fso
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019
OR
☐ |
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: 001-35935
PORTOLA PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
20-0216859 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
|
270 E. Grand Avenue South San Francisco, California |
94080 |
(Address of Principal Executive Offices) |
(Zip Code) |
(650) 246-7000
(Registrant’s Telephone Number, Including Area Code)
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 (§232.405 of this chapter) 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.
Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☐ |
|
|
|
|
|
|
|
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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Sec urities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock |
PTLA |
The Nasdaq Global Select Market |
As of May 6, 2019, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 68,109,684.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2019
INDEX
PART I. FINANCIA L INFORMATION
PORTOLA PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share data)
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
226,793 |
|
|
$ |
138,951 |
|
Short-term investments |
|
|
96,048 |
|
|
|
178,013 |
|
Restricted cash |
|
|
1,528 |
|
|
|
1,062 |
|
Trade and other receivables, net |
|
|
11,787 |
|
|
|
5,849 |
|
Unbilled - collaboration and license revenue |
|
|
6,317 |
|
|
|
9,880 |
|
Inventories |
|
|
2,672 |
|
|
|
7,873 |
|
Prepaid and other current assets |
|
|
9,713 |
|
|
|
11,699 |
|
Total current assets |
|
|
354,858 |
|
|
|
353,327 |
|
Property and equipment, net |
|
|
5,032 |
|
|
|
5,236 |
|
Intangible assets |
|
|
7,137 |
|
|
|
7,279 |
|
Prepaid and other long-term assets |
|
|
33,355 |
|
|
|
20,577 |
|
Total assets |
|
$ |
400,382 |
|
|
$ |
386,419 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
9,748 |
|
|
$ |
13,215 |
|
Accrued research and development |
|
|
18,376 |
|
|
|
19,831 |
|
Accrued and other liabilities |
|
|
28,413 |
|
|
|
22,310 |
|
Deferred revenue, current portion |
|
|
2,212 |
|
|
|
1,847 |
|
Current portion of notes payable and long term royalty-based debt |
|
|
15,079 |
|
|
|
11,802 |
|
Total current liabilities |
|
|
73,828 |
|
|
|
69,005 |
|
Notes payable, less current portion |
|
|
46,860 |
|
|
|
48,298 |
|
Long term royalty-based debt, less current portion |
|
|
156,926 |
|
|
|
155,256 |
|
Long term debt |
|
|
56,839 |
|
|
|
— |
|
Long term obligation to collaborator, less current portion |
|
|
6,438 |
|
|
|
6,881 |
|
Deferred revenue, long-term less current portion |
|
|
4,426 |
|
|
|
4,488 |
|
Other long-term liabilities |
|
|
4,415 |
|
|
|
11,924 |
|
Total liabilities |
|
|
349,732 |
|
|
|
295,852 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued and outstanding |
|
— |
|
|
— |
|
||
Common stock, $0.001 par value, 150,000 shares authorized at March 31, 2019 and December 31, 2018; 67,977 shares and 66,618 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively |
|
|
70 |
|
|
|
68 |
|
Additional paid-in capital |
|
|
1,652,292 |
|
|
|
1,614,320 |
|
Accumulated deficit |
|
|
(1,603,860 |
) |
|
|
(1,525,704 |
) |
Accumulated other comprehensive loss |
|
|
(80 |
) |
|
|
(283 |
) |
Total Portola stockholders’ equity |
|
|
48,422 |
|
|
|
88,401 |
|
Noncontrolling interest |
|
|
2,228 |
|
|
|
2,166 |
|
Total stockholders’ equity |
|
|
50,650 |
|
|
|
90,567 |
|
Total liabilities and stockholders’ equity |
|
$ |
400,382 |
|
|
$ |
386,419 |
|
Amounts include the assets and liabilities of SRX Cardio, LLC (“SRX Cardio”), a consolidated variable interest entity (“VIE”). Portola’s interests and obligations with respect to the VIE’s assets and liabilities are limited to those accorded to Portola in its agreement with the VIE. See Note 7, “Asset Acquisition and License Agreements”, to these condensed consolidated financial statements. See accompanying notes to the unaudited condensed consolidated financial statements .
