on Form S-3 until October 1, 2021, assuming the Company continues to timely file the Company’s required Exchange Act reports. In the interim, however, the Company may raise capital pursuant to a registration statement on Form S-1 or on a private placement basis.
The Company is using the net proceeds of this offering for working capital and general corporate purposes, which include, but are not limited to advancing the Company’s product portfolio, acquiring the rights to new product candidates and general and administrative expenses.
Sales Agreements
On February 23, 2018, the Company entered into a Common Stock Sales Agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time, at its option, shares of the Company’s common stock, through HCW, as sales agent. On July 19, 2019, the Company entered into an amendment to the Sales Agreement reducing the maximum amount that may be sold under the Sales Agreement to $20 million.
For the three months ended March 31, 2021, no shares were issued pursuant to the Sales Agreement, and a total of 143,248 shares, resulting in net proceeds to the Company of $475,000 have been issued since inception. As of March 31, 2021, subject to complying with its terms and conditions, $19.5 million remained available.
On July 19, 2019, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC (the “Open Market Agreement”). Pursuant to the terms of the Open Market Agreement, the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, through Jefferies LLC, as sales agent.
For the three months ended March 31, 2021, no shares were issued pursuant to the terms of the Open Market Agreement, and a total of 493,000 shares, resulting in net proceeds to the Company of $1,539,000, have been issued since inception. As of March 31, 2021, subject to complying with its terms and conditions, $28.4 million remained available under the Sales Agreement.
The Offering is being made by means of a written prospectus supplement and accompanying prospectus forming part of a shelf registration statement on Form S-3, previously filed with the SEC on November 20, 2020, which was declared effective on December 2, 2020. We have filed a final prospectus supplement, dated March 24, 2021, with the SEC relating to the Offering. Pursuant to the Underwriting Agreement, our directors and executive officers entered into agreements in substantially the form agreed to by the Underwriters providing for a 90-day “lock-up” period with respect to sales of specified securities, subject to certain exceptions. For the three months ended March 31, 2021, no shares were issued under either the Sales Agreement or the Open Market Agreement.
INTEREST RATE CHANGES
Management does not believe that our working capital needs are sensitive to changes in interest rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Chief Executive Officer and President/Principal Financial Officer have concluded that the Company’s disclosure controls and procedures as
32
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of March 31, 2021 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and President/Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.
ITEM 1A. RISK FACTORS
For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussion set forth in Item 1A of CASI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the information under “Special Note Regarding Forward-Looking Statements” included in this report. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
33
ITEM 6. EXHIBITS
EXHIBIT INDEX
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1.1 |
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3.1 |
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10.1 |
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31.1 |
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31.2 |
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Rule 13a-14(a) Certification of Principal Financial Officer** |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.** |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document.** |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document.** |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document.** |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document.** |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document.** |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). |
+ Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(B)(10)(IV) of Regulation S-K because it (i) is not material and (ii) would likely cause competitive harm to CASI Pharmaceuticals, Inc. if publicly disclosed.
**Filed Herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CASI PHARMACEUTICALS, INC. |
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(Registrant) |
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Date: May 13, 2021 |
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/s/ Wei-Wu He |
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Wei-Wu He |
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Chief Executive Officer |
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Date: May 13, 2021 |
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/s/ Larry (Wei) Zhang |
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Larry (Wei) Zhang |
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Principal Financial Officer |
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Exhibit 10.1
INFORMATION IN THIS EXHIBIT IDENTIFIED BY BRACKETS IS CONFIDENTIAL AND HAS BEEN EXCLUDED PURSUANT TO ITEM 601(B)(10)(IV) OF REGULATION S-K BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO CASI PHARMACEUTICALS, INC. IF PUBLICLY DISCLOSED.
*** TRIPLE ASTERISKS DENOTE OMISSIONS
LICENSE AND DEVELOPMENT AGREEMENT FOR CB-5339
Dated March 5th, 2021
By and Between
Cleave Therapeutics, Inc.
And
CASI Pharmaceuticals, Inc.
TABLE OF CONTENTS
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ARTICLE I Definitions |
6 |
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ARTICLE II Licenses and Other Rights |
19 |
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2.1. |
Grant of License to CASI |
19 |
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2.2. |
Grant of Sublicense by CASI |
19 |
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2.3. |
Grant of License to Cleave |
19 |
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2.4. |
Right to Subcontract of CASI |
19 |
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2.5. |
Non-Compete Obligations of CASI |
20 |
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2.6. |
Acquisition of Competing Programs |
20 |
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2.7. |
[***] for Competing Product of Cleave |
20 |
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2.8. |
[***] for CB-5339 Global Rights |
21 |
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2.9. |
Cleave Third Party Agreements |
21 |
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ARTICLE III Governance |
22 |
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3.1 |
Formation and Composition of the Joint Steering Committee |
22 |
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3.2 |
JSC Functions and Powers |
22 |
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3.3. |
Limitations of Powers of the JSC |
22 |
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3.4. |
Determinations |
22 |
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3.5. |
Meetings of the JSC |
22 |
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3.6. |
Meeting Minutes |
23 |
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3.7. |
Urgent Matters |
23 |
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3.8. |
Subcommittees |
23 |
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3.9. |
Appointment of Project Leaders |
23 |
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ARTICLE IV Development |
24 |
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4.1. |
Development of the Licensed Product by CASI |
24 |
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4.2. |
Diligence |
25 |
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4.3. |
Technology Transfer to CASI |
25 |
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4.4. |
Technology Transfer to Cleave |
26 |
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4.5. |
Cleave Support in Development |
26 |
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4.6. |
Records |
26 |
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4.7. |
Development Reports |
27 |
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ARTICLE V Supply and Manufacturing |
27 |
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5.1. |
Supply |
27 |
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5.2. |
Manufacturing Technology Transfer |
27 |
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5.3. |
Manufacturing Collaboration |
28 |
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ARTICLE VI Commercialization |
28 |
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Page 2 of 57
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6.1. |
Commercialization |
28 |
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6.2. |
Diligence |
28 |
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6.3. |
Commercialization Reporting |
28 |
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6.4. |
Trademarks |
29 |
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6.5. |
Compliance with Anti-Corruption and Anti-Bribery Laws |
29 |
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6.6. |
Compliance with Laws, Generally |
29 |
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ARTICLE VII Regulatory Matters |
29 |
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7.1. |
Holder of Regulatory Approvals and Regulatory Materials |
29 |
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7.2. |
Regulatory Responsibilities |
30 |
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7.3. |
Regulatory Materials |
30 |
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7.4. |
Rights of Reference |
30 |
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7.5. |
Adverse Event Reporting |
31 |
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7.6. |
Recall of Licensed Product |
31 |
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7.7. |
Personally Identifiable Data |
32 |
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ARTICLE VIII Financial Provisions |
32 |
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8.1. |
Initial Fee and Equity Investment |
32 |
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8.2. |
Milestone Payments |
32 |
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8.3. |
Commercial Event Payments |
33 |
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8.4. |
Royalty Payments for the Licensed Product |
34 |
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8.5. |
Royalty Reduction |
34 |
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8.6. |
Cleave Third Party Agreement Fees |
35 |
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8.7. |
Timing of Payment |
35 |
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8.8. |
Mode of Payment and Currency |
35 |
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8.9. |
Royalty Reports and Records Retention |
35 |
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8.10. |
Legal Restrictions |
35 |
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8.11. |
Late Payments |
35 |
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8.12. |
Audits |
36 |
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8.13. |
Taxes |
36 |
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ARTICLE IX Inventions and Patents |
36 |
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9.1. |
Patent Contacts |
36 |
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9.2. |
Ownership of Background Technology |
37 |
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9.3. |
Ownership of Foreground Technology |
37 |
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9.4. |
Patent Prosecution and Maintenance |
37 |
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9.5. |
Enforcement of Patents |
39 |
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9.6. |
Third Party Actions Claiming Infringement |
40 |
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ARTICLE X Confidentiality |
41 |
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10.1. |
Confidentiality Obligations |
41 |
Page 3 of 57
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10.2. |
Publications |
42 |
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10.3. |
Press Releases and Disclosure |
43 |
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ARTICLE XI Representations and Warranties |
43 |
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11.1. |
Representations and Warranties of Both Parties |
43 |
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11.2. |
Additional Representations, Warranties and Covenants of Cleave |
43 |
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11.3. |
Additional Representations, Warranties and Covenants of CASI |
45 |
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ARTICLE XII Indemnification and Insurance |
46 |
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12.1. |
Indemnification by CASI |
46 |
|
12.2. |
Indemnification by Cleave |
47 |
|
12.3. |
No Consequential Damages |
47 |
|
12.4. |
Notification of Claims; Conditions to Indemnification Obligations |
47 |
|
12.5. |
Insurance |
47 |
|
ARTICLE XIII Term and Termination |
48 |
|
|
13.1. |
Term and Expiration |
48 |
|
13.2. |
Termination of the Agreement by CASI for Convenience |
48 |
|
13.3. |
Termination upon Material Breach |
48 |
|
13.4. |
Termination for Bankruptcy |
48 |
|
13.5. |
Effects of Termination |
48 |
|
ARTICLE XIV Dispute Resolution |
51 |
|
|
14.1. |
Disputes |
51 |
|
14.2. |
Escalation to Executive Officers |
51 |
|
14.3. |
Arbitration |
51 |
|
ARTICLE XV Miscellaneous Provisions |
51 |
|
|
15.1. |
Relationship of the Parties |
51 |
|
15.2. |
Assignment |
52 |
|
15.3. |
Performance by Affiliates |
52 |
|
15.4. |
Further Actions |
52 |
|
15.5. |
Accounting Procedures |
52 |
|
15.6. |
Force Majeure |
52 |
|
15.7. |
No Trademark Rights |
53 |
|
15.8. |
Entire Agreement of the Parties; Amendments |
53 |
|
15.9. |
Captions |
53 |
|
15.10. |
Governing Law |
53 |
|
15.11. |
Notices and Deliveries |
53 |
|
15.12. |
Language |
54 |
|
15.13. |
Waiver |
54 |
|
15.14. |
Severability |
54 |
Page 4 of 57
|
15.15. |
Interpretation |
54 |
|
15.16. |
Counterparts |
54 |
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LICENSE AND DEVELOPMENT AGREEMENT FOR CB-5339
THIS LICENSE AND DEVELOPMENT AGREEMENT FOR CB-5339 (the “Agreement”) is dated as of March 5th, 2021 (the “Effective Date”) by and between Cleave Therapeutics, Inc., a corporation organized under the laws of Delaware having its place of business at 135 Main Street, Suite 1145, San Francisco, CA 94105 (“Cleave”), and CASI Pharmaceuticals, Inc., a corporation organized under the laws of Delaware having a place of business at 9620 Medical Center Drive, Suite 300, Rockville, Maryland 20850 (“CASI”). Cleave and CASI may be each referred to herein as a “Party” or, collectively, as “Parties.”
RECITALS:
WHEREAS, Cleave is a pharmaceutical company engaged in the discovery and development of therapeutics for the treatment of cancer and other diseases;
WHEREAS, CASI is engaged in the research, development, manufacturing, and commercialization of pharmaceutical products; and
WHEREAS, CASI desires to license from Cleave and Cleave wishes to license to CASI, on an exclusive basis, the right to develop and commercialize Cleave’s proprietary small molecule VCP/p97 inhibitor known as CB-5339 in the Territory.
NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have the following meanings:
1.1.“Accounting Standard” means (a) with respect to CASI and its Affiliates, GAAP, (b) with respect to Cleave, GAAP, in each case (a) and (b), consistently applied.
1.2.“Action” has the meaning set forth in Section 9.5(b).
1.3.“Adverse Event” means any serious untoward medical occurrence in a patient or subject who is administered a Licensed Product, but only if and to the extent that such serious untoward medical occurrence is required under Applicable Laws to be reported to the NMPA, the FDA, the EMA, or any other Regulatory Authority.
1.4.“Affiliate” means a Person or entity that controls, is controlled by or is under common control with a Party, but only for so long as such control exists. For the purposes of this Section 1.4, the word “control” (including, with correlative meaning, the terms “controlled by” or “under the common control with”) means the actual power, either directly or indirectly through one or more intermediaries, to direct the management and policies of such Person or entity, whether by the ownership of at least fifty percent (50%) of the voting stock of such entity, or by contract or otherwise.
1.5.“Applicable Laws” means any applicable supranational, federal, national, state, local or foreign law, statute, ordinance or principle of common law, or any rule, regulation,
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standard, judgment, order, writ, injunction, decree, arbitration award, agency guidelines or other requirement, license or permit of any Governmental Body, which may be in effect from time to time.
1.6.“Background Technology” of a Party means (a) the Technology owned or Controlled by that Party existing as of the Effective Date or (b) discovered, developed or invented by, for or on behalf of such Party after the Effective Date outside of the scope of this Agreement.
1.7.“Bankrupt Party” has the meaning set forth in Section 13.4.
1.8.“Bankruptcy Event” means (a) voluntary or involuntary proceedings by or against a Party are instituted in bankruptcy under any insolvency law, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; (b) a receiver or custodian is appointed for a Party; (c) proceedings are instituted by or against a Party for corporate reorganization, dissolution, liquidation or winding-up of such Party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing; or (d) substantially all of the assets of a Party are seized or attached and not released within sixty (60) days thereafter.
1.9.“Business Day” means any day of the week excluding Saturday, Sunday and any day which is a legal holiday in the USA, or anywhere in the Territory.
1.10.“Calendar Quarter” means each three (3) month period commencing January 1, April 1, July 1 or October 1, provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the Term shall end upon the expiration of this Agreement.
1.11.“Calendar Year” means the period beginning on the 1st of January and ending on the 31st of December of the same year, provided, however, that (a) the first Calendar Year of the Term shall commence on the Effective Date and end on December 31, 2021 and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of termination or expiration of this Agreement.
1.12.“CASI Development Plan” has the meaning set forth in Section 4.1(a).
1.13.“CASI Indemnitees” has the meaning set forth in Section 12.2.
1.14.“CASI Know-How” means all Know-How that is developed or created by or on behalf of CASI or any of its Affiliates under this Agreement during the Term and is necessary or reasonably useful for the Development, manufacture, use, or Commercialization of the Licensed Product. Notwithstanding the foregoing, CASI Know-How does not include any Know-How that is Joint Technology.
1.15.“CASI Materials” means all chemical, biological or physical materials that are developed or created by or on behalf of CASI or any of its Affiliates under this Agreement during the Term and that are necessary or reasonably useful for the Development, manufacture, use or Commercialization of the Licensed Product. Notwithstanding the foregoing, CASI Materials do not include any Material that is Joint Technology.
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1.16.“CASI Patents” means all Patent Rights based on inventions invented by or on behalf of CASI or its Affiliates under this Agreement during the Term and that are necessary or reasonably useful for the Development, manufacture, use, or Commercialization of the Licensed Product. Notwithstanding the foregoing, CASI Patents do not include any Joint Patents.
1.17.“CASI Technology” means the CASI Patents, the CASI Know-How and the CASI Materials.
1.18.“CB-5339” means CB-5339, an inhibitor of the Valosin-containing protein (VCP) or transitional endoplasmic reticulum ATPase (TER ATPase) also known as p97. The chemical structure of CB-5339 is set forth on Exhibit A.
1.19.“Cleave In-Licensed Technology” has the meaning set forth in Section 1.24.
1.20.“Cleave Indemnitees” has the meaning set forth in Section 12.1.
1.21.“Cleave Know-How” means all Know-How that is Controlled by Cleave or any of its Affiliates as of the Effective Date or at any time thereafter during the Term and is necessary or reasonably useful for the Development, manufacture, use, or Commercialization of the Licensed Product. Notwithstanding the foregoing, Cleave Know-How does not include any Know-How that is Joint Technology.
1.22.“Cleave Materials” means all chemical, biological or physical materials that are Controlled by Cleave or any of its Affiliates as of the Effective Date or at any time thereafter during the Term and that are necessary or reasonably useful for the Development, manufacture, use or Commercialization of the Licensed Product. Notwithstanding the foregoing, Cleave Materials do not include any Material that is Joint Technology.
1.23.“Cleave Patents” means all Patent Rights that are Controlled by Cleave or its Affiliates as of the Effective Date or at any time thereafter during the Term and that are necessary or reasonably useful for the Development, manufacture, use, or Commercialization of the Licensed Product. The Patent Rights set forth in Exhibit B constitute all such Patent Rights Controlled by Cleave as of the Effective Date. Notwithstanding the foregoing, Cleave Patents do not include any Joint Patents.
1.24.“Cleave Technology” means the Cleave Patents, the Cleave Know-How and the Cleave Materials. For the avoidance of doubt, the Cleave Technology includes any Cleave Patents, Cleave Know-How and Cleave Materials Controlled by Cleave pursuant to any Cleave Third Party Agreement (“Cleave In-Licensed Technology”).