F-1
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Revenues: |
|
|
|
|
|
|
|
|
Product revenue, net |
|
$ |
20,362 |
|
|
$ |
606 |
|
Collaboration and license revenue |
|
|
1,807 |
|
|
|
6,038 |
|
Total revenues |
|
|
22,169 |
|
|
|
6,644 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
7,150 |
|
|
|
336 |
|
Research and development |
|
|
35,584 |
|
|
|
60,067 |
|
Selling, general and administrative |
|
|
53,034 |
|
|
|
31,541 |
|
Total operating expenses |
|
|
95,768 |
|
|
|
91,944 |
|
Loss from operations |
|
|
(73,599 |
) |
|
|
(85,300 |
) |
Interest and other income, net |
|
|
1,984 |
|
|
|
3,371 |
|
Interest expense |
|
|
(6,481 |
) |
|
|
(2,581 |
) |
Net loss |
|
|
(78,096 |
) |
|
|
(84,510 |
) |
Net (income) loss attributable to noncontrolling interest |
|
|
(60 |
) |
|
|
332 |
|
Net loss attributable to Portola |
|
$ |
(78,156 |
) |
|
$ |
(84,178 |
) |
Net loss per share attributable to Portola common stockholders: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(1.17 |
) |
|
$ |
(1.28 |
) |
Shares used to compute net loss per share attributable to Portola common stockholders: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
67,070,168 |
|
|
|
65,509,945 |
|
See accompanying notes to the unaudited condensed consolidated financial statements .
F-2
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Net loss |
|
$ |
(78,096 |
) |
|
$ |
(84,510 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities, net of tax |
|
|
203 |
|
|
|
(392 |
) |
Comprehensive loss |
|
|
(77,893 |
) |
|
|
(84,902 |
) |
Comprehensive (income) loss attributable to noncontrolling interest |
|
|
(60 |
) |
|
|
332 |
|
Total comprehensive loss attributable to Portola |
|
$ |
(77,953 |
) |
|
$ |
(84,570 |
) |
See accompanying notes to the unaudited condensed consolidated financial statements .
F-3
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total |
|
|||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
Stockholders’ |
|
||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Interest |
|
|
Equity |
|
|||||||
Balance at December 31, 2018 |
|
|
66,618 |
|
|
$ |
68 |
|
|
$ |
1,614,320 |
|
|
$ |
(1,525,704 |
) |
|
$ |
(283 |
) |
|
$ |
2,166 |
|
|
$ |
90,567 |
|
Issuance of common stock pursuant to equity award plans |
|
|
1,359 |
|
|
|
2 |
|
|
|
25,660 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
25,662 |
|
Stock-based compensation expense |
|
|
– |
|
|
|
– |
|
|
|
12,312 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
12,312 |
|
Other comprehensive income |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
203 |
|
|
|
– |
|
|
|
203 |
|
Net income (loss) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(78,156 |
) |
|
|
– |
|
|
|
60 |
|
|
|
(78,096 |
) |
Change in noncontrolling interest |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2 |
|
|
|
2 |
|
Balance at March 31, 2019 |
|
|
67,977 |
|
|
$ |
70 |
|
|
$ |
1,652,292 |
|
|
$ |
(1,603,860 |
) |
|
$ |
(80 |
) |
|
$ |
2,228 |
|
|
$ |
50,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total |
|
|||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
Stockholders’ |
|
||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Interest |
|
|
Equity |
|
|||||||
Balance at December 31, 2017 |
|
|
65,297 |
|
|
$ |
66 |
|
|
$ |
1,551,728 |
|
|
$ |
(1,204,519 |
) |
|
$ |
(409 |
) |
|
$ |
2,627 |
|
|
$ |
349,493 |
|
Adjustment to accumulated deficit due to adoption of ASC 606 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
29,037 |
|
|
|
– |
|
|
|
– |
|
|
|
29,037 |
|
Issuance of common stock pursuant to equity award plans |
|
|
514 |
|
|
|
1 |
|
|
|
5,678 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
5,679 |
|
Stock-based compensation expense |
|
|
– |
|
|
|
– |
|
|
|
10,980 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
10,980 |
|
Other comprehensive loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(392 |
) |
|
|
– |
|
|
|
(392 |
) |
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(84,178 |
) |
|
|
– |
|
|
|
(332 |
) |
|
|
(84,510 |
) |
Change in noncontrolling interest |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(119 |
) |
|
|
(119 |
) |
Balance at March 31, 2018 |
|
|
65,811 |
|
|
$ |
67 |
|
|
$ |
1,568,386 |
|
|
$ |
(1,259,660 |
) |
|
$ |
(801 |
) |
|
$ |
2,176 |
|
|
$ |
310,168 |
|
See accompanying notes to the unaudited condensed consolidated financial statements .