1.25.“Cleave Third Party Agreement(s)” means any agreement between Cleave or any of its Affiliates, on the one hand, and any Third Party, on the other hand, pursuant to which Cleave or its Affiliates has in-licensed any Cleave Patents, Cleave Know-How, or Cleave Material from such Third Party. Cleave Third Party Agreements existing as of the Effective Date are set forth on Exhibit C.
1.26.“cGCP” means the current standards, practices and procedures set forth in the International Conference on Harmonization (ICH) guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance” including related requirements imposed
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by the FDA and equivalent NMPA regulations or standards, as applicable, as such standards, practices, procedures, requirements and regulations may be amended from time to time.
1.27.“cGLP” means the current good laboratory practice regulations promulgated by the FDA, published at 21 U.S C.F.R. § 58, and equivalent NMPA regulations or standards, as applicable, as such current laboratory practices, regulations and equivalent NMPA regulations or standards may be amended from time to time.
1.28.“cGMP” means those current practices, as amended from time to time, related to the manufacture of pharmaceutical products and any precursors thereto promulgated in guidelines and regulations of standard compilations including the GMP Rules of the World Health Organization, the United States Code of Federal Regulations, the Guide to Inspection of Bulk Pharmaceutical Chemicals (established by the United States Department of Health and Human Services), the Pharmaceutical Inspection Convention, the PRC Drug Manufacturing Quality Management Standards issued by the NMPA and related laws, regulations, standards and documents (including the China Pharmacopeia), and the European Community Guide to Good Manufacturing Practice in the production of pharmaceutical products.
1.29.“Change of Control” means
(a)a transaction or series of related transactions that results in the sale or other disposition of all or substantially all of a Party’s assets; or
(b)a merger or consolidation in which a Party is not the surviving corporation or in which, if a Party is the surviving corporation, the shareholders of such Party immediately prior to the consummation of such merger or consolidation do not, immediately after consummation of such merger or consolidation, possess a majority of the voting power of all of the Party’s outstanding stock and other securities and the power to elect a majority of the members of the Party’s board of directors; or
(c)a transaction or series of related transactions (which may include without limitation a tender offer for a Party’s stock or the issuance, sale or exchange of stock of a Party) if the shareholders of such Party immediately prior to the initial such transaction do not, immediately after consummation of such transaction or any of such related transactions, own stock or other securities of the entity that possess a majority of the voting power of all of the Party’s outstanding stock and other securities and the power to elect a majority of the members of the Party’s board of directors.
1.30.“Clinical Trial” means a clinical trial in human subjects that has been approved by a Regulatory Authority and is designed to measure the safety and/or efficacy of a Licensed Product. Clinical Trials shall include Phase I Trials, Phase II Trials and Phase III Trials.
1.31.“CMO” has the meaning set forth in Section 5.1.
1.32.“Co-Chairperson” has the meaning set forth in Section 3.1.
1.33.“Combination Product” means a product containing both (a) a pharmaceutically active agent or ingredient which constitutes a Licensed Product and (b) one or more other pharmaceutically active agents or ingredients which do not constitute Licensed Products (each, an “Other Component”).
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1.34.“Commercialization” or “Commercialize” means any and all activities undertaken before and after Regulatory Approval of an NDA for a particular Licensed Product and that relate to the marketing, promoting, distributing, importing or exporting for sale, offering for sale, and selling of the Licensed Product, and interacting with Regulatory Authorities regarding the foregoing, in a country, region, or other jurisdiction.
1.35.“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by any Party with respect to any objective, such reasonable, diligent, and good faith efforts as a company of similar size and having similar resources in the pharmaceutical industry would normally use to accomplish a similar objective under similar circumstances exercising reasonable business judgment, taking into account relevant factors that may affect the Development, Manufacture or Commercialization of a product, such as the market potential, estimated profitability, stage in development or product life cycle, provided, however, that with respect to the Development and Commercialization of the Licensed Products in the Territory, such efforts shall be in no event less than those efforts and resources consistently used by CASI for an internally Developed or an in-licensed product of similar strategic importance and at a similar stage of its product life cycle. Without limiting the foregoing, Commercially Reasonable Efforts requires that CASI, its Affiliates or Sublicensees (a) promptly assign responsibility for Development, manufacturing and Commercialization activities with respect to Licensed Products to specific employees or subcontractors and monitoring such progress on an ongoing basis, (b) set and seek to achieve specific and meaningful objectives and timelines for carrying out such Development, manufacturing and Commercialization activities with respect to Licensed Products in the Territory, and (c) make decisions and allocate resources designed to advance progress with respect to such objectives and that seek to achieve timelines set forth in the CASI Development Plan.
1.36.“Competing Product” has the meaning set forth in Section 2.5.
1.37.“Competing Product Transaction” has the meaning set forth in Section 2.7(a).
1.38.“Confidential Information” of a Party means information relating to the business, operations and products of a Party or any of its Affiliates, including but not limited to any technical information, Know-How, trade secrets, or inventions (whether patentable or not), proprietary information, formulae, processes, techniques and information relating to a Party’s past, present and future research, Development, manufacture and Commercialization activities, not known or generally available to the public, that such Party discloses to the other Party under this Agreement, or otherwise becomes known to the other Party by virtue of this Agreement.
1.39.“Controlled” or “Controls” means, with respect to (a) Patent Rights, (b) Know-How, (c) Material, (d) a Competing Product, (e) Regulatory Material, (f) Regulatory Approval, or (g) other property right, that a Party or one of its Affiliates owns or has a license or sublicense to such Patent Rights, Know-How, Material, Competing Product, Regulatory Material, Regulatory Approval, or other property right (or in the case of Material, has the right to physical possession of such Material), whether directly or indirectly, and has the ability to grant a license or sublicense to, or assign its right, title and interest in and to, such Patent Rights, Know-How, Material, Competing Product, Regulatory Material, Regulatory Approval, or other property right as provided for in this Agreement without violating the terms of any agreement or other arrangement with any Third Party. Notwithstanding anything in this Agreement to the contrary, a Party will be deemed not to Control any Patent Rights, Know-How, Material, Competing Product, Regulatory Material, Regulatory Approval, or other property right
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Controlled by the acquiror or successor following a Change of Control of a Party that such acquiror or successor Controlled immediately prior to such Change of Control, except (i) any Patent Rights, Know-How, Material, Regulatory Material, Regulatory Approval, or other property right arising from active participation by employees or consultants of such acquiror or successor in the Development, manufacture, use, and Commercialization of the Licensed Product in the Field after such Change of Control, or (ii) to the extent any Patent Rights, Know-How, Material, Regulatory Material, Regulatory Approval, or other property right are included in or used in furtherance of the Development, manufacture, use, and Commercialization of the Licensed Product in the Field by such acquiror or successor after such Change of Control.
1.40.“Controlling Party” has the meaning set forth in Section 9.6(c).
1.41.“Cover,” “Covering” or “Covered” means, with respect to a Licensed Product, that the using, selling, or offering for sale of the Licensed Product would, but for a license granted under this Agreement to the relevant Patent Rights, infringe a Valid Claim of the relevant Patent Rights in the Region in which the activity occurs.
1.42.“CTA” means a drug clinical trial registration application submitted to the NMPA or the equivalent application or submission to any equivalent agency or Governmental Body in each Region in the Territory for approval to commence Clinical Trial(s) in such jurisdiction.
1.43.“Development” or “Develop” means, with respect to a Licensed Product, the performance of all pre-clinical and clinical development (including, without limitation, toxicology, pharmacology, test method development and stability testing, process development, formulation development, quality control development, and statistical analysis), Clinical Trials, manufacturing and regulatory activities that are required to obtain Regulatory Approval of the Licensed Product in a country, region, or other jurisdiction.
1.44.“Discontinued Patent” has the meaning set forth in Section 9.4(f).
1.45.“EMA” means the European Medicines Agency or any successor agency.
1.46.“European Commission” means the authority within the European Union that has the legal authority to grant Regulatory Approvals in the European Union based on input received from the EMA or other competent Regulatory Authorities.
1.47.“Executive Officers” means, together, the Chief Executive Officer of CASI and the Chief Executive Officer of Cleave.
1.48.“FDA” means the United States Food and Drug Administration, or a successor federal agency thereto.
1.49.“Field” means the treatment of all diseases and conditions.
1.50.“First Commercial Sale” means, with respect to a Licensed Product in any Region in the Territory after all necessary Regulatory Approvals for such Licensed Product in such Region have been obtained, the first commercial transfer or disposition for value of the Licensed Product in such Region to an independent or unaffiliated Third Party by CASI, an Affiliate of CASI or a Sublicensee.
Page 11 of 57
1.51.“Foreground Technology” means any Technology developed by either Party alone, or by the Parties jointly, under this Agreement after the Effective Date.
1.52.“Fully Burdened Manufacturing Costs” means, with respect to the Licensed Product manufactured by a Party, that Party’s standard cost per unit comprised [***]. To the extent that Licensed Products are sourced from one or more CMOs or a third party by either Party, Fully Burdened Manufacturing Costs shall be [***].
1.53.“GAAP” means United States generally accepted accounting principles, consistently applied.
1.54.“Generic Competition” means that one of the following conditions are met: (a) after Generic Entry in a Region of the Territory during a Calendar Quarter, [***] (b) after Generic Entry in a Region of the Territory [***].
1.55.“Generic Entry” means, on a Licensed Product-by-Licensed Product basis, the date on which a Generic Product obtained Regulatory Approval and the first commercial sale of such Generic Product occurred in a Region of the Territory.
1.56.“Generic Product(s)” means, with respect to a Licensed Product, any pharmaceutical product that meets all of the following conditions: (a) it is sold by a Third Party that did not obtain such product in a chain of distribution that includes any of CASI, its Affiliates or Sublicensees, and was not manufactured under a sublicense obtained from CASI, its Affiliates or Sublicensees; (b) (i) it contains the active pharmaceutical ingredient of the Licensed Product or (ii) qualifies as a generic product of such Licensed Product under Applicable Laws in the Territory.
1.57.“Global Notice” has the meaning set forth in Section 2.8(a).
1.58.“[***]” has the meaning set forth in Section 2.8(a).
1.59.“Global Study” has the meaning set forth in Section 4.1(d).
1.60.“Global Transaction” has the meaning set forth in Section 2.8(a).
1.61.“Governmental Body” means any (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (d) multinational or supranational organization or body; or (e) individual, entity, or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.
1.62.“Indication” means a disease classification block as defined within the “International Statistical Classification of Diseases and Related Health Problems” as published from time to time by the World Health Organization (e.g., “C50 Malignant neoplasm of Breast,” “C92 Myeloid leukemia,” “B20 Human immunodeficiency virus [HIV] disease resulting in infectious and parasitic diseases,” “M34 Systemic sclerosis”).
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1.63.“Initiation” of a Clinical Trial means the date of the first dosing of the Licensed Product to the first subject in such Clinical Trial.
1.64.“Joint Patents” means any Patent Rights within the Joint Technology.
1.65.“Joint Technology” means any Technology that is developed or reduced to practice together by an employee, contractor, subcontractor or Affiliate of CASI and an employee, contractor, subcontractor or Affiliate of Cleave in the course of or in connection with this Agreement after the Effective Date.
1.66.“JSC” or “Joint Steering Committee” has the meaning set forth in Section 3.1.
1.67.“Know-How” means any proprietary scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain or otherwise publicly known, including, without limitation, discoveries, inventions, trade secrets, databases, practices, protocols, regulatory filings, methods, processes, techniques, concepts, ideas, specifications, formulations, formulae, data (including, but not limited to, pharmacological, biological, chemical, toxicological, clinical and analytical information, quality control, trial and stability data), case reports forms, medical records, data analyses, reports, studies and procedures, designs for experiments and tests and results of experimentation and testing (including results of research or development), summaries and information contained in submissions to and information from ethical committees, the NMPA, FDA, EMA, or other Regulatory Authorities, and manufacturing process and development information, results and data, whether or not patentable, all to the extent not claimed or disclosed in a patent or patent application. The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation, including the item, and/or a development relating to the item, is (and remains) not known to the public. “Know-How” includes any rights including copyright, database or design rights protecting such Know-How. “Know-How” excludes Patent Rights.
1.68.“Knowledge” means, with respect to a matter that is the subject of a given representation or warranty of a Party, the actual knowledge, information or belief that any officer or director or other employee of such Party has.
1.69.“Licensed Product” means CB-5339, an inhibitor of the Valosin-containing protein (VCP) or transitional endoplasmic reticulum ATPase (TER ATPase), also known as p97. This shall mean any pharmaceutical composition or preparation containing or comprising CB-5339 as its sole active ingredient, including all presentations, formulations, modes of administration, dosages and dosage forms thereof, including as part of a Combination Product.
1.70.“Losses” has the meaning set forth in Section 12.1.
1.71.“Manufacturing Collaboration and Supply Agreement” has the meaning set forth in Section 5.3.
1.72.“Material” means any tangible chemical, biological or physical research materials (including, without limitation, plasmids, cell lines, molecules, compounds and other chemical compositions) that are furnished by or on behalf of one Party to the other Party in connection with this Agreement.
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1.73.“NDA” means a New Drug Application submitted pursuant to the requirements of the FDA, as more fully defined in 21 U.S. CFR.§ 314.3 et seq, a European Marketing Authorization Application and any equivalent application submitted in any Region in the Territory, including a drug registration marketing application in the People’s Republic of China, together, in each case, with all additions, deletions or supplements thereto.
1.74.“Net Sales” means the gross amounts invoiced by CASI, its Affiliates and Sublicensees for sales of Licensed Products to independent or unaffiliated Third Party purchasers of the Licensed Product in bona fide, arms-length transactions, less the following deductions with respect to such sales to the extent that such amounts are either included in the billing as a line item as part of the gross amount invoiced, or otherwise documented in accordance with the applicable Accounting Standard to be specifically attributable to actual sales of the Licensed Product.
(a)Customary and reasonable trade discounts, including trade, cash and quantity discounts or rebates, credits, or refunds (including inventory management fees, discounts, or credits);
(b)allowances or credits actually granted upon claims, returns or rejections of products, including recalls, regardless of the party requesting such recall;
(c)charges included in the gross sales price for freight, insurance, transportation, postage, handling, and any other charges relating to the sale, transportation, delivery or return of the Licensed Product;
(d)customs duties, sales, excise and use taxes and any other governmental charges (including value-added tax) actually paid in connection with the transportation, distribution, use or sale of the Licensed Product (but excluding what is commonly known as income taxes);
(e)rebates and chargebacks or retroactive price reductions made to federal, state, or local governments (or their agencies), or any Third Party payor, administrator or contractor, including managed health organizations;
(f)deductions for bad debts to the extent relating to the Licensed Product actually written off, with reasonable collection efforts and added back if collected;
(g)fees paid to wholesalers, distributors, or other trade customers related to the distribution or sale of Licensed Products, provided that, in any event, deductions for such fees shall [***] of the underling Net Sales; and
(h)other similar and customary deductions to the extent such deductions are a bona fide reduction from gross invoiced sales which are in accordance with the applicable Accounting Standards to arrive at “net sales” under the applicable Accounting Standards.
For the avoidance of doubt, Net Sales shall include the amount or fair market value of all other considerations received by CASI, its Affiliates or Sublicensees in respect of the Licensed Products, whether such consideration is in cash, payment in kind, exchange or other form. Net Sales will be calculated only once for the first bona fide arm’s length sale of such Licensed Product by Licensee, its Affiliates or Sublicensees
Page 14 of 57
to a Third Party purchaser, and will not include sales between or among CASI, its Affiliates or Sublicensees unless the purchaser in such sale is the final end user.
The transfer of a Licensed Product to an Affiliate, Sublicensee, or other Third Party for no profit (w) in connection with the Development or testing of a Licensed Product (including the conduct of clinical studies), (x) for purposes of distribution as promotional samples, (y) in connection with patient assistance programs or other charitable purposes, such as compassionate use, “named patient” or expanded access programs, or (z) by and between CASI and its Affiliates or Sublicensees shall not, in any case, be considered a Net Sale of a Licensed Product under this Agreement.
If a Licensed Product under this Agreement is sold in the form of a Combination Product, then Net Sales for such Combination Product shall be determined on a Region-by-Region basis by mutual agreement of the Parties in good faith taking into account the perceived relative value contributions of the Licensed Product and the other ingredient or agent in the Combination Product, as reflected in their respective market prices. In case of disagreement, an independent expert agreed upon by both Parties or, failing such agreement, designated by the International Chamber of Commerce in Paris, shall determine such relative value contributions and such determination shall be final and binding upon the Parties.
In the event a Licensed Product is “bundled” for sale together with one or more other products in a Region (a “Product Bundle”), then Net Sales for the Licensed Product shall be determined on a Region-by-Region basis by mutual agreement of the Parties in good faith taking into account the relative value contributions of the Licensed Product and the other products in the Product Bundle, as reflected in their individual sales prices. In case of disagreement, an independent expert agreed upon by both Parties or, failing such agreement, the International Chamber of Commerce shall determine such relative value contributions and such determination shall be final and binding upon the Parties.
1.75.“NMPA” means the National Medical Products Administration, or any successor agency of the People’s Republic of China. For the avoidance of doubt, NMPA includes its affiliated centers, such as the Center for Drug Evaluation, the Center for Food and Drug Inspections, and the Center for Drug Revaluation (National Adverse Drug Reaction Center).
1.76.“Other Component” has the meaning set forth in Section 1.33.
1.77.“Other Party” has the meaning set forth in Section 9.5(b).
1.78.“Out-of-Pocket Expenses” means expenses actually paid by a Party to any Third Party.
1.79.“Patent Contacts” means the person responsible for communication on patent matters appointed by each Party in accordance with Section 9.1.
1.80.“Patent Prosecution Party” has the meaning set forth in Section 9.4(d).
1.81.“Patent Right” means (a) an issued or granted patent, including any patent term extension, supplementary protection certificate (including any pediatric extension),
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registration, confirmation, reissue, reexamination, extension or renewal thereof; (b) a pending patent application, including any continuation, divisional, continuation-in-part, substitute or provisional application thereof; and (c) all counterparts or foreign equivalents of any of the foregoing issued by or filed in any country, region, or other jurisdiction.
1.82.“Person” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or agency or political subdivision thereof.
1.83.“Phase I Trial” means a Clinical Trial in which the Licensed Product is administered to human subjects at single and multiple dose levels with the primary purpose of determining safety, metabolism, and pharmacokinetic and pharmacodynamic properties of the Licensed Product, and which is consistent with 21 U.S. CFR § 312.21(a), or, with respect to any other country or jurisdiction, the equivalent of such a Clinical Trial in such other country or jurisdiction.
1.84.“Phase II Trial” means a Clinical Trial of the Licensed Product in human patients, the principal purposes of which are to make a preliminary determination that the Licensed Product is safe for its intended use, to determine its optimal dose, and to obtain sufficient information about the Licensed Product’s efficacy to permit the design of Phase III Trials, and which is consistent with 21 U.S. CFR § 312.21(b), or, with respect to any other country or jurisdiction, the equivalent of such a Clinical Trial in such other country or jurisdiction.
1.85.“Phase III Trial” means a Clinical Trial of the Licensed Product in human patients, which trial is designed (a) to establish that the Licensed Product is safe and efficacious for its intended use; (b) to define warnings, precautions and adverse reactions that are associated with the Licensed Product in the dosage range to be prescribed; and (c) to be, either by itself or together with one or more other Clinical Trials having a comparable design and size, the final human Clinical Trial in support of Regulatory Approval of an NDA of the Licensed Product, and (d) consistent with 21 U.S. CFR § 312.21(c), or, with respect to any other country or jurisdiction, the equivalent of such a Clinical Trial in such other country or jurisdiction.
1.86.“PRC” means the People’s Republic of China, for purposes of this Agreement, excluding Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan.
1.87.“Product Bundle” has the meaning set forth in Section 1.74.
1.88.“Project Leader” has the meaning set forth in Section 3.9.
1.89.“Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to a patent, the preparation, filing, prosecution and maintenance of such patent, as well as of re-examinations, reissues, appeals, and requests for patent term adjustments with respect to such patent, together with the initiation or defense of interferences, the initiation or defense of oppositions, the initiation or defense of invalidations, and other similar proceedings with respect to the particular patent, and any appeals therefrom. For clarity, “Prosecution and Maintenance” or “Prosecute and Maintain” shall not include any other defense (including defending patent validity in an infringement suit brought by a third party), or enforcement actions taken with respect to a patent.
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1.90.“Region” has the meaning set forth in Section 1.112.
1.91.“Regulatory Approval” means any and all approvals, licenses, registrations, or authorizations of the relevant Regulatory Authority necessary for the Development, manufacture, use, storage, import, transport or Commercialization of the Licensed Product in a particular country, region, or jurisdiction.
1.92.“Regulatory Authority” means (a) the NMPA, (b) the FDA, (c) the EMA or the European Commission, or (d) any regulatory body with similar regulatory authority over pharmaceutical or biotechnology products in any other jurisdiction anywhere in the world.
1.93.“Regulatory Communications” any meetings, submissions, filings by CASI with any Regulatory Authority in a Region and any notices, correspondences, communications, or other filings received by CASI from any Regulatory Authority in a Region relating to the Development, manufacture, packaging, obtaining marketing authorization, marketing, selling or otherwise Commercialization of the Licensed Product in such Region.
1.94.“Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by Applicable Laws or any Regulatory Authority with respect to a Licensed Product other than patents, including rights conferred in the United States under the Hatch-Waxman Act or the FDA Modernization Act of 1997 (including pediatric exclusivity), rights conferred in the PRC under the PRC Patent Law, the Implementation Rules of the PRC Drug Administration Law and the relevant regulatory guidance documents or rights similar thereto outside of the United States or the PRC.
1.95.“Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, discussion/meeting minutes, registrations, Regulatory Approvals and/or other filings made or related to, received from or otherwise conducted with a Regulatory Authority that are necessary in order to Develop, manufacture, package, obtain marketing authorization, market, sell or otherwise Commercialize the Licensed Product in a particular country, region, or regulatory jurisdiction. Regulatory Materials include INDs, presentations, responses, and applications for other Regulatory Approvals.
1.96.“Representatives” has the meaning set forth in Section 10.1.
1.97.“Results” has the meaning set forth in Section 4.6.
1.98.“[***]” has the meaning set forth in Section 2.7(a).
1.99.“[***]” has the meaning set forth in Section 2.7(a).
1.100.“[***]” has the meaning set forth in Section 2.7(a).
1.101.“[***]” has the meaning set forth in Section 2.7(a).
1.102.“[***]” has the meaning set forth in Section 2.7(a).
1.103.“Royalty Term” means, on a Licensed Product-by-Licensed Product and Region-by-Region basis, the period from the First Commercial Sale of such Licensed Product in such Region until the later of (a) [***], (b) [***], and (c) the expiry of any Regulatory Exclusivity in that Region.
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1.104.“Safety and Pharmacovigilance Agreement” has the meaning set forth in Section 7.5.
1.105.“Segregate” means, with respect to a Competing Product, to segregate the research, development, manufacturing and commercialization activities relating to such Competing Product from research, development and commercialization activities with respect to Licensed Products under this Agreement, including by ensuring that (a) no personnel involved in performing the research, development or commercialization, as applicable, of such Competing Product, have access to non-public plans or non-public information or data relating to the research, development or commercialization of Licensed Products or any other Confidential Information of the applicable Party; and (b) no personnel involved in performing the research, development or commercialization of Licensed Products have access to non-public plans or information relating to the research, development or commercialization of such Competing Product; provided that, in case of either (a) or (b), senior management personnel may review and evaluate plans and information regarding the research, development and commercialization of such Competing Products, solely in connection with portfolio decision-making among product opportunities.
1.106.“Sublicensee” means a Person other than an Affiliate of a Party to which that Party has granted sublicense rights under any of the license rights granted under Article II. “Sublicense” shall be construed accordingly.
1.107.“Supply Agreement” has the meaning set forth in Section 5.1.
1.108.“Target” means the Valosin-containing protein (VCP) or transitional endoplasmic reticulum ATPase (TER ATPase) also known as p97, including all isoforms and mutations of such.
1.109.“Tax” or “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges, or withholdings imposed by any Governmental Body, including any interest, additions to tax or penalties applicable thereto.
1.110.“Technology” means Know-How, Materials, and/or Patent Rights.
1.111.“Term” has the meaning set forth in Section 13.1.
1.112.“Territory” means PRC, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (individually referred to as a “Region”).
1.113.“Third Party” means any Person, company or corporation other than Cleave, CASI or Affiliates of either of them.
1.114.“Third Party Action” means any claim or action made by a Third Party against either Party that claims that the Licensed Product, or its use, Development, manufacture or Commercialization infringes such Third Party’s intellectual property rights.
1.115.“United States” or “US” means the United States of America, its territories and possessions.
1.116.“Valid Claim” means any claim in any (a) unexpired and issued patent that has not been disclaimed, revoked or held invalid by a final non-appealable decision of a court or other governmental agency of competent jurisdiction or (b) patent application that has not
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lapsed, in the case of a provisional patent application, or been cancelled, withdrawn or abandoned without the possibility or revival, nor has been pending [***] from the earliest priority date claimed for such application.
ARTICLE II
LICENSES AND OTHER RIGHTS
2.1.Grant of License to CASI. Subject to the terms and conditions of this Agreement, Cleave hereby grants to CASI an exclusive, royalty-bearing right and license (with the right to sublicense, and to further sublicense, subject to the provisions of Section 2.2) under the Cleave Technology and Cleave’s interest in the Joint Technology to Develop (subject to Article V), manufacture and have manufactured (subject to Article V), use and Commercialize (subject to Article V) the Licensed Product (including as one component of a Combination Product) in the Field in the Territory. Notwithstanding anything to the contrary in this Agreement, Licensee is not granted a license under the Cleave Technology or any other intellectual property rights Controlled by Cleave to Develop, manufacture and have manufactured, use or Commercialize any Other Component, including any Other Component of a Combination Product.
2.2.Grant of Sublicense by CASI. CASI shall have the right to grant Sublicenses to its Affiliates under the licenses granted in Section 2.1 above and rights of reference granted under Section 7.4 without Cleave’s consent. CASI shall have the right to grant Sublicenses to a Third Party, in whole or in part, under the license granted in Section 2.1 above and rights of reference granted under Section 7.4, subject to the prior written consent of Cleave, which consent shall not be unreasonably delayed, withheld or conditioned. Each Sublicense agreement shall be consistent with, and shall be subject to, the terms and conditions of this Agreement, and CASI shall remain responsible for the performance of its obligations under this Agreement, regardless of whether CASI may have delegated those obligations to its Sublicensees. CASI shall promptly, and in any event within [***] of granting a Sublicense, provide Cleave with a copy of the executed Sublicense agreement, provided that CASI may redact any confidential or proprietary information contained therein that is not necessary for Cleave to determine compliance with this Agreement.
2.3.Grant of License to Cleave. Subject to the terms and conditions of this Agreement, CASI hereby grants to Cleave an exclusive, royalty-free right and license (with the right to sublicense, and to further sublicense) under the CASI Technology and CASI’s interest in the Joint Technology to Develop, manufacture and have manufactured, use and Commercialize the Licensed Product in the Field in all countries outside of the Territory.
2.4.Right to Subcontract of CASI. CASI may exercise any of the rights or obligations that CASI may have under this Agreement by subcontracting the exercise or performance of all or any portion of such rights and obligations on CASI’s behalf without having to grant any Sublicense to the applicable subcontractor. Any Affiliate or Third Party subcontractor to be engaged by CASI hereunder shall meet the qualifications set forth on Exhibit G. CASI shall remain responsible and obligated for such subcontracted activities and the performance of this Agreement and shall cause any such subcontractor to comply with all applicable terms and conditions of this Agreement. In addition, CASI shall ensure that any and all Know-How, Patent Rights and other intellectual property rights arising or created by any such Affiliate or Third Party subcontractor in relation to the subcontracted activity shall be assigned solely to and in the name of CASI hereunder.
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2.5.Non-Compete Obligations of CASI. Subject to Section 2.6 and except as otherwise agreed by the Parties, during the Term, CASI shall not, and shall ensure that its Affiliates do not, independently or for or with any Third Party, develop, manufacture, commercialize or otherwise exploit [***] (each a “Competing Product”) in the Territory, other than Licensed Products in accordance with this Agreement.
2.6.Acquisition of Competing Programs. Notwithstanding Section 2.5, if at any time during the Term,
(a)CASI or any of its Affiliates acquires rights in the Territory to a Competing Product through the acquisition of a Third Party (whether by merger or acquisition of all or substantially all of the stock or assets of a Third Party or of any operating or business division of a Third Party or similar transaction), such acquisition, and the development, manufacture, commercialization or otherwise exploitation of such Competing Product thereafter, shall not constitute a breach of Section 2.5, provided [***]; or
(b)a Third Party that is (at the time of such acquisition) developing, manufacturing, commercializing or otherwise exploiting a Competing Product acquires CASI (whether by merger or acquisition of all or substantially all of the stock or of all or substantially all of the assets of CASI or of any operating or business division of CASI or similar transaction that includes the business of CASI to which this Agreement relates), such acquisition, and the development, manufacture, commercialization or otherwise exploitation of such Competing Product by such relevant acquiring Third Party, as the case may be, or any of its Affiliates, shall not constitute a breach of Section 2.5, provided that such acquiring Third Party at all times following such acquisition Segregates such Competing Product.
2.7.[***] for Competing Product of Cleave.
(a)General. For any Competing Product Controlled by Cleave or its Affiliates, on a Competing Product-by-Competing Product and Region-by-Region basis, Cleave hereby grants to CASI a [***]. At the time when Cleave or its Affiliates intends to develop, manufacture, commercialize or otherwise exploit (either by itself, its Affiliates, or with a Third Party) a Competing Product Controlled by Cleave or its Affiliates in a Region, Cleave shall [***].
(b)[***] Expiration. If (i) CASI does not provide Cleave with [***] with respect to a Competing Product in a Region prior to the expiration of the [***], or (ii) if CASI timely provides Cleave with a [***] Notice with respect to such Competing Product and the Parties [***] and Cleave shall be free to pursue a transaction with any Third Party with respect to such Competing Product in such Region, provided that in the case of clause (ii) above, [***] by CASI or Cleave during the [***].
(c)[***]. Notwithstanding anything to the contrary herein, the Parties agree that the [***] with respect to a Competing Product for a Region shall automatically renew if Cleave does not enter into a definitive agreement for a Competing Product Transaction with respect thereto with a Third Party as described in Section 2.7(b) above within [***] after the expiration of the most recent [***] with respect to such Competing Product for such Region; provided, however, that (i) [***],
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then the [***] with respect to such Competing Product for such Region shall not renew until the earlier of completion of such negotiations without execution of an agreement for such Competing Product Transaction or [***] following the end of such [***], and (ii) in no event shall the [***] with respect to any Competing Product extend beyond the Term.
2.8.[***] for CB-5339 Global Rights.
(a)General. Cleave hereby grants to CASI a [***] during the Term to acquire the rights or obtain an exclusive license to develop, manufacture, commercialize or otherwise exploit the global rights to CB-5339, including the Patent Rights, Know-How, and other intellectual property Controlled by Cleave or its Affiliates relating to CB-5339, including the Licensed Product, if Cleave or an acquirer of Cleave [***] (a “Global Transaction”) solely in accordance with the terms set forth in this Section 2.8(a) (the “Global [***]”). At any time when Cleave and its Affiliates intend to [***], Cleave shall promptly provide CASI with a written notice of [***] (the “Global Notice”) detailing (i) a description of the development and commercialization activities of CB-5339 outside the Territory together with any other materials or information in Cleave’s or its Affiliates’ possession regarding CB-5339 that would be reasonably useful for CASI to determine its interest therein, and (ii) a description of the financial and other material terms under which Cleave would enter into such Global Transaction. Upon CASI’s written request, Cleave shall promptly, and in any case within [***] of receipt of such request, provide any additional information in Cleave’s or its Affiliates’ possession with respect to CB-5339 or the proposed terms of such Global Transaction reasonably requested by CASI that is reasonably necessary to assist [***] under this Section 2.8(a). Within [***] following CASI’s receipt of such [***] Notice (the “Global Exercise Period”), CASI may exercise the Global [***] by providing Cleave with written notice of its intent thereto (the “Global Exercise Notice”). Upon Cleave’s receipt of such Global Exercise Notice, the Parties shall exclusively negotiate in good faith for a period of [***] from the date of the Global Exercise Notice (the “Global Negotiation Period”) to agree on the terms for such Global Transaction.
(b)Global [***]. If (i) CASI does not provide Cleave with a [***] with respect to a Global Transaction prior to the expiration of the [***], or (ii) if CASI timely provides Cleave with a [***] and the Parties [***] and Cleave shall be free to pursue a transaction with any Third Party with respect to such Global Transaction, subject to the rights granted to CASI under this Agreement.
2.9.Cleave Third Party Agreements. Cleave Technology licensed from Cleave Third Party Agreements are set forth in Exhibit C, and include all material terms and conditions of Cleave Third Party Agreements that CASI must comply with or that may restrict or limit CASI’s use of Cleave’s In-Licensed Technology. Cleave shall obtain consent or approval from the respective contracting parti es of any Cleave Third Party Agreements where such party’s consent or approval is required for CASI to use any Cleave In-Licensed Technology to conduct any activities as contemplated under this Agreement. In relation to such Cleave Third Party Agreements, Cleave agrees to certain representations, warranties and covenants set forth in Section 11.2.