F-4
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(78,096 |
) |
|
$ |
(84,510 |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
792 |
|
|
|
756 |
|
Amortization of right-of-use asset |
|
|
459 |
|
|
|
— |
|
Accretion of discount on investment securities |
|
|
(262 |
) |
|
|
(491 |
) |
Non-cash interest expense |
|
|
6,481 |
|
|
|
2,581 |
|
Stock-based compensation expense, net of capitalized labor |
|
|
17,894 |
|
|
|
10,980 |
|
Remeasurement gain on embedded derivatives liabilities |
|
|
(472 |
) |
|
|
(1,634 |
) |
Provision for excess and obsolete inventories |
|
|
3,945 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Inventories |
|
|
1,498 |
|
|
|
(2,149 |
) |
Trade and other receivables, net |
|
|
(5,938 |
) |
|
|
4,763 |
|
Unbilled - collaboration and license revenue |
|
|
3,563 |
|
|
|
2,034 |
|
Prepaid expenses and other current assets |
|
|
1,986 |
|
|
|
(11,244 |
) |
Prepaid and other long-term assets |
|
|
(11,042 |
) |
|
|
4,797 |
|
Accounts payable |
|
|
(4,489 |
) |
|
|
11,469 |
|
Accrued research and development |
|
|
(1,455 |
) |
|
|
(22,868 |
) |
Accrued and other liabilities |
|
|
3,225 |
|
|
|
(4,324 |
) |
Deferred revenue |
|
|
303 |
|
|
|
1,650 |
|
Notes payable, long term royalty-based debt and long term obligation to collaborator |
|
|
(2,027 |
) |
|
|
— |
|
Other long-term liabilities |
|
|
— |
|
|
|
(230 |
) |
Net cash used in operating activities |
|
|
(63,635 |
) |
|
|
(88,420 |
) |
Investing activities |
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
(327 |
) |
|
|
(512 |
) |
Purchases of investments |
|
|
(41,708 |
) |
|
|
(78,048 |
) |
Proceeds from maturities of investments |
|
|
124,138 |
|
|
|
148,141 |
|
Net cash provided by investing activities |
|
|
82,103 |
|
|
|
69,581 |
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from debt issuance, net |
|
|
59,203 |
|
|
|
— |
|
Proceeds from issuance of common stock pursuant to equity award plans, net |
|
|
10,637 |
|
|
|
5,678 |
|
Other |
|
|
— |
|
|
|
(119 |
) |
Net cash provided by financing activities |
|
|
69,840 |
|
|
|
5,559 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
88,308 |
|
|
|
(13,280 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
140,013 |
|
|
|
181,741 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
228,321 |
|
|
$ |
168,461 |
|
See accompanying notes to the unaudited condensed consolidated financial statements .
F-5
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Portola Pharmaceuticals, Inc. ® (the “Company” or “we” or “our” or “us”) is a biopharmaceutical company focused on the development and commercialization of novel therapeutics in the areas of thrombosis, other hematologic diseases and inflammation for patients who currently have limited or no approved treatment options. We were incorporated in September 2003 in Delaware. Our headquarters and operations are located in South San Francisco, California and we operate in one segment.
We refer to our two approved drugs in this report as Andexxa and Bevyxxa. If approved outside of the United States, each drug may be marketed under different brand names. For example, Andexanet alfa received conditional approval under the brand name Ondexxya by the European Commission (“EC”) on April 26, 2019. In addition, an international nonproprietary name (“INN”) has been designated for each drug. Our previous INN for Andexxa was andexanet alfa; however, in the United States this INN has been replaced with “coagulation factor Xa (recombinant), inactivated-zhzo.” For the European Union (“EU”) and other parts of the world, andexanet alfa could remain the INN for Andexxa. Our use of Andexxa or Bevyxxa in this document in the context of continued development activities for which we have not yet received regulatory approval should not be read to imply that we have received regulatory approval for any indication or in any jurisdiction not reflected in our product labels.
2. Summary of Significant Accounting Policies
Consolidation and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the amounts of Portola, its wholly-owned subsidiaries and a development partner that is a variable interest entity (a “VIE”) for which Portola is deemed, under applicable accounting guidance, to be the primary beneficiary as of March 31, 2019. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP has been condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of our financial information. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2018 included in our Annual Report on Form 10-K filed on March 1, 2019 with the SEC.