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ARTICLE III
GOVERNANCE
3.1.Formation and Composition of the Joint Steering Committee. As soon as reasonably practicable after the Effective Date, but in no event later than thirty (30) days following the Effective Date, a Joint Steering Committee shall be established to oversee and control the implementation of this Agreement between the Parties: It shall be composed of three (3) representatives from each Party (the “JSC” or “Joint Steering Committee”). The Parties shall notify one another in writing of any change in the membership of the JSC. An alternate member designated by a Party may serve temporarily in the absence of a permanent member of the JSC for such Party. Each Party will designate one member of the JSC, which shall be drawn from the ranks of senior management of each Party, as a “Co-Chairperson.”
3.2.JSC Functions and Powers. The JSC shall:
(a)monitor the progress of the CASI Development Plan and review and discuss any results thereunder;
(b)approve updates and amendments to the CASI Development Plan each Calendar Quarter, including all relevant timelines;
(c)serve as a forum of exchange and coordination with respect to regulatory, clinical, patent, manufacturing, and Commercialization strategies (directly or through subcommittees);
(d)serve as the first forum for the settlement of disputes or disagreements resulting from or arising out of this Agreement; and
(e)perform such other functions as appropriate to further the purposes of this Agreement, as mutually agreed to in writing by the Parties.
3.3.Limitations of Powers of the JSC. The JSC shall have no power to amend this Agreement and shall have only such powers as are specifically delegated to it hereunder.
3.4.Determinations. The JSC will take action by unanimous consent of the Parties, with each Party having a single vote, irrespective of the number of representatives actually in attendance at a meeting. Determinations of the JSC can also be made by a written resolution, signed by a designated representative of each of the Parties. In the event the JSC is unable to secure unanimous consent on a matter and such matter is unable to be resolved by the Executive Officers within the period of ten (10) Business Days in accordance with Section 14.2, then CASI shall have final decision-making authority on matters that primarily relate to the [***], in which case Cleave will have the final decision-making authority with respect to such matter. Without limitation, such matters include (a) [***].
3.5.Meetings of the JSC. Subject to the provisions of the next sentence and Section 3.7, the JSC shall hold meetings at least once each Calendar Quarter (unless otherwise unanimously agreed by the JSC) at such times and places as shall be determined by the JSC (including by videoconference, telephone, or web conference), but in no event shall such meetings be held in person less frequently than once per Calendar Year (unless otherwise unanimously agreed by the JSC or for force majeure reasons such as travel restrictions from a pandemic). The first JSC meeting shall be held as soon as possible, but no later than thirty (30)
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days after the Effective Date. At least three (3) members of the JSC will constitute a quorum for any meeting, provided that at least one (1) representative from each Party is present. Each Co-Chairperson will on an alternate basis be responsible for organizing the meetings of the JSC and for distributing the agenda of the meetings but will have no additional powers or rights beyond those held by the other representatives to the JSC. The responsible Co-Chairperson will include on the agenda any item within the scope of the responsibility of the JSC that is requested to be included by a Party and will distribute the agenda to the Parties no less than five (5) Business Days before any meeting of the JSC. A Party may invite other senior personnel of their organization to attend meetings of the JSC, as appropriate; provided, however, that such other senior personnel shall not have any duties of a JSC member. The JSC may act without a meeting if prior to such action a written consent thereto is given by both Parties in accordance with Section 3.4. Each Party shall be responsible for its travel costs incurred for attending JSC meetings.
3.6.Meeting Minutes. Minutes will be kept of all JSC meetings by the responsible Co-Chairperson for that JSC meeting and sent to all members of the JSC for review and approval within five (5) Business Days after each meeting. Minutes will be deemed approved unless any member of the JSC objects to the accuracy of such minutes by providing written notice to the other members of the JSC within five (5) Business Days of receipt of the minutes. In the event of any such objection that is not resolved by mutual agreement of the Parties, such minutes will be amended to reflect such unresolved dispute.
3.7.Urgent Matters. Notwithstanding anything in Section 3.5 expressed or implied to the contrary, in the event that an urgent issue or matter arises that requires prompt action by the JSC, the JSC shall arrange for a teleconference call (or otherwise meet) for the purpose of resolving the issue or matter. Such JSC teleconference call shall take place as promptly as possible, with the immediacy of the issue or matter requiring JSC action determining the time, place and manner of the conduct of the meeting.
3.8.Subcommittees. The JSC may form subcommittees as determined by the needs of the Parties. Any subcommittee established by the JSC shall have appropriate representation of each Party. Any such subcommittee shall be given assignments from the JSC, shall be subject to the authority of the JSC, shall have no power or authority greater than that of the JSC, and shall report its actions to the JSC. At the request of either Party at any time, any such subcommittee shall be dissolved and its powers and functions returned to the JSC.
3.9.Appointment of Project Leaders. Each Party shall appoint its initial project leader who shall coordinate the Development of the Licensed Product (each, a “Project Leader”) within ten (10) Business Days after the Effective Date and shall promptly thereafter notify the other Party of such appointment. If at any time a vacancy occurs for any reason, the Party that appointed the prior incumbent shall as soon as reasonably practicable appoint a successor. Each Party shall promptly notify the other Party of any substitution of another person as its Project Leader. Each Party’s Project Leader will be available during the existence of the JSC to answer any reasonable questions from the other Party. In addition, CASI’s Project Leader shall endeavor to keep Cleave’s Project Leader regularly updated on the progress of the CASI Development Plan. Cleave’s Project Leader shall endeavor to keep CASI’s Project Leader regularly updated on the global strategy by Cleave or its licensee to the extent such information would reasonably be expected to have any implications on Development or Commercialization of the Licensed Product in the Territory.
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ARTICLE IV
DEVELOPMENT
4.1.Development of the Licensed Product by CASI.
(a)Except to the extent otherwise set forth in this Agreement, CASI shall have the sole responsibility to Develop the Licensed Product and to conduct (either itself or through its Affiliates, agents, subcontractors and/or Sublicensees) all Clinical Trials and non-clinical studies CASI believes appropriate to obtain Regulatory Approval for the Licensed Product in the Territory. The Licensed Product will be developed in the Territory as an imported product through the Import Drug Registration pathway and/or domestically as a locally manufactured product. Cleave or any of its Affiliates will provide all reasonable assistance and support necessary for CASI to effectuate the Development and registration of the Licensed Product for clinical trial approval and marketing approval in the Territory. If the Licensed Product is to be registered as an imported product, the NMPA regulations and process require that Cleave remain the Sponsor and Market Authorization Holder on record in the product submissions and CASI will be on record as Cleave’s agent and licensee. In furtherance of the foregoing, Cleave or any of its affiliates will provide CASI reasonable assistance and cooperation as necessary for CASI to serve as Cleave’s agent and licensee of the Licensed Product in the Territory. Should the law in China change to permit CASI to hold the clinical trial approval and/or marketing authorization, CASI will apply for such transfer at Cleave’s request. Within ninety (90) days after the Effective Date, the JSC will approve a CASI clinical development plan and timelines for the Development of CB-5339 in the Territory (the “CASI Development Plan”). The CASI Development Plan will be reviewed and agreed upon by the CB-5339 Joint Project Team established by the Parties as a subcommittee of the JSC and will be based on the PRC import drug registration requirements. The initial CASI Development Plan, with respect to acute myeloid leukemia (AML) and multiple myeloma (MM) indications, will be based on the CB-5339 Global Development Plan, attached hereto as Exhibit D. The requirements of the NMPA (including a potential Phase 1 Trial dose escalation study, a pharmacokinetics study and any analytical testing in the PRC on patient samples from Chinese citizens) will be built into the CASI Development Plan. Without limiting and subject to CASI’s diligence obligations under Section 4.2, the following timeframes are generally required:
(i)for CASI to file the first CTA for the Licensed Product in the Territory: Approximately [***] after completion of the initial technology transfer to CASI in accordance with Section 4.3 and CASI’s receipt from Cleave of the complete IND, data package, manufacturing documentation, regulatory filings, vendor master files and documentation from Cleave necessary for such CTA filing in the Territory; and
(ii)for study site Initiation for the first Clinical Trial in the Territory: Approximately [***] after CASI receiving the Regulatory Approval from the Regulatory Authority in the Territory to conduct such Clinical Trial.
CASI shall make necessary amendments to the CASI Development Plan in accordance with any change in local regulatory requirements with respect to the Development of the Licensed Products in the Territory.
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(b)For clarity, the CASI Development Plan shall describe in reasonable detail the Development activities to be performed as well as corresponding decision points and milestones to further the Development process and to obtain Regulatory Approval for the Licensed Product in the Territory.
(c)Cleave shall consult with CASI for key decisions relating to the Development of the Licensed Product that may affect the Development of the Licensed Product in the Territory including but not limited to (i) clinical development strategy, (ii) design of Clinical Trials, and (iii) manufacturing changes. CASI shall in good faith take into consideration any suggestions made by Cleave but shall have [***].
(d)If Cleave or any of its licensees or sublicensees conducts a global clinical study that comprises a clinical trial administering the Licensed Product, the results of which would form the basis for submitting a regulatory marketing authorization application for the Licensed Product (“Global Study”) under Cleave’s or such licensee’s or sublicensee’s IND, and the data generated from such Global Study in the Territory would be necessary or reasonably useful for CASI to obtain regulatory approval of the Licensed Product in the Territory, then to the extent permitted under applicable law, CASI will [***], subject to the terms below. Cleave shall, and shall cause its Third Party licensees or sublicensees (as applicable) to allow CASI to [***] Party licensee or sublicensee shall have the final decision-making authority with respect to such Global Study, and (b) [***].
4.2.Diligence. CASI shall use Commercially Reasonable Efforts to Develop the Licensed Product in the Territory and conduct clinical studies necessary to support Regulatory Approval of the Licensed Product in the Territory. CASI shall maintain and utilize qualified staff, laboratories, offices and other facilities as needed to Develop the Licensed Product and shall use personnel with skills and experience as may be required to accomplish efficiently and expeditiously such tasks and objectives of the CASI Development Plan in a good scientific manner and in compliance in all material respects with all Applicable Laws, and cGLP, cGCP and cGMP standards, as applicable. CASI shall, as part of its obligations hereunder, (a) obtain all required Regulatory Authority, human genetic resource, and ethics committee and independent review board approvals prior to conducting any Clinical Trials involving human subjects and (b) obtain all the consents required by Applicable Law from the human subjects participating in any Clinical Trials conducted by CASI.
4.3.Technology Transfer to CASI.
(a)[***] Cleave shall provide CASI with preclinical, clinical trial and CMC data and regulatory filings and documentation that are Controlled by Cleave and in Cleave’s possession and necessary or reasonably useful to assist CASI in IND, CTA and NDA filing for CB-5339 in the Territory. Within [***] of the Effective Date, Cleave shall provide CASI with complete, core data package and regulatory filings and documentation (including IND) that are Controlled by Cleave and in its possession and necessary or reasonably useful for CB-5339 IND and CTA filing in the Territory, including any of the foregoing requested by CASI.
(b)Throughout the Term, Cleave will provide to CASI clinical trial data and regulatory filings and documentation for CB-5339 as such data and filings become available and to the extent such data and filings are necessary or reasonably useful for CB-5339 licensure in the Territory (or reasonably requested by CASI). Cleave’s
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obligation to provide data and regulatory filings and documentation will include any CB-5339 data and regulatory filings and documentation in the name of Cleave’s Affiliates. Any regulatory filings in Cleave’s name, including human genetic resource applications on which Cleave is named as a collaborator or an “other entity,” shall be subject to Cleave’s approval prior to submission. From time to time during the Term, Cleave will provide to CASI any new Cleave Technology necessary or reasonably useful for CASI to Develop and Commercialize the Licensed Product in the Territory [***]. In the event that a Third Party licensee of Cleave conducts Clinical Trials for the Licensed Product in any territory outside the Territory, Cleave will use Commercially Reasonable Efforts to obtain or retain the ability to share that Third Party licensee’s data and regulatory filings and documentation with CASI, and share the same with CASI, solely for purposes of Development and Commercialization of the Licensed Product in the Territory.
(c)In case CASI requires any materials provided to CASI pursuant to Section 4.3(a) or Section 4.3(b) translated into Chinese, any required language translation from English into Chinese will be performed by [***]. In the event any such materials are in a language other than English, at CASI’s request, Cleave will translate such materials into English [***].
4.4.Technology Transfer to Cleave. From time to time during the Term, CASI will transfer to Cleave any new CASI Technology necessary or reasonably useful for Cleave, its Affiliates or licensees to Develop, manufacture and Commercialize the Licensed Product outside of the Territory, [***].
4.5.Cleave Support in Development.
(a)Support. Cleave shall provide all reasonable assistance and support as set forth in Section 4.1(a) [***]. Such assistance and support to be provided by Cleave during the Term is subject to the continued availability of resources and its employees who have the required technical knowledge to provide such assistance and support. Preparation for and participation by Cleave in JSC meetings or meetings of subcommittees formed under Section 3.8 shall not be considered to be such assistance and support.
(b)Cleave Expenses. All reasonable expenses incurred by Cleave which CASI is responsible for reimbursing under this Section 4.5 shall be reimbursed by CASI in U.S. Dollars based on the exchange rate at the end of the Calendar Quarter in which the expenses were incurred. Within thirty (30) days following the end of each Calendar Quarter, Cleave shall submit an invoice to CASI (addressed to CASI’s Project Leader) for the expenses Cleave incurred during such Calendar Quarter in connection with the Cleave Development support, and CASI shall pay such invoice within thirty (30) days after receipt thereof.
4.6.Records. CASI shall maintain or cause to be maintained records in sufficient detail and in a manner that will completely and accurately reflect all work done and all data, results, inventions and discoveries (“Results”) achieved in the performance of the CASI Development Plan (such records to be in the form required under any applicable Governmental Body regulations). CASI will promptly provide to the JSC any Results that would reasonably be expected to have a material impact on the Development of the Licensed Product outside of
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the Territory or create any financial liability for Cleave. Such records shall be maintained during the Term and for a period of [***] thereafter.
4.7.Development Reports. Following the Effective Date and as long as any Development of the Licensed Product is performed in the Territory, on a [***] basis after the first JSC meeting, CASI shall provide to Cleave a written report that summarizes the Development activities performed by CASI and its Affiliates and Sublicensees in the Territory since the prior report by CASI, including summaries of (a) all clinical and non-clinical data and (b) other results and analysis related to the Development of the Licensed Products. Starting from the second JSC meeting, where applicable, Development reports for each Indication shall be provided by CASI’s Project Leader to the JSC in preparation of the next JSC meeting in accordance with Section 3.5. Each Development report shall be compiled and reported in the English language. All information and reports provided to Cleave pursuant to this Section 4.7 shall be treated as Confidential Information of CASI hereunder.
ARTICLE V
SUPPLY AND MANUFACTURING
5.1.Supply. Subject to Section 5.2, Cleave shall (by itself, through a contract manufacturing organization (“CMO”), or through a third party selected by Cleave) be solely responsible for the manufacturing of the Licensed Product at a facility located outside the PRC for CASI’s Development and Commercialization of the Licensed Product in the Territory. Cleave shall supply such Licensed Product to CASI in such quantities as required by CASI at Cleave’s [***]. The Parties shall enter into a supply agreement (“Supply Agreement”), which will set out specific terms and conditions for clinical and commercial supply of Licensed Product by Cleave to CASI. The Parties shall make Commercially Reasonable Efforts to enter into such Supply Agreement [***] after the Effective Date. The Supply Agreement shall provide that if a Regulatory Authority in the Territory desires to conduct an inspection or audit of Cleave with regard to the manufacture of the Licensed Product, Cleave shall allow such Regulatory Authority to conduct such inspection and audit, and CASI shall cooperate with Cleave and the Regulatory Authority with respect to such inspection or audit and provide reasonable assistance requested by Cleave with respect thereto, including, at Cleave’s request and to the extent permitted by Applicable Law, attending the applicable portions of such inspection or audit and using Commercially Reasonable Efforts to ensure the confidentiality of any information or documents accessed in such inspection or audit. Following receipt of the inspection or audit observations of the Regulatory Authority, Cleave will prepare any appropriate responses or filings with respect thereto, and, if requested by Cleave, CASI will reasonably assist Cleave. CASI reserves the right, but not the obligation, to manufacture the Licensed Product in China at its or its Affiliates’ future manufacturing facility in the Wuxi Huishan Economic Development Zone in Jiangsu Province, China, or through a qualified China CMO, provided that CASI will only use a manufacturing facility or a CMO that meets the minimum qualification criteria as set forth on Exhibit H. This right includes the agreement, [***], to transfer the manufacture of the Licensed Product, including all technology transfer of the CMC/manufacturing process and use of any Drug Master File, to CASI or a qualified CMO in China. Cleave will, [***], provide technical support as requested by CASI for the successful completion of the tech transfer and local GMP manufacturing of the Licensed Product in China.
5.2.Manufacturing Technology Transfer. If CASI notifies Cleave in writing that it decides that CASI, an Affiliate of CASI, or a CMO selected by CASI will manufacture the Licensed Product in the Territory and request the manufacturing technology transfer, (a) the Parties shall discuss in good faith which entity should manufacture the Licensed Product,
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taking into account all relevant factors, provided that CASI shall have sole discretion on deciding which entity will manufacture the Licensed Product (but subject to the minimum qualification criteria as set forth on Exhibit H); and (b) Cleave shall promptly approve CASI and its Affiliates (as well as, if applicable, a further sublicense by CASI to such CMO) to manufacture the Licensed Product for use in the Field in the Territory. The Parties will promptly establish a plan for the transfer of the manufacturing process and QC assays that are owned or otherwise controlled by Cleave, from Cleave to CASI, CASI’s Affiliate, or such CMO selected by CASI. The manufacturing technology transfer plan will set out (i) activities and timelines for such manufacturing technology transfer and (ii) the support required by CASI from Cleave for such transfer, pursuant to which Cleave will provide access and transfer, to CASI, CASI’s Affiliate, or the CMO selected by CASI, all Cleave Technology that is Controlled by Cleave and is necessary or reasonably useful to manufacture the Licensed Product in the Field in the Territory. Upon CASI’s reasonable request, Cleave or its CMO will provide assistance and on-site support related to the manufacturing technology transfer to enable CASI, its Affiliate, or the CMO selected by CASI to manufacture the Licensed Product in substantially the same manner as Cleave (or its Affiliates, CMOs, or a third party selected by Cleave, as applicable) manufactures the Licensed Product for CASI. [***]. Notwithstanding the foregoing, the Parties acknowledge that CASI, at its sole discretion, may never exercise the option to manufacture the Licensed Product in the Territory.
5.3.Manufacturing Collaboration. After manufacturing technology transfer from Cleave to CASI, and at the request of Cleave, the Parties may enter into a manufacturing collaboration and supply agreement (“Manufacturing Collaboration and Supply Agreement”), which sets out specific terms and conditions for:
(a)the supply of Licensed Product by CASI to Cleave, its Affiliates, and any Cleave licensees for use outside of the Territory; and
(b)the sharing of manufacturing and batch data between CASI and Cleave.
ARTICLE VI
COMMERCIALIZATION
6.1.Commercialization. Subject to Section 3.2(c) and Section 3.4, CASI shall have the sole decision-making authority and responsibility to Commercialize the Licensed Product in the Territory itself or through one or more Sublicensees or other Third Parties selected by CASI (but subject to the requirements in Section 2.2) and shall have the sole decision-making authority and responsibility in all matters relating to the Commercialization of the Licensed Product in the Territory.
6.2.Diligence. CASI shall use Commercially Reasonable Efforts to Commercialize the Licensed Product in a Region in the Territory after receiving Regulatory Approval in such Region in the Territory. Subject to Section 3.2(c) and Section 3.4, CASI shall have the exclusive right to determine the launch strategy for the Licensed Product in the Territory. Activities by CASI’s Affiliates and Sublicensees will be considered as CASI’s activities under this Agreement for purposes of determining whether CASI has complied with any obligation to use Commercially Reasonable Efforts.
6.3.Commercialization Reporting. CASI shall, on each anniversary of the first commercial launch of the Licensed Product, provide Cleave with a written report summarizing in reasonable detail its major Commercialization activities conducted during the prior Calendar
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Year. All information and reports provided to Cleave pursuant to this Section 6.3 shall be treated as Confidential Information of CASI hereunder.
6.4.Trademarks. CASI shall have the sole authority to select trademarks for the Licensed Product in the Territory and shall own all such trademarks.
6.5.Compliance with Anti-Corruption and Anti-Bribery Laws. CASI shall comply with all Applicable Laws including compliance and anti-corruption and anti-bribery laws and regulations, with respect to the Commercialization of the Licensed Product in the Territory. In particular, CASI shall conform its practices and procedures relating to educating the medical community in the Territory with respect to the Licensed Product to any applicable industry association regulations, policies and guidelines, as the same may be amended from time to time and shall comply with all Applicable Laws with respect thereto.
For the avoidance of doubt, anti-corruption and anti-bribery laws shall include but not be limited to the U.S. Foreign Corrupt Practices Act, the UK Anti-Bribery Act, the Criminal Law of the People’s Republic of China, the Laws of the People’s Republic of China Against Unfair Competition, the Provisional Regulation on Prohibition of Commercial Bribery, the Pharmaceutical Administration Law of the People’s Republic of China and other Applicable Laws of the People’s Republic of China and other Regions in the Territory, as well as any laws, regulations, administrative guidelines, judicial interpretations governing the operation and business activities of CASI, its Affiliates and Sublicensees in connection with the performance of this Agreement in the Territory, all as amended from time to time.
6.6.Compliance with Laws, Generally. Each Party shall conduct, and shall cause its Affiliates, Sublicensees, subcontractors, consultants to conduct, all activities under this Agreement in good scientific manner and in material compliance with all applicable regulatory requirements and compulsory standards and all Applicable Laws now in force or which may hereafter be in force in the Territory. A Party will immediately notify the other Party if, at any time during the Term, the notifying Party, its Affiliates or any of its Sublicensees is convicted of an offense that would impede the Development or Commercialization of the Licensed Products in the Territory.
ARTICLE VII
REGULATORY MATTERS
7.1.Holder of Regulatory Approvals and Regulatory Materials. To the extent permissible under Applicable Laws based on activities and roles of each Party set forth in the then-current CASI Development Plan, CASI (or an Affiliate of CASI) shall be the holder of Regulatory Approvals and Regulatory Materials for Licensed Products in the Field in the Territory. To the extent the foregoing is not permissible under Applicable Laws, then Cleave shall be the holder of Regulatory Approvals and Regulatory Materials for Licensed Products in the Field in the Territory for CASI’s benefit, and appoint CASI (or an Affiliate of CASI) as Cleave’s sole authorized regulatory agent of record in the Territory and take actions on behalf of and for the benefit of Cleave in accordance with Applicable Laws; provided that Cleave shall promptly transfer all Regulatory Approvals and Regulatory Materials to CASI or its designee when Applicable Laws in the Territory allow CASI (or an Affiliate of CASI) to hold such Regulatory Approvals and Regulatory Materials for the Licensed Product in the Territory at CASI’s expense. Cleave shall reasonably cooperate with CASI, [***] to enable CASI (or an Affiliate of CASI) to obtain any or all such Regulatory Approvals and Regulatory Materials. Cleave shall have the right to preapprove the content of any filing that officially names CASI
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(or an Affiliate of CASI) as its regulatory agent in the Territory, such approval not to be unreasonably withheld, delayed, or conditioned.
7.2.Regulatory Responsibilities. CASI shall be responsible for all regulatory activities necessary to obtain and maintain Regulatory Approval of the Licensed Product in the Territory. CASI shall keep Cleave informed of regulatory developments related to the Licensed Product in the Territory both via the JSC and CASI’s reports pursuant to Section 4.7 and Section 6.3.
7.3.Regulatory Materials. CASI shall prepare and submit all Regulatory Materials for the Licensed Product in the Territory. CASI shall timely notify Cleave of all material Regulatory Communications in English that are related to the Licensed Product in the Territory, and give Cleave a reasonable opportunity to review and comment. Moreover, with respect to submission of (a) an NDA in the Territory, CASI will provide Cleave with drafts of such filing in the language such filing is drafted and a reasonable English summary of such filing (which summary will include key information) not less than [***] prior to submission so that Cleave may review and comment, and (b) other material Regulatory Materials to any Regulatory Authority in the Territory, CASI will provide Cleave with drafts of such submissions in the language such submissions are drafted, and reasonable English summaries of such submissions (which summaries will include key information) not less than [***] prior to document finalization so that Cleave may review and comment on them. CASI shall consider all comments of Cleave in good faith, taking into account the best interests of the Development and/or Commercialization of the Licensed Product. If requested by Cleave (no more frequently than once every [***]), CASI shall provide Cleave copies of all Regulatory Communications that are not de minimis or non-substantive and that have not been previously provided to Cleave, in the language such Regulatory Communications were made. CASI shall also provide to Cleave copies of the final submitted version of each material Regulatory Material and each granted Regulatory Approval in the Territory. Upon request by CASI, Cleave shall, in accordance with Section 4.1(a) and subject to Section 4.5, reasonably assist CASI in seeking and obtaining Regulatory Approvals with respect to the Licensed Product in the Territory. Notwithstanding the foregoing, the day-to-day functional teams of the Parties may agree to other procedures for notifications, English summaries and translations, and commenting in respect of meetings, submissions, filings with any Regulatory Authority and notices, correspondences, communications or other filings received from any Regulatory Authority that are related to the Licensed Product in the Territory in order to facilitate the day-to-day work of the functional teams of the Parties.
7.4.Rights of Reference. Cleave hereby grants CASI the right to use and reference all Regulatory Materials (including data contained therein) and Regulatory Approvals for the Licensed Product outside the Territory submitted by or on behalf of Cleave, its Affiliates, which right may be used by CASI only in the Field in the Territory. Cleave shall cause all relevant licensees of Cleave to grant access to relevant data and Regulatory Materials as may be required to satisfy reporting requirements, which will be limited to pharmacovigilance requirements in the Territory unless CASI has participated in the Global Study, in which case CASI will also have access to the data resulting from the Global Study for regulatory submissions and requests in the Territory. Cleave shall cause all relevant licensees of Cleave to grant such cross-reference rights, with right to sublicense to CASI. CASI hereby grants Cleave the right to use and reference all Regulatory Materials (including data contained therein) and Regulatory Approvals for the Licensed Product in the Territory submitted by or on behalf of CASI or its Affiliates, including obtaining human genetic resource pre-approval or clearance
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for the transfer of data to Cleave or any third party Cleave designates to receive such data, which right may be used by Cleave only outside the Territory. CASI shall cause all relevant licensees of CASI to grant access to relevant data and Regulatory Materials as may be required to satisfy reporting requirements, which will be limited to pharmacovigilance requirements outside the Territory unless Cleave’s licensees have participated in the Global Study, in which case they will also have access to the data resulting from the Global Study for regulatory submissions and requests outside the Territory. Each Party shall execute any documentation that is reasonably requested by the other Party to facilitate the exercise of such rights of reference.
7.5.Adverse Event Reporting. During the Term, The Parties agree to comply with any and all Applicable Laws then applicable to the Licensed Product safety data collection and reporting. The Parties (or their respective Affiliates) will execute a safety and pharmacovigilance agreement (the “Safety and Pharmacovigilance Agreement”) prior to the initiation of clinical activities by CASI, but in any event within ninety (90) days after the Effective Date, to ensure the exchange of relevant safety data within appropriate time frames and in an appropriate format to enable the Parties to fulfill local and international regulatory reporting obligations and to facilitate appropriate safety reviews. In the event of any inconsistency between the terms of this Agreement and the Safety and Pharmacovigilance Agreement, the terms of this Agreement shall govern, except to the extent such conflicting terms relate directly to the pharmacovigilance responsibilities of the Parties (including the exchange of safety data), in which case the terms of the Safety and Pharmacovigilance Agreement shall govern. The Safety and Pharmacovigilance Agreement will include safety data exchange procedures governing the coordination of collection, investigation, reporting, and exchange of information concerning any Adverse Events, pregnancy reports, and any other safety information arising from or related to the use of the Licensed Product, consistent with Applicable Law. Such guidelines and procedures shall be in accordance with, and enable the Parties and their Affiliates to fulfill, local and international regulatory reporting obligations to Regulatory Authorities. The information exchanged between the Parties pursuant to this Section 7.5 shall be transmitted by email, facsimile or overnight courier to the following address:
Transmission to Cleave:
Cleave Therapeutics, Inc.
135 Main Street, Suite 1145,
San Francisco, CA 94105
Attn: Chief Operating Officer
Email: [***]
Transmission to CASI:
CASI Pharmaceuticals, Inc.
9620 Medical Center Drive, Suite 300
Rockville, MD 20850
Attn: Chief Medical Officer
Email: [***]
7.6.Recall of Licensed Product.
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(a)Mandatory Recall. In the event that any Regulatory Authority in the Territory issues or requests a recall or takes similar action in connection with the Licensed Product, the Party notified of such recall or similar action shall, within one (1) Business Day at the latest, advise the other Party thereof by telephone (and confirm by email), or email. Following notification of a mandatory recall in the Territory, the Parties shall comply with the mandatory recall.
(b)Voluntary Recall. In the event that either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal, the Party desiring such recall or similar action shall, within twenty-four (24) hours, advise the other Party thereof by telephone (and confirm by email or facsimile), email or facsimile. Following notification of a voluntary recall in the Territory, the Parties shall decide through the JSC whether to conduct a recall and the manner in which any such recall shall be conducted. In any case of dispute, Section 3.4 shall apply. All recalls shall be conducted in accordance with Applicable Laws.
(c)Costs of a Recall. As between the Parties, CASI shall bear the expenses of any recall of the Licensed Product in the Territory unless such recall is caused by the gross negligence or willful misconduct of Cleave or its other licensees outside the Territory. As between the Parties, Cleave shall bear the expenses of any recall of the Licensed Product outside the Territory.
7.7.Personally Identifiable Data. Each Party shall process all Confidential Information containing personally identifiable data or personal data that it receives from the other Party in accordance with applicable data protection and privacy laws, rules and regulations to the extent the foregoing are applicable to such data.
ARTICLE VIII
FINANCIAL PROVISIONS
8.1.Initial Fee and Equity Investment.
(a)Initial Fee. In partial consideration of Cleave’s grant of the rights and licenses to CASI, CASI shall pay, or cause to be paid to Cleave, a fee of five million, five hundred thousand U.S. Dollars ($5,500,000), within ten (10) Business Days following the Effective Date.
(b)Equity Consideration in Form of a Convertible Promissory Note. In partial consideration of Cleave’s grant of the rights and licenses to CASI, CASI shall purchase from Cleave a Convertible Promissory Note for five million, five hundred thousand U.S. Dollars ($5,500,000) (the Principal) to be converted into shares of Conversion Stock (the Securities) in accordance with the terms and conditions of the Convertible Promissory Note attached hereto as Exhibit F.
8.2.Milestone Payments. As further partial consideration for Cleave’s grant of the rights and licenses to CASI hereunder, CASI shall pay, or cause to be paid, to Cleave the following non-refundable milestone payments with respect to the first achievement by the Licensed Product of the milestone events described below by CASI, its Affiliate or Sublicensee. CASI shall promptly, but in no event later than [***] days following achievement of such milestone event, notify Cleave in writing of the achievement of any such milestone
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event and shall pay the relevant milestone within [***] days following receipt of a corresponding invoice from Cleave.
|
Milestone event for the Licensed Product |
Milestone Payment (U.S. Dollars) |
||
|
|
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
|
[***] |
[***] |
[***] |
[***] |
Each of the milestone payments listed above shall [***]. If a milestone [***].
8.3.Commercial Event Payments. As further partial consideration for Cleave’s grant of rights and licenses to CASI hereunder, CASI shall pay Cleave the [***] amounts for [***] of the following commercial event milestones for the Licensed Product:
(a)[***] U.S. Dollars ($[***]) for the first Calendar Year in which the [***] Net Sales in the Territory in [***] of the Licensed Product exceed [***] U.S. Dollars ([***]);
(b)[***] U.S. Dollars ([***]) for the first Calendar Year in which the [***] Net Sales in the Territory in [***] of the Licensed Product exceed [***] U.S. Dollars ([***]);
(c)[***] U.S. Dollars ([***]) for the first Calendar Year in which the [***] Net Sales in the Territory in [***] of the Licensed Product exceed [***] U.S. Dollars [***]); and
(d)[***] U.S. Dollars ([***]) for the first Calendar Year in which the [***] Net Sales in the Territory in [***] of the Licensed Product exceed [***] U.S. Dollars ([***]).
Total (Maximum): [***] U.S. Dollars ([***])
CASI shall deliver written notice to Cleave within [***] of the end of the Calendar Year in which a commercial event milestone occurs. CASI shall deliver the corresponding commercial event milestone payment to Cleave within [***] of receipt of a corresponding invoice from Cleave for the commercial event milestone payment set forth in the written notice.
For the avoidance of doubt, each commercial event milestone payment shall be made [***], regardless of the number of Calendar Years in which the Licensed Product achieves such commercial event milestone.