The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other interim period or for any other future year. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our significant accounting policies and estimates. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
F-6
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Cash as Reported in Condensed Consolidated Statements of Cash Flows
Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and restricted cash. Restricted cash consists of cash restricted for royalty payments to HealthCare Royalty Partners and its Affiliates (“HCR”) and cash held by SRX Cardio, LLC (“SRX Cardio”). Cash as reported in the condensed consolidated statements of cash flows consists of the following (in thousands):
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Cash and cash equivalents |
$ |
226,793 |
|
|
$ |
138,951 |
|
Restricted cash (SRX Cardio) |
|
29 |
|
|
|
30 |
|
Restricted cash for royalty payments to HealthCare Royalty Partners and its affiliates ("HCR") |
|
1,499 |
|
|
|
1,032 |
|
Total cash balance in condensed consolidated statements of cash flows |
$ |
228,321 |
|
|
$ |
140,013 |
|
Customer Concentration
We have four Andexxa specialty distributor customers who each accounted for 10% or more of total net revenues during the three months ended March 31, 2019. We have three collaboration revenue customers who each accounted for less than 10% of total net revenues during the three months ended March 31, 2019. Each of these collaboration revenue customers accounted for more than 10% of total net revenues during the three months ended March 31, 2018.
Recent Accounting Pronouncements Adopted
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use (“ROU”) asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods, with early adoption permitted. We adopted this new standard effective January 1, 2019 using the optional transition method, which allows us to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit at the date of adoption and apply the new disclosure requirements beginning in the period of adoption. Our adoption of the standard added approximately $2.1 million in ROU assets and $3.3 million in lease liabilities to our condensed consolidated balance sheet upon adoption and did not significantly impact financial results.
The new standard provides a number of optional practical expedients and we elected the following:
|
• |
Transition Elections. We elected the package of practical expedients that permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. We also elected the practical expedient to not separate lease and non-lease components for facility lease classes of underlying assets to new or modified leases beginning on or after the adoption date. That is, we will account for each separate lease component of a contract and its associated non-lease components as a single lease component. |
|
• |
Ongoing Accounting Policy Elections. We elected the short-term lease recognition exemption whereby ROU assets and lease liabilities will not be recognized for leasing arrangements with terms less than one year. |
F-7
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
I n June 2018, the FASB issued ASU No. 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting , which amends the existing accounting standards for share-based payments to nonemployees. This ASU aligns much of the guidanc e on measuring and classifying nonemployee awards with that of awards to employees. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date. This ASU becomes effective in the first quarter of fiscal year 2019 and ear ly adoption is permitted but no earlier than an entity’s adoption date of Topic 606. Entities will apply this ASU by recognizing a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. We adopted this new s tandard effective January 1, 2019. Adoption of this standard did not result in an adjustment to our beginning accumulated deficit upon the adoption, and did not significantly impact our financial results .
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) . This ASU implements an impairment model, known as the current expected credit loss model that is based on expected losses rather than incurred losses. For trade receivables, entities will be required to estimate lifetime expected credit losses. This could result in the earlier recognition of credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than an other-than-temporary impairment that reduces the cost basis of the investment. Further, an entity will recognize any improvements in estimated credit losses immediately in earnings. Under the current guidance, a recovery of an impairment loss on an available-for-sale debt security is recognized prospectively as interest income. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. We are in the process of assessing the impact of ASU 2016-13 on our condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, this ASU requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. This ASU is effective for us for all interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. We are in the process of assessing the impact of ASU 2018-15 on our condensed consolidated financial statements.
3. Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The following table presents our revenues, disaggregated by timing of transfer of goods or services (in thousands):
|
|
Three Months Ended March 31, 2019 |
|
|||||||||
|
|
Product Revenue, net |
|
|
Collaboration and License Revenue |
|
|
Total |
|
|||
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
Transferred at a point in time |
|
$ |
20,362 |
|
|
$ |
— |
|
|
$ |
20,362 |
|
Transferred over time |
|
|
— |
|
|
|
1,807 |
|
|
|
1,807 |
|
Total |
|
$ |
20,362 |
|
|
$ |
1,807 |
|
|
$ |
22,169 |
|
F-8
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents changes in our contract assets and liabilities for the three months ended March 31, 2019 (in thousands):
|
|
Balance at Beginning of Period |
|
|
Addition |
|
|
Deduction |
|
|
Balance at End of Period |
|
||||
Contract assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled - collaboration and license revenue |
|
$ |
9,880 |
|
|
$ |
1,634 |
|
|
$ |
(5,197 |
) |
|
$ |
6,317 |
|
Total contract assets |
|
$ |
9,880 |
|
|
$ |
1,634 |
|
|
$ |
(5,197 |
) |
|
$ |
6,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
6,335 |
|
|
$ |
1,112 |
|
|
$ |
(809 |
) |
|
$ |
6,638 |
|
Total contract liabilities |
|
$ |
6,335 |
|
|
$ |
1,112 |
|
|
$ |
(809 |
) |
|
$ |
6,638 |
|
Significant changes in the contract liabilities balances during the period are as follows (in thousands):
|
|
|
|
|
|
Three Months Ended as of March 31, 2019 |
|
|
Revenue recognized according to the current period performance that was included in the contract liability at the beginning of the period |
|
|
173 |
|
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2019 (in thousands):
Collaborator |
|
Transaction Price Allocated to the Remaining Performance Obligation as of March 31, 2019 |
|
|
Expected Year By Which Revenue Recognition Will Be Completed |
|
|
Percentage of Revenue Recognized |
|
|||
BMS and Pfizer - 2016 agreement |
|
$ |
1,525 |
|
|
|
2021 |
|
|
|
88 |
% |
Daiichi Sankyo - 2014 agreement |
|
|
1,112 |
|
|
|
2020 |
|
|
|
97 |
% |
Daiichi Sankyo - 2016 agreement |
|
|
3,257 |
|
|
|
2023 |
|
|
|
79 |
% |
Bayer - 2016 agreement |
|
|
2,911 |
|
|
|
2023 |
|
|
|
81 |
% |
Total |
|
$ |
8,805 |
|
|
|
|
|
|
|
|
|
F-9
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Milestone payments or refundable advance payments that are not considered probable of being achieved are excluded from the transaction price until they are probable.
Sales-based royalties, including milestone payments based on the level of sales, related to license arrangements are excluded from variable consideration and will be recognized at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.
Product Revenue, Net
To date, our source of product revenue has been from the U.S. sales of Andexxa and Bevyxxa, which we began shipping to customers in May 2018 and January 2018, respectively. No costs to obtain or fulfill the contracts have been capitalized. For the three month periods ended March 31, 2019, we recorded a total of $2.4 million as a reduction to revenue consisting primarily of distribution fees and reserves for chargebacks and returns.
Collaboration and License Revenue
BMS and Pfizer
Agreement Terms
In January 2014, we entered into an agreement with BMS and Pfizer to further study Andexxa as a reversal agent for their jointly-owned, U.S. Food and Drug Administration (“FDA”)-approved oral Factor Xa inhibitor, apixaban, through Phase 3 studies (the “2014 BMS and Pfizer Agreement”). We are responsible for the cost of conducting this clinical study.
In February 2016, we entered into a collaboration and license agreement with BMS and Pfizer whereby BMS and Pfizer obtained exclusive rights to develop and commercialize Andexxa in Japan (the “2016 BMS and Pfizer Agreement”). BMS and Pfizer are responsible for all development, regulatory and commercial activities in Japan and we will reimburse BMS and Pfizer for expenses they incur for research and development activities specific to Factor Xa inhibitors other than apixaban. Pursuant to this agreement, we are obligated to provide certain research and development activities outside of Japan, provide clinical drug supply and related manufacturing services and to participate on various committees in exchange for a non-refundable upfront fee of $15.0 million. We are also eligible to receive, contingent payments totaling up to $20.0 million which may be earned upon achievement of certain regulatory events and up to $70.0 million which may be earned upon achievement of specified annual net sales volumes in Japan. We are also entitled to receive royalties ranging from 5% to 15% on net sales of Andexxa in Japan.
Revenue Recognition
We assessed the 2014 BMS and Pfizer Agreement and the 2016 BMS and Pfizer Agreement in accordance with ASC 606 and concluded that BMS and Pfizer are customers.