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8.4.Royalty Payments for the Licensed Product. As further consideration for Cleave’s grant of the rights and licenses to CASI hereunder, CASI shall, during the applicable Royalty Term, pay to Cleave a royalty on [***] Net Sales in the Territory of the Licensed Product for each Calendar Year at the percentage rates set forth below:
For example, if in a Calendar Year [***] Net Sales in the Territory of a Licensed Product in U.S. Dollars is [***], the total royalties due and payable by CASI to Cleave for such Net Sales would be [***] U.S. Dollars [***]
[***]
[***]
[***]
[***]
8.5.Royalty Reduction. During the Royalty Term and [***], royalties due hereunder are subject to adjustment as a result of the events set forth below (such adjustments to be prorated for the then-current Calendar Quarter in which the reduction becomes applicable); provided, however, [***] the amounts set forth in Section 8.4 by any [***] for the Commercialization of the Licensed Product in the Territory by any or all reasons of the adjustments set forth below.
(a)Third Party Licenses. If CASI, its Affiliates or Sublicensees are required to make any royalty payments to a Third Party for [***], then the amount of royalties payable under Section 8.4 [***] the sale of the Licensed Product [***].
(b)Patent Expiry. During the Royalty Term and [***]. The [***] in order to reflect the circumstance that the license granted by Cleave to CASI under Section 2.1 of this Agreement with respect to such Licensed Product in such Region refers substantially to Cleave Know-How and Cleave’s interest in Know-How within Joint Technology.
(c)Royalty Adjustment for Generic Entry. Upon Generic Competition with respect to a Licensed Product [***], the royalty rate for the remainder of the Term payable to Cleave on the Net Sales of such Licensed Product [***] in Section 8.4.
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8.6.Cleave Third Party Agreement Fees. Notwithstanding anything to the contrary hereunder, [***] to the respective counterparty or counterparties under each applicable Cleave Third Party Agreements.
8.7.Timing of Payment. Royalties payable under Section 8.4 shall be [***]. Royalty obligations that have accrued during a particular Calendar Quarter shall be paid, on a Calendar Quarter basis, within [***] following receipt of a corresponding invoice from Cleave after the end of each Calendar Quarter during which the royalty obligation accrued.
8.8.Mode of Payment and Currency. All payments to Cleave hereunder shall be made by deposit of U.S. Dollars in the requisite amount to such bank account as Cleave may from time to time designate by written notice to CASI. With respect to sales not denominated in U.S. Dollars, CASI shall convert each applicable quarterly sales in foreign currency into U.S. Dollars by using the exchange rate quoted by Bloomberg on www.bloomberg.com/markets/currencies/ on the last day of the relevant Calendar Quarter. Based on the resulting sales in U.S. Dollars, the then applicable royalties shall be calculated. The Parties may vary the method of payment set forth herein at any time upon mutual agreement, and any change shall be consistent with the local Applicable Law at the place of payment or remittance.
Invoices of Cleave shall be addressed to:
CASI Pharmaceuticals, Inc.
9620 Medical Center Drive, Suite 300
Rockville, MD 20850
Attn: Chief Operating Officer
Email: [***]
8.9.Royalty Reports and Records Retention. Within [***] after the end of each Calendar Quarter and Calendar Year during which the Licensed Product have been sold, CASI shall deliver to Cleave, together with the applicable royalty payment due, a written report on [***], of (a) [***] of Licensed Product subject to royalty payments for such Calendar Quarter or Calendar Year, (b) [***] (following the definition of Net Sales) from such gross invoiced amounts to calculate Net Sales, (c) [***] subject to royalty payments for such Calendar Quarter or Calendar Year and (d) corresponding [***]. Following Cleave’s receipt of such written report, Cleave will provide to CASI an invoice for the corresponding royalty obligation accrued. Such report shall be deemed Confidential Information of CASI subject to the obligations of Article X of this Agreement. [***] after each sale of the Licensed Product, CASI shall keep (and shall ensure that its Affiliates and Sublicensees shall keep) complete and accurate records of such sale in sufficient detail to confirm the accuracy of the royalty calculations hereunder.
8.10.Legal Restrictions. If at any time legal restrictions prevent the remittance by CASI of all or any part of royalties on Net Sales in [***], CASI shall have the right and option to make such payment by depositing the amount thereof in local currency to an account in the name of Cleave in a bank or other depository selected by Cleave in [***].
8.11.Late Payments. All payments under this Agreement shall earn interest from the date due until paid at a rate [***] above the average of the prime rate as published in The Wall Street Journal, Western U.S. Edition, or any successor thereto during the [***] immediately preceding the due date of such overdue payment.
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8.12.Audits.
(a)During the Royalty Term and [***] thereafter, upon the written request of Cleave, and not more than once in each Calendar Year, CASI shall permit, and shall cause its Affiliates or Sublicensees to permit, an independent certified public accounting firm of nationally recognized standing selected by Cleave, and reasonably acceptable to CASI or such Affiliate or Sublicensee, to have access to and to review, during normal business hours upon reasonable prior written notice, the applicable records of CASI and its Affiliates or Sublicensees to verify the accuracy of the royalty reports and payments under this Article VIII. Such review may cover the records for sales made in any Calendar Year ending not more than four (4) years prior to the date of such request. The accounting firm shall disclose to Cleave and CASI only whether the royalty reports are correct or incorrect and the specific details concerning any discrepancies. No other information shall be provided to Cleave.
(b)If such accounting firm concludes that additional royalties were owed during such period, CASI shall pay the additional royalties [***] after the date Cleave delivers to CASI such accounting firm’s written report, plus interest at the rate specified in Section 8.11. If such accounting firm concludes that an overpayment was made, such overpayment shall be fully creditable against amounts payable in subsequent payment periods, or at CASI’s request, shall be reimbursed to CASI. Cleave shall pay for the cost of any audit, unless CASI has underpaid Cleave by [***] or more, in which case CASI shall pay for the costs of audit.
(c)Each Party shall treat all information that it receives under this Section 8.12 in accordance with the confidentiality provisions of Article X of this Agreement, and shall cause its accounting firm to enter into an acceptable confidentiality agreement with the other Party obligating such firm to retain all such financial information in confidence pursuant to such confidentiality agreement, except to the extent necessary for such Party to enforce its rights under the Agreement.
8.13.Taxes. Taxes required to be withheld under Applicable Laws for any royalty payment, milestone payments or other payments will be withheld by CASI, its Affiliates or Sublicensees. CASI, or its Affiliates, and Cleave shall [***], provided that CASI will use its best efforts to [***] for all payments made under the definitive agreement. The Parties agree to cooperate with one another and use reasonable efforts [***] required by Applicable Laws to be [***] under this Agreement, including by completing all procedural steps, and taking all reasonable measures, to ensure that [***] to the extent permitted under Applicable Laws, including income tax treaty provisions and related procedures for claiming treaty relief. Cleave shall assist and cooperate with CASI, its Affiliates, or Sublicensees, as applicable, to [***].
ARTICLE IX
INVENTIONS AND PATENTS
9.1.Patent Contacts. Each Party shall designate its initial Patent Contact within thirty (30) days following the Effective Date and shall promptly thereafter notify the other Party of such designation. If at any time a vacancy occurs for any reason, the Party that appointed the prior incumbent shall as soon as reasonably practicable appoint a successor. Each Party shall promptly notify the other Party of any substitution of another person as its Patent Contact.
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The Patent Contacts shall, from time to time, coordinate the respective patent strategies of the Parties relating to this Agreement.
9.2.Ownership of Background Technology. All Background Technology shall remain the sole and undivided property of the Party, which owns the Background Technology.
9.3.Ownership of Foreground Technology. Subject to the terms and conditions of this Agreement and any relevant Third Party agreements, ownership of Foreground Technology will be as follows.
(a)Any Technology that is developed or reduced to practice solely by CASI, or by an employee, contractor, subcontractor or Affiliate of CASI in the course of or in connection with this Agreement after the Effective Date, shall be owned exclusively by CASI and shall be licensed to Cleave pursuant to Section 2.3.
(b)Any Technology that is developed or reduced to practice solely by Cleave, or by an employee, contractor, subcontractor or Affiliate of Cleave after the Effective Date, shall be owned exclusively by Cleave and shall be licensed to CASI pursuant to Section 2.1.
(c)Any Joint Technology shall be owned jointly by the Parties, with each Party having an undivided one-half (1/2) interest therein, and each Party shall license its ownership interest in the Joint Technology to the other Party pursuant to Section 2.1 and Section 2.3. Each Party will exercise its ownership rights in and to such Joint Technology, including the right to license and sublicense or otherwise to exploit, transfer, or encumber its ownership interest, without an accounting or obligation to, or consent required from, the other Party, but subject to the licenses hereunder and the other relevant terms and conditions of this Agreement.
Each Party shall require its employees, contractors, and subcontractors to assign all inventions made by them to the Party by whom they are engaged.
9.4.Patent Prosecution and Maintenance.
(a)Cleave Patents. Cleave shall be [***] for the Prosecution and Maintenance of Patent Rights with respect to any Cleave Patents (such costs in connection with Cleave’s interest in Joint Technology is addressed in Section 9.4(c)), provided that CASI shall reimburse Cleave for its reasonable Out-of-Pocket Expenses for the Prosecution and Maintenance of Patent Rights with respect to any Cleave Patents that cover the Licensed Product in the Territory.
(b)CASI Patents. CASI shall be [***] for the Prosecution and Maintenance of Patent Rights with respect to any CASI Patents (such costs in connection with CASI’s interest in Joint Technology is addressed in Section 9.4(c)).
(c)Joint Technology. CASI and Cleave shall share responsibilities and decision-making with regard to patent matters relating to Joint Technology and shall [***] with respect thereto. Cleave shall be primarily responsible and shall [***] for the Prosecution and Maintenance of Patent Rights with respect to any Joint Patents outside of the Territory. CASI shall be primarily responsible and shall [***] for the Prosecution and Maintenance of Patent Rights with respect to any Joint Patents in the Territory.
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(d)Patent Prosecution Party. The “Patent Prosecution Party” means:
(i)with respect to Patent Rights within the CASI Patents: CASI;
(ii)with respect to Patent Rights within the Joint Patents in the Territory: CASI;
(iii)with respect to Patent Rights within the Cleave Patents: Cleave;
(iv)with respect to Patent Rights within the Joint Patents outside of the Territory: Cleave.
For each patent application, patent and proceeding described in this Section 9.4(d), the Patent Prosecution Party shall, to the extent such activities relate to the Licensed Product:
(i)deliver to the other Party copies of communications between the Patent Prosecution Party and patent offices; and
(ii)take the other Party’s comments and suggestions, if any, into consideration when framing responses and submissions to patent offices.
The Patent Prosecution Party shall have final authority over patent strategy, including selection of jurisdictions in which to file patent applications and the content of responses and submissions to patent offices.
(e)Patent Term Extensions and Supplementary Protection Certificates. The Parties shall cooperate in seeking any available extension or expansion of any Patent Rights in and to the CASI Patents, Cleave Patents, or Joint Patents. Such cooperation shall include:
(i)advising each other in a timely manner of any action by any Regulatory Authority that is pertinent to any such extension;
(ii)reasonably supplying each other with all information in its control pertaining to the extension of any such Patent Rights; and
(iii)cooperating with each other to execute all supporting affidavits or documents required in connection with the extension of any such Patent Rights.
(f)Discontinued Patents. Either Party may at any time elect, by written notice to the other Party, to discontinue support for one or more Patent Rights for which it is the Patent Prosecution Party within the CASI Patents, Cleave Patents, or Joint Patents, as applicable (a “Discontinued Patent”); unless otherwise required in any administrative proceedings, such notice shall be sent at least [***] before any deadline applicable to the Prosecution and Maintenance of the Discontinued Patent. The Party discontinuing the Prosecution and Maintenance of its Patent Rights shall not be responsible for any costs relating to a Discontinued Patent that are incurred more [***] after receipt of that notice by the other Party. The other Party may elect, at its sole discretion and at its sole expense, to continue Prosecution and Maintenance of the Discontinued Patent in its respective territory if such Discontinued Patent is exclusively
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licensed to such Party in the respective territory of such Party hereunder (as regards CASI, the Territory, and as regards Cleave, outside the Territory). The Party discontinuing the Prosecution and Maintenance of its Patent Rights shall [***] Prosecution and Maintenance of the Discontinued Patent. [***] responsibility for Prosecution and Maintenance of any Discontinued Patent [***] with respect to such Discontinued Patent, including the rights of enforcement and defense under Section 9.5 and Section 9.6 of this Agreement, and the Discontinued Patent shall [***] and included in the Cleave Patents, Joint Patents or CASI Patents. In the event a Discontinued Patent is a Cleave Patent, such Discontinued Patent shall not be included in Cleave Patents for the purpose of [***] under this Agreement and [***]. Notwithstanding the foregoing, Cleave or CASI, respectively, may elect not to prepare and file in one or more countries or territories a patent application that would become Cleave Patents or CASI Patents, respectively, without having such potential patent application be deemed to be a Discontinued Patent.
9.5.Enforcement of Patents.
(a)Notice. If either Party believes that a Cleave Patent is being infringed in the Territory or a CASI Patent, or Joint Patent is being infringed in or outside of the Territory, by a Third Party or if a Third Party claims that any Cleave Patent in the Territory in invalid or unenforceable, or a CASI Patent, or Joint Patent in or outside of the Territory is invalid or unenforceable, the Party possessing such knowledge or belief shall notify the other Party and provide it with details of such infringement or claim that are known by such Party.
(b)Right to Bring an Action. The Patent Prosecution Party shall have the exclusive right to attempt to resolve such infringement or claim, including by filing an infringement suit, defending against such claim or taking other similar action (each, an “Action”) and to compromise or settle such infringement or claim. At the request of the Patent Prosecution Party, the other Party (“Other Party”) shall immediately provide the Patent Prosecution Party with all relevant documentation (as may be requested by the Patent Prosecution Party) evidencing that the Patent Prosecution Party is validly empowered by the Other Party to take an Action. The Other Party shall be under the obligation to join the Patent Prosecution Party in its Action if the Patent Prosecution Party determines that it is necessary to demonstrate “standing to sue”. If the Patent Prosecution Party does not intend to prosecute or defend an Action, the Patent Prosecution Party shall promptly inform the Other Party. If the Patent Prosecution Party does not initiate an Action with respect to such an infringement or claim within [***] following notice thereof, the Other Party shall have the right to attempt to resolve such infringement or claim. The Party initiating such Action shall have the sole and exclusive right to select counsel for any suit initiated by it pursuant to this Section 9.5(b).
(c)Costs of an Action. Subject to the respective indemnity obligations of the Parties set forth in Article XII, the Party taking an Action under Section 9.5(b) shall pay all costs associated with such Action, other than (subject to Section 9.5(e)) the expenses of the other Party if the other Party elects to join such Action (as provided in the last sentence of this paragraph). Each Party shall have the right to join an Action relating to a Cleave Patent, CASI Patent, or Joint Patent taken by the other Party at its own expense.
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(d)Settlement. Neither Party shall settle or otherwise compromise any Action by admitting that any Cleave Patent, CASI Patent, or Joint Patent is invalid or unenforceable without the other Party’s prior written consent, and, in the case of Cleave, Cleave may not settle or otherwise compromise an Action in a way that adversely affects or would be reasonably expected to adversely affect CASI’s rights or benefits hereunder with respect to the Licensed Product in the Territory or CASI’s rights with respect to a CASI Patent or Joint Patent in or outside the Territory, without CASI’s prior written consent. The settlement will be treated, for the purposes of Section 8.12, in accordance with the Applicable Law of the Region to which the settlement relates.
(e)Reasonable Assistance. The Party not enforcing or defending Cleave Patent, CASI Patent, or Joint Patents shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence and making its employees available, subject to [***] on an ongoing basis by the non-enforcing or non-defending Party in providing such assistance.
(f)Distribution of Amounts Recovered. Any amounts recovered by the Party taking an Action pursuant to this Section 9.5, whether by settlement or judgment, shall be allocated in the following order: (i) [***]; (ii) to [***] not taking such Action [***] in such Action, [***]; and (iii) the remaining [***] shall [***] (A) if Cleave brought the Action then [***] the Parties, and (B) if CASI brought the Action then [***] and deemed to be [***], and CASI shall [***].
9.6.Third Party Actions Claiming Infringement.
(a)Notice. If a Party becomes aware of any Third Party Action in the Territory, such Party shall promptly notify the other Party of all details regarding such claim or action that is reasonably available to such Party.
(b)Right to Defend. The Patent Prosecution Party shall have the right, at its sole expense, but not the obligation, to defend a Third Party Action described in Section 9.6(a) and to compromise or settle such Third Party Action. If the Patent Prosecution Party declines or fails to assert its intention to defend such Third Party Action within [***] of receipt/sending of notice under Section 9.6(a), then the Other Party shall have the right to defend such Third Party Action. The Party defending such Third Party Action shall have the sole and exclusive right to select counsel for such Third Party Action.
(c)Consultation. The Party defending a Third Party Action pursuant to Section 9.6(b) shall be the “Controlling Party.” The Controlling Party shall consult with the non-Controlling Party on all material aspects of the defense. The non-Controlling Party shall have a reasonable opportunity for meaningful participation in decision-making and formulation of defense strategy. The Parties shall reasonably cooperate with each other in all such actions or proceedings. The non-Controlling Party will be entitled to be represented by independent counsel of its own choice at its own expense.
(d)Appeal. In the event that a judgment in a Third Party Action is entered against the Controlling Party and an appeal is possible, the Controlling Party shall have the first right, but not the obligation, to file such appeal. In the event the Controlling
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Party does not desire to file such an appeal, it will promptly, in a reasonable time period (i.e., with sufficient time for the non-Controlling Party to take whatever action may be necessary) prior to the date on which such right to appeal will lapse or otherwise diminish, permit the non-Controlling Party to pursue such appeal at such non-Controlling Party’s own cost and expense. If Applicable Law requires the other Party’s involvement in an appeal, the other Party shall be a nominal party of the appeal and shall provide reasonable cooperation to such Party at such Party’s expense.
(e)Costs of an Action. Subject to the respective indemnity obligations of the Parties set forth in Article XII, the Controlling Party shall [***] with such Third Party Action [***] if the other Party elects to join such Third Party Action (as provided in the last sentence of this paragraph). Each Party shall have the right to join a Third Party Action defended by the other Party at its own expense.
(f)No Settlement Without Consent. Neither Party shall settle or otherwise compromise any Third Party Action [***] without the other Party’s prior written consent, and, in the case of Cleave, [***], without CASI’s prior written consent.
ARTICLE X
CONFIDENTIALITY
10.1.Confidentiality Obligations. Each Party agrees that, for the Term and for [***] thereafter, such Party shall, and shall ensure that its officers, directors, employees and agents (“Representatives”) shall, keep completely confidential and not publish or otherwise disclose and not use for any purpose except as expressly permitted hereunder any Confidential Information disclosed to it by the other Party pursuant to this Agreement. The receiving Party shall provide or permit access to Confidential Information of the disclosing Party only to those of its Representatives who have a need to know such Confidential Information to assist the receiving Party with the activities contemplated or required of it by this Agreement, provided that those persons are bound by confidentiality and non-use obligations of the Confidential Information consistent with the confidentiality provisions of this Agreement as they apply to the receiving Party and that the receiving Party will remain fully responsible for any breach of the confidentiality or non-use obligation by such persons. The foregoing obligations shall not apply to any Confidential Information disclosed by a Party hereunder to the extent that the receiving Party can demonstrate that such Confidential Information:
(a)was already known to the receiving Party or its Affiliates, other than under an obligation of confidentiality, at the time of disclosure;
(b)was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;
(c)became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;
(d)was subsequently lawfully disclosed to the receiving Party or its Affiliates by a Third Party that is entitled to disclose it other than in contravention of a confidentiality obligation of such Third Party to the disclosing Party; or
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(e)was developed or discovered by employees or agents of the receiving Party or its Affiliates without the use of the Confidential Information of the disclosing Party.
Notwithstanding the above obligations of confidentiality and non-use, a Party may disclose information to the extent that such disclosure is reasonably necessary in connection with:
(i)filing or prosecuting patent applications;
(ii)prosecuting or defending litigation;
(iii)conducting Clinical Trials pursuant to this Agreement;
(iv)seeking Regulatory Approval of the Licensed Product and other approvals necessary to perform this Agreement; or
(v)complying with Applicable Law, including securities law and the rules of any securities exchange or market on which a Party’s securities are listed or traded.
In addition to the foregoing, CASI may, in furtherance of its rights under this Agreement, disclose Confidential Information of Cleave to Third Party subcontractors, consultants, advisors, Sublicensees, or agents on a “need-to-know” basis, provided that such Third Party is bound by obligations of confidentiality at least as stringent as the ones herein.
In making any disclosures set forth in clauses (i) through (v) above, the disclosing Party shall, where reasonably practicable, give such advance notice to the other Party of such disclosure requirement as is reasonable under the circumstances and will use its reasonable efforts to cooperate with the other Party in order to secure confidential treatment of such Confidential Information required to be disclosed. In addition, in connection with any permitted filing by either Party of this Agreement with any Governmental Body, the filing Party shall endeavor to obtain confidential treatment of economic, trade secret information and such other information as may be requested by the other Party, and shall provide the other Party with the proposed confidential treatment request with reasonable time for such other Party to provide comments, and shall include in such confidential treatment request all reasonable comments of the other Party.
10.2.Publications. CASI shall not publish any information relating to the Licensed Product without the written consent of Cleave (which shall not be unreasonably withheld or delayed) unless such information has already been publicly disclosed either prior to the Effective Date or after the Effective Date through no fault of CASI or otherwise not in violation of this Agreement. CASI shall submit to Cleave for Cleave’s written approval any publication or presentation (including, without limitation, in any seminars, symposia or otherwise) of information related directly to the Licensed Product for review and approval [***] prior to submission for the proposed date of publication or presentation. Cleave shall have the right to make such publications or presentations as it chooses, in its sole discretion, without the approval of CASI; provided, however, Cleave shall notify CASI of any proposed publication or presentation (including, without limitation, in any seminars, symposia or otherwise) that
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references any data provided by CASI and/or names a CASI Representative as an author thereof, provide a copy of such proposed publication or presentation to CASI for review and comment [***] prior to submission for the proposed date of publication or presentation, and consider CASI’s comments in good faith.
10.3.Press Releases and Disclosure.
(a)The agreed public announcement by the Parties of the execution of this Agreement is set forth on Exhibit E hereto.
(b)Neither Party may make any subsequent press release or public announcements regarding this Agreement or any matter covered by this Agreement, including the Development or Commercialization of the Licensed Product in the Territory, without the prior written consent of the other Party. If a Party desires to make a press release or public announcement, such Party shall provide the other Party with a draft thereof [***] prior to the date on which such Party would like to make such press release or public announcement. The Parties shall use good faith efforts to agree on a joint press release with respect to such matter. Notwithstanding the foregoing, a Party may make a press release or public announcement without the consent of the other Party if so required by Applicable Law.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1.Representations and Warranties of Both Parties. Each Party represents and warrants to the other Party that, as of the Effective Date:
(a)such Party is duly organized and validly existing under the Applicable Laws of the jurisdiction of its incorporation or organization;
(b)such Party has taken all action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement;
(c)this Agreement is a legal and valid obligation of such Party, binding upon such Party and enforceable against such Party in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equitable principles;
(d)The execution, delivery and performance of this Agreement by such Party does not conflict with, breach or create in any Third Party the right to accelerate, terminate or modify any agreement or instrument to which such Party is a party or by which such Party is bound, and does not violate any Applicable Law of any Governmental Body having authority over such Party; and
(e)such Party has all right, power and authority to enter into this Agreement and to perform its obligations under this Agreement.
11.2.Additional Representations, Warranties and Covenants of Cleave. Cleave represents, warrants and covenants to CASI, as of the Effective Date that:
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(a)Cleave Controls the Cleave Technology, and has all rights under the Cleave Technology to grant the licenses to CASI as purported to be granted under this Agreement, free of any lien or security interest, and Cleave has not previously licensed, assigned, transferred, or otherwise conveyed any right, title, or interest in and to the Licensed Product or Cleave Technology to any Third Party in the Territory that would conflict or interfere with any rights or licenses granted CASI hereunder;
(b)to the Knowledge of Cleave, all tangible information and data provided by or on behalf of Cleave to CASI on or before the Effective Date in contemplation of this Agreement was and is true, accurate and complete in all material respects, and Cleave has not failed to disclose, or cause to be disclosed, any information or data that would cause the information and data that has been disclosed to be misleading in any material respect;
(c)the Cleave Patents listed on Exhibit B hereto constitute all of the Cleave Patents that Cover the Development, Manufacture and/or Commercialization of Licensed Product in the Territory as contemplated by this Agreement;
(d)none of the Cleave Patents listed on Exhibit B hereto has been adjudged invalid or unenforceable in whole or in part, nor is there any such proceeding pending;
(e)to the Knowledge of Cleave, there is no infringement or misappropriation of any Cleave Technology in the Territory by any Third Party;
(f)it has not received any written notice of any suit, claim, action or proceeding challenging or seeking to deny its rights or any of its Affiliates’ rights in any Cleave Technology, excluding prosecution of patent applications with the relevant administrative patent offices;
(g)to the Knowledge of Cleave, the practice and use of the Cleave Technology as licensed herein does not infringe the Patent Rights or misappropriate the intellectual property rights of any Third Party in the Territory;
(h)to the Knowledge of Cleave, it (and any other party acting under its authority) has complied in all material respects with all Applicable Laws in connection with the Development, manufacture, storage and disposition of the Licensed Product (including information and data provided to Regulatory Authorities), and has not used any employee, consultant or contractor who has been debarred by any Regulatory Authority, or to the Knowledge of Cleave, is the subject of a debarment proceeding by any Regulatory Authority;
(i)except for the Cleave Third Party Agreement set forth on Exhibit C, there is no agreement between Cleave or its Affiliates with any Third Party pursuant to which Cleave or its Affiliates has licensed, sublicensed or obtained any Cleave Technology from a Third Party;
(j)it has provided CASI with a true, complete and correct copy of each Cleave Third Party Agreement;
(k)the right Cleave grants to CASI under this Agreement is not in conflict with any Cleave Third Party Agreement, and Cleave’s performance of its obligations
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under this Agreement does not and will not cause any breach of any Cleave Third Party Agreement;
(l)Cleave and its Affiliates (i) have not breached or defaulted under any of its obligations under the terms and conditions with any Cleave Third Party Agreement as of the Effective Date and all Cleave Third Party Agreements as of the Effective Date are in full force and effect; (ii) have not received any written notice that alleges breach or default by Cleave of, requests a material amendment of, or termination of any Cleave Third Party Agreement; (iii) are not aware of any potential breach, default, or potential default of any Cleave Third Party Agreement; and (iv) are not aware of any other facts or circumstances likely to result in a material breach or termination of any Cleave Third Party Agreement or that would result in any reduction or loss of any rights granted to CASI hereunder;
(m)during the Term, Cleave and its Affiliates (i) will not breach or default under the terms and conditions of each Cleave Third Party Agreement that would be necessary or reasonably useful for CASI to Develop, manufacture, or Commercialize the Licensed Product in the Field in the Territory pursuant to this Agreement; (ii) will ensure that the Cleave Third Party Agreements are in full force and effect for so long as any Cleave Technology licensed to Cleave under such Cleave Third Party Agreements are necessary or reasonably useful for the Development, manufacture, or Commercialization of the Licensed Products in the Field in the Territory; (iii) will provide prompt notice to CASI of its receipt of any written notice that alleges breach or default by Cleave of, requests a material amendment of, or termination of any Cleave Third Party Agreement; (iv) will not amend, modify or terminate any Cleave Third Party Agreements in a manner that would terminate rights that are sublicensed to CASI hereunder or otherwise diminish the scope or exclusivity of the licenses granted to CASI under the technology licensed to CASI hereunder; and (v) after any Cleave Third Party Agreement is amended, Cleave shall promptly notify CASI of the same, and provide a true and complete copy of the amended Cleave Third Party Agreement for CASI to determine Cleave’s compliance of its covenants hereunder;
(n)during the Term, Cleave and its Affiliates will not grant any interest in the Cleave Technology that is inconsistent with the terms and conditions of this Agreement.
11.3.Additional Representations, Warranties and Covenants of CASI. CASI represents warrants and covenants to Cleave, as of the Effective Date that:
(a)all declarations made, directly or indirectly, by CASI to Cleave related to CASI’s qualifications, ability, and competence to Develop, manufacture and Commercialize the Licensed Product in the Territory are true and correct in all material respects. In particular, CASI has secured availability of funds sufficient to perform its financial obligations to Cleave, as well as Development, manufacturing and Commercialization obligations hereunder.
(b)CASI, in conformity with current generally accepted industry standards and procedures, (i) shall have and maintain facilities, personnel, experience and expertise to perform its obligations hereunder; (ii) shall perform its obligations hereunder with reasonable due care; and (iii) shall establish and maintain quality
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assurance, quality controls and review procedures to facilitate performance of its obligations hereunder;
(c)CASI shall comply in all material respects with all Applicable Laws and regulations now in force or which may hereafter be in force in relation to bookkeeping obligations, tax obligations, and compliance obligations under Applicable Laws;
(d)CASI shall implement security systems and intellectual property protection guidelines within its organization, which are in conformity with international industry standards designed to avoid unauthorized disclosure of proprietary intellectual property rights within the Cleave Technology, CASI Technology, or Joint Technology, including any Know-How therein, to any Third Party;
(e)to the Knowledge of CASI, there are not any Patent Rights, Know-How or Materials Controlled by CASI or any of its Affiliates, including Third Party rights, which are necessary in the Development, manufacture, use or Commercialization of the Licensed Products as of the Effective Date;
(f)all employees of CASI or its Affiliates working under this Agreement will be under the obligation to assign all, right, title and interest in and to their inventions and discoveries, whether or not patentable, made in performance of such work to CASI or its Affiliates as the sole owner thereof; and
(g)neither CASI nor any of its Affiliates or any of its or their subcontractors or any of its or their employees who may perform any activities under this agreement is or has been disqualified or debarred (or the subject of a similar penalty in the Territory) by a Regulatory Authority or, to the best of CASI’s knowledge, is or has been the subject of disqualification or debarment proceedings (or similar proceedings in the Territory) by a Regulatory Authority.
ARTICLE XII
INDEMNIFICATION AND INSURANCE
12.1.Indemnification by CASI. CASI shall indemnify, defend and hold Cleave and its Affiliates and each of their respective employees, officers, directors and agents (the “Cleave Indemnitees”) harmless from and against any and all liability, damage, loss, cost or expense (including reasonable attorneys’ fees) (“Losses”) to the extent arising out of Third Party claims or suits related to (a) the gross negligence or intentional misconduct of CASI or any of its Affiliates, Sublicensees, or contractors, or any of their respective directors, officers, employees and agents, in performing CASI’s obligations or exercising CASI’s rights under this Agreement; (b) the breach by CASI of its representations or warranties set forth in Article 11; or (c) the Development, manufacture or Commercialization of the Licensed Product by CASI or any of its Affiliates, Sublicensees or subcontractors, including any product liability, personal injury, property damage or other damage caused by or in the course of (i) the conduct of Clinical Trials or (ii) the distribution, use of or exposure to the Licensed Product; provided, however, that CASI’s obligations pursuant to this Section 12.1 shall not apply (w) to the extent such claims or suits result from the negligence or willful misconduct of any of the Cleave Indemnitees, (x) with respect to product liability claims arising out of any breach by Cleave of the Supply Agreement, (y) with respect to claims or suits arising out of breach by Cleave of its representations, warranties or covenants set forth in Article XI, or (z) to the extent such Losses
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arise from, are based on, or result from any activity or occurrence for which Cleave is obligated to indemnify pursuant to Section 12.2.
12.2.Indemnification by Cleave. Cleave shall indemnify, defend and hold CASI and its Affiliates and each of their respective agents, employees, officers and directors (the “CASI Indemnitees”) harmless from and against any and all Losses to the extent arising out of Third Party claims or suits related to (a) the gross negligence or intentional misconduct of Cleave or any of its Affiliates, sublicensees, or contractors, or any of their respective directors, officers, employees and agents, in performing Cleave’s obligations or exercising Cleave’s rights under this Agreement; (b) the breach by Cleave of its representations, warranties or covenants set forth in Article 11; or (c) the development, manufacture, or commercialization of the Licensed Product by Cleave or any of its Affiliates, licenses, or sublicensees or subcontractors outside the Territory, including any product liability, personal injury, property damage or other damage caused by or in course of (i) the conduct of Clinical Trials or (ii) the distribution, use of or exposure to the Licensed Product; provided, however, that Cleave’s obligations pursuant to this Section 12.2 shall not apply (x) to the extent that such claims or suits result from the negligence or willful misconduct of any of the CASI Indemnitees, (y) with respect to claims or suits arising out of a breach by CASI of its representations or warranties set forth in Article XI, or (z) to the extent such Losses arise from, are based on, or result from any activity or occurrence for which CASI is obligated to indemnify pursuant to Section 12.1.
12.3.No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY BREACH HEREOF.
12.4.Notification of Claims; Conditions to Indemnification Obligations. The Party seeking for indemnification under this Article XII shall (a) promptly notify the other Party as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto, (b) cooperate, and cause the individual indemnitees to cooperate, with the indemnifying Party in the defense, settlement or compromise of such claim or suit, and (c) permit the indemnifying Party to control the defense, settlement or compromise of such claim or suit, including the right to select defense counsel. In no event, however, may the indemnifying Party compromise or settle any claim or suit in a manner which admits fault or negligence on the part of the indemnified Party or any indemnitee without the prior written consent of the indemnified Party. The indemnifying Party shall have no liability under this Article XII with respect to claims or suits settled or compromised without its prior written consent.
12.5.Insurance. During the Term, CASI shall obtain and maintain, at its sole cost and expense, clinical trial and product liability insurance (including any self-insured arrangements) in amounts that are reasonable and customary in the pharmaceutical and biotechnology industry for companies engaged in comparable activities in the Territory, and such insurance shall name Cleave as an additional insured. It is understood and agreed that this insurance shall not be construed to limit CASI’s liability with respect to its indemnification obligations hereunder. CASI will, except to the extent self-insured, provide to Cleave upon request a certificate evidencing the insurance CASI is required to obtain and keep in force under this Section 12.5.
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ARTICLE XIII
TERM AND TERMINATION
13.1.Term and Expiration. The term of this Agreement (the “Term”) shall commence on the Effective Date and, unless earlier terminated as provided in this Article XIII, shall continue in full force and effect on a Region-by-Region basis until the Royalty Term in such Region with respect to the Licensed Product expires, at which time this Agreement shall expire in its entirety with respect to the Licensed Product in such Region, and the terms of Section 13.5(b)(i) shall apply.
13.2.Termination of the Agreement by CASI for Convenience. At any time during the Term, CASI may, at its convenience, terminate this Agreement in its entirety [***] written notice to Cleave.
13.3.Termination upon Material Breach.
(a)If a Party commits a material breach of this Agreement, the other Party may give to the breaching Party a written notice specifying the nature of the breach, [***], and stating its intention to terminate this Agreement [***]. If such breach is not cured [***] after the receipt of such notice by the breaching Party, the other Party shall be entitled to terminate this Agreement immediately by written notice to the breaching Party.
(b)Notwithstanding Section 13.3(a), if the allegedly breaching Party in good faith disputes such material breach and provides written notice of that dispute to the other Party within the applicable period set forth in Section 13.3(a), the matter shall be addressed under the dispute resolution provisions in Article XIV, and the termination shall not become effective unless and until it has been determined under Article XIV that the allegedly breaching Party is in material breach of this Agreement and has failed to cure such breach within the time period provided in Section 13.3(a) following such determination. It is understood and acknowledged that during the pendency of such a dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to perform all of their respective obligations hereunder.
13.4.Termination for Bankruptcy. If at any time during the term of this Agreement, a Bankruptcy Event relating to either Party (the “Bankrupt Party”) occurs, the other Party shall have, in addition to all other legal and equitable rights and remedies available hereunder, the option to terminate this Agreement upon [***] prior written notice to the Bankrupt Party. It is agreed and understood that if the other Party does not elect to terminate this Agreement upon the occurrence of a Bankruptcy Event, except as such other Party may otherwise agree with the trustee or receiver appointed to manage the affairs of the Bankrupt Party, such other Party shall continue to make all payments required of it under this Agreement as if the Bankruptcy Event had not occurred, and the Bankrupt Party shall not have the right to terminate any license granted herein.
13.5.Effects of Termination.
(a)Survival
(i)Without limiting the foregoing, Article I (Definitions), Section 2.3 (Grant of License to Cleave), Section 4.6 (Records)(solely with
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respect to the obligation to maintain records for the period specified therein), Section 8.9 (Royalty Reports and Records Retention) through Section 8.12 (Audits) (with respect to payments payable and Net Sales realized prior to the termination effective date of this Agreement or post the termination effective date pursuant to Section 13.5(b)(ii)(F)), Section 8.13 (Taxes), Section 9.2 (Ownership of Background Technology) and Section 9.3 (Ownership of Foreground Technology), Section 9.4 (Patent Prosecution and Maintenance) and Section 9.5 (Enforcement of Patents) (each, solely with respect to Joint Technology), Section 9.6 (Third Party Actions Claiming Infringement), Section 10.1 (Confidentiality Obligations), Article XII (Indemnification and Insurance)(excluding Section 12.5 (Insurance)), Section 13.5 (Effects of Termination), Article XIV (Dispute Resolution), Section 15.8 through Section 15.12 (Miscellaneous) hereof shall survive the expiration or termination of this Agreement for any reason.
(ii)Termination of this Agreement shall not relieve the Parties of any liability that accrued hereunder prior to the effective date of such termination. In addition, termination of this Agreement shall not preclude either Party from pursuing all rights and remedies it may have hereunder or at Applicable Law or in equity with respect to any breach of this Agreement nor prejudice either Party’s right to obtain performance of any obligation.
(b)Licenses
(i)Upon expiration of the Royalty Term with respect to any Licensed Product [***], then as of the effective date of such expiration and [***], the license from Cleave to CASI under Section 2.1 shall convert to a fully paid, royalty free, irrevocable, perpetual, exclusive, and sublicenseable license under the Cleave Technology to Develop, manufacture, have manufactured, use and Commercialize such Licensed Product in such Region.
(ii)Upon termination of this Agreement for any reason, the following provisions shall apply:
(A)all licenses granted to CASI under Section 2.1 [***];
(B)CASI shall, to the extent permissible under Applicable Laws and commercially feasible, upon written request by Cleave and subject to Cleave assuming legal responsibility for any Clinical Trials of the Licensed Product then ongoing, [***] if the termination is by CASI under Section 13.3, or (2) [***] under Section 13.3 or by CASI under Section 13.2, all regulatory documentation and Regulatory Approvals prepared or obtained by or on behalf of CASI prior to the date of such termination, to the extent solely related to the Licensed Product [***], and CASI shall have the right to [***] documentation and Regulatory Approvals for recordkeeping purposes;
(C)CASI shall, upon written request of Cleave, [***], at CASI’s option, destroy, (1) [***] under Section 13.3, and (2) at CASI’s cost and expense if the termination is by Cleave under Section 13.3 or by CASI under Section 13.2, all relevant records and materials in its
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possession or control containing or comprising the Cleave Know-How and the Cleave Materials or such other Confidential Information of Cleave, and CASI shall have the right to [***] Materials and such other Confidential Information [***].
(D)CASI may, following consultation with Cleave and at its sole option and discretion, (1) destroy or retain any and all Materials relating to or comprising the Licensed Product, including clinical supplies of the Licensed Product, that are Controlled by CASI, or (2) [***] if the termination is by Cleave under Section 13.3 or by CASI under Section 13.2), or (3) [***]. Any clinical supplies of the Licensed Product or other Materials purchased by Cleave from CASI shall be purchased on an “as is” basis with no representations or warranties.
(E)To the extent not prohibited by Applicable Law, CASI shall wind down any ongoing Clinical Trials with respect to the Licensed Product, or if allowable under Applicable Law, [***] if the termination is by CASI under Section 13.3 or (2) [***] if the termination is by Cleave under Section 13.3 or by CASI under Section 13.2, in which case [***] of the Licensed Product at [***].
(F)CASI and its Affiliates and Sublicensees shall be entitled, during the [***] following such termination, to sell on the normal business terms in existence prior to such termination, any commercial inventory of the Licensed Product which remains on hand as of the date of the termination, [***] in accordance with the terms and conditions set forth in this Agreement. [***].
(G)CASI shall, if the termination is by Cleave under Section 13.3 or by CASI under Section 13.2, at Cleave’s option, [***] owned by CASI relating to the Licensed Product [***] to be agreed upon between the Parties.
(H)Except in the case CASI terminates this Agreement pursuant to Section 13.3 or Section 13.4, the license granted by CASI to Cleave under Section 2.3 shall be expanded to include the Territory.
(I)In the case CASI terminates this Agreement pursuant to Section 13.3, the licenses granted to Cleave under Section 2.3 shall terminate. If Cleave requests in writing a continuation of such licenses, Cleave has [***] into a distinct License Agreement regarding such [***], after which such rights of Cleave shall expire.
(iii)Upon any termination of this Agreement, each of CASI’s Sublicensees shall continue to have the rights and license set forth in its Sublicense agreements and such Sublicense agreements shall be automatically assigned by CASI to Cleave in its entirety, if such Sublicense agreement is related solely to the Licensed Product, or in part, with respect to the part of such Sublicense agreement that relates solely to the Licensed Product; provided that (a) such Sublicensee is not then in breach of any of its material obligations under its Sublicense agreement, (b) Cleave shall not be obligated to conduct any
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obligations under such Sublicense agreement that are beyond the scope of Cleave’s obligations owing to CASI under this Agreement (by way of example, if CASI has committed to its Sublicensee under a Sublicense agreement to provide Development work such as funding or conducting a clinical trial, such obligations shall not be automatically assigned to Cleave), and (c) such Sublicense agreement will not be automatically assigned to Cleave upon termination of this Agreement if CASI does not terminate or otherwise remains obligated to perform any of the obligations that Cleave is not obligated to conduct under (b) above.
ARTICLE XIV
DISPUTE RESOLUTION
14.1.Disputes. The Parties recognize that disputes as to certain matters may from time to time arise during the Term which relate to either Party’s rights or obligations hereunder. It is the objective of the Parties to establish under this Article XIV procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. In the event that the Parties are unable to resolve such dispute through diligent review and deliberation by the JSC (in accordance with Section 3.4) [***] from the day that one Party had designated the issue as a dispute in written notice to the JSC, then either Party shall have the right to escalate such matter to senior management as set forth in Section 14.2.
14.2.Escalation to Executive Officers. Either Party may, by written notice to the other Party, request that a dispute that remained unresolved by the JSC [***] as set forth in Section 14.1 arising between the Parties in connection with this Agreement, or a dispute relating to material breach, be resolved by the Executive Officers for resolution, [***] of their first consideration of such dispute.
14.3.Arbitration. If the Executive Officers cannot resolve such dispute [***] of their first consideration of such dispute, then upon the filing of a Request for Arbitration by either Party, such dispute shall be submitted to Arbitration in the State of Delaware and settled under the Commercial Arbitration Rules of the AAA. The place of arbitration shall be the State of Delaware. The language to be used in the arbitral proceedings shall be English. The dispute, controversy or claim referred to arbitration shall be decided in accordance with the laws of the State of Delaware. Except to the extent necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration without the prior written consent of both Parties. Nothing in this Section 14.3 will preclude either Party from seeking interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration, if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1.Relationship of the Parties. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, joint venture, or employer-employee relationship between the Parties.
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15.2.Assignment.
(a)Except as expressly provided herein, neither this Agreement nor any interest hereunder shall be assignable, nor any other obligation delegable, by either Party without the prior written consent of the other Party. Notwithstanding the foregoing, and without prejudice to Section 2.6, Section 2.7, and Section 2.8, either Party may assign this Agreement or delegate its obligations in whole without the consent of the other Party to (i) an Affiliate of such Party; (ii) a successor to all or substantially all of the business of that Party to which this Agreement relates, in connection with any merger, sale of stock, sale of assets or other similar transaction; or (iii) the surviving corporation in the event of a Change of Control.
(b)No assignment under this Section 15.2 shall relieve the assigning Party of any of its responsibilities or obligations hereunder and provided, further, that as a condition of such assignment, the assignee shall agree in writing to be bound by all obligations of the assigning Party hereunder.
(c)This Agreement shall be binding upon the successors and permitted assigns of the Parties.
15.3.Performance by Affiliates. Either Party shall have the right to have any of its obligations hereunder performed, or its rights hereunder exercised by, any of its Affiliates, and the performance of such obligations by any such Affiliate(s) shall be deemed to be performance by such Party; provided, however, that such Party shall be responsible for ensuring the performance of its obligations under this Agreement and that any failure of any Affiliate performing obligations of such Party hereunder shall be deemed to be a failure by such Party to perform such obligations.
15.4.Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
15.5.Accounting Procedures. Each Party shall calculate all amounts hereunder and perform other accounting procedures required hereunder and applicable to it in accordance with the Accounting Standard applicable to such Party.
15.6.Force Majeure. Neither Party shall be liable to the other Party or be deemed to have breached or defaulted under this Agreement for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by or results from acts of God, earthquake, riot, civil commotion, terrorism, war, epidemics, strikes or other labor disputes, fire, flood, failure or delay of transportation, omissions or delays in acting by a Governmental Body, acts of a government or an agency thereof or judicial orders or decrees or restrictions or any other reason which is beyond the control of the respective Party. The Party affected by force majeure shall provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and will use Commercially Reasonable Efforts to overcome the difficulties created thereby and to resume performance of its obligations hereunder as soon as practicable. The payment of invoices due and owing hereunder shall in no event be delayed by the payer because of a force majeure affecting the payer. The Parties agree the effects of the COVID-19 pandemic that is ongoing as of the Effective Date may be invoked as a force majeure for the purposes of this Agreement
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even though the pandemic is ongoing solely to the extent those effects are not reasonably foreseeable by the Parties as of the Effective Date.
15.7.No Trademark Rights. No right, express or implied, is granted by this Agreement to a Party to use in any manner the name or any other trade name or trademark of the other Party in connection with the performance of this Agreement or otherwise.
15.8.Entire Agreement of the Parties; Amendments. This Agreement and the Exhibits hereto constitute and contain the entire understanding and agreement of the Parties respecting the subject matter hereof and cancel and supersede any and all prior negotiations, correspondence, understandings, and agreements between the Parties, whether oral or written, regarding such subject matter. No waiver, modification, or amendment of any provision of this Agreement shall be valid or effective unless made in a writing referencing this Agreement and signed by a duly authorized officer of each Party.
15.9.Captions. The captions to this Agreement are for convenience only and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement.
15.10.Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware.
15.11.Notices and Deliveries. Any notice, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by electronic mail, facsimile (receipt verified) or by express courier service (signature required) to the Party to which it is directed at its address or facsimile number shown below or such other address or facsimile number as such Party shall have last given by notice to the other Party.
If to Cleave, addressed to:
Cleave Therapeutics, Inc.
135 Main Street, Suite 1145,
San Francisco, CA 94105
Attn: CEO
Email: [***]
If to CASI, addressed to:
CASI Pharmaceuticals, Inc.
9620 Medical Center Drive, Suite 300
Rockville, MD 20850
Attn: Chief Operating Officer
Email: [***]
With a copy to:
Ropes & Gray LLP
36F, Park Place
1601 Nanjing Road West
Shanghai, China 200040
Attention: Geoffrey Lin and David R. Chen
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Email: [***]; [***]
15.12.Language. Unless otherwise provided in this Agreement, any written communication or documentation exchanged under this Agreement shall be in the English language. The Party supplying the documentation shall be responsible, at its own cost, for having such documentation translated into English, if necessary. Either Party may request that the other Party provide copies of the original source documents in addition to the English language translations thereof.
15.13.Waiver. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any other term or condition hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.
15.14.Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under Applicable Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. The Parties shall make a good faith effort to replace the invalid or unenforceable provision with a valid one which in its economic effect is most consistent with the invalid or unenforceable provision.
15.15.Interpretation. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” All references herein to Articles, Sections, and Exhibits shall be deemed references to Articles and Sections of, and Exhibits to, this Agreement unless the context shall otherwise require. Unless the context otherwise requires, countries shall include territories.
15.16.Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of which together will be deemed to be one and the same instrument. A facsimile or a portable document format (PDF) copy of this Agreement, including the signature pages, will be deemed an original.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the day and year first above written, each copy of which shall for all purposes be deemed to be an original.
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Cleave Therapeutics, Inc. |
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Name: Amy Burroughs Title: CEO |
[Signature Page to the License Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the day and year first above written, each copy of which shall for all purposes be deemed to be an original.
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CASI Pharmaceuticals, Inc. |
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Name: Wei-Wu He Title: Chairman and CEO |
[Signature Page to the License Agreement]
Exhibit A
CB-5339
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit A
Exhibit B
Cleave Patents
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit B
Exhibit C
Cleave Third Party Agreements
(NONE)
Exhibit C
Exhibit D
CB-5339 Global Development Plan
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit D
Exhibit E
Press Release
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit E
Exhibit F
Convertible Promissory Note
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit F
Exhibit G
Subcontractor Qualifications
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit G
Exhibit H
Facility/CMO Qualifications
Criteria for a China-based CMO:
[Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K]
Exhibit H
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
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Date: May 13, 2021 |
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/s/ Wei-Wu He |
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Wei-Wu He |
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Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
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Date: May 13, 2021 |
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/s/ Larry (Wei) Zhang |
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Larry (Wei) Zhang |
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Principal Financial Officer |
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Exhibit 32.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CASI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wei-Wu He, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report. |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
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Date: May 13, 2021 |
/s/ Wei-Wu He |
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Wei-Wu He |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CASI Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Larry (Wei) Zhang, as Principal Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report. |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
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Date: May 13, 2021 |
/s/ Larry (Wei) Zhang |
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Larry (Wei) Zhang |
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Principal Financial Officer |