For the 2014 BMS and Pfizer Agreement, we determined that the duration of the contract began on the effective date in January 2014 and ends upon Andexxa approval in United States and Europe, which we expected to be achieved in 2019. All the performance obligations under this agreement were delivered and we recognized all related revenues by the first quarter of 2019. For the three months ended March 31, 2019, we recognized less than $0.1 million as license and collaboration revenue under the 2014 BMS and Pfizer Agreement.
For the 2016 BMS and Pfizer Agreement, we determined that the duration of the contract begins on the effective date in February 2016 and ends upon estimated completion of the Andexxa Phase 4 expansion clinical trial in Japan.
We determined that the transaction price of the 2016 BMS and Pfizer Agreement was $12.9 million as of March 31, 2019 which includes routine updates for estimated costs that BMS and Pfizer will incur in developing Andexxa in Japan. In determining the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2019, the transaction price included $15.0 million of upfront payment, $5.0 million for acceptance of the Japan New Drug Application (“JNDA”) in Japan, as management expects it to be probable of achievement, $4.4 million of estimated variable consideration for cost-sharing payments from BMS and Pfizer for agreed upon research and development services for clinical trials outside of Japan, and $0.6
F-10
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
million for the estimated costs of Andexxa clinical supplies to BMS and Pfizer for Andexxa P hase 4 expansion clinical trial in Japan . Our transaction price is reduced by $ 1 2 . 1 million for estimated payments to be made to BMS and Pfizer for costs they will incur in developing Andexxa in Japan. Regulatory approval milestones were fully constrained and therefore are not included in the transaction price, as the receipts of such milestones are outside of our control. In determining whether to constrain other milestones , we considered numerous factors, including whether receipt of the milestones is within our control , contingent upon success in future clinical trial s and /or the licensee’s effort s. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to BMS and Pfizer and therefore have also been excluded from the transaction price. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
For the three months ended March 31, 2019, we recognized $0.2 million as license and collaboration revenue under the 2016 BMS and Pfizer Agreement and recorded $5.5 million as deferred revenue under contract liabilities as of March 31, 2019 on the condensed consolidated balance sheets.
Daiichi Sankyo, Inc. (“Daiichi Sankyo”)
Agreement Terms
In July 2014, we entered into an agreement with Daiichi Sankyo to study the safety and efficacy of Andexxa as a reversal agent to edoxaban, in our Phase 3 and Phase 4 studies (the “2014 Daiichi Sankyo Agreement”). We are responsible for the cost of conducting these clinical studies. Pursuant to our agreement with Daiichi Sankyo we are obligated to provide research, development and regulatory services and to manufacture and supply Andexxa in exchange for an upfront nonrefundable fee of $15.0 million, up to two contingent payments totaling $5.0 million which are payable upon the initiation of our Phase 3 study and achievement of certain events associated with scaling up our manufacturing process to support a commercial launch, and up to four payments totaling $20.0 million which are payable upon acceptance of filing and regulatory approval of Andexxa as a reversal agent to edoxaban by the FDA and the European Medicines Agency (“EMA”).
In October 2016, we amended this agreement to expedite the expansion of our Phase 4 trial in exchange for an upfront fee of $15.0 million, $8.0 million of which is payable back to Daiichi Sanko based solely on quarterly royalty payments of 1% of world-wide net sales of Andexxa. We are also eligible to receive up to three contingent payments totaling $10.0 million payable upon achieving specified clinical site activation and patient enrollment targets. Additionally, the $2.5 million contingent payment associated with scaling up our manufacturing process from the original agreement has been removed by this amendment.
In March 2016, we entered into an agreement with Daiichi Sankyo to perform an ESS-Study of Japanese ethnicity, perform any further studies requested by the Japanese regulatory authorities and to deliver services in connection with our collaboration agreement to commercialize Andexxa in Japan with BMS and Pfizer (the “2016 Daiichi Sankyo Agreement”). Daiichi Sankyo will reimburse us for 33% of our costs and expenses incurred to conduct the ESS-Study and between 33% and 100% of costs and expenses we incur for other studies that involve edoxaban under the terms of the arrangement.
Revenue Recognition
We assessed the 2014 Daiichi Sankyo Agreement as amended in October 2016 and the 2016 Daiichi Sankyo Agreement in accordance with ASC 606 and concluded that Daiichi Sankyo is a customer.
For the 2014 Daiichi Sankyo Agreement, we determined that the duration of the contract begins on the effective date in July 2014 and ends upon Andexxa approval as a reversal agent to edoxaban in the United States and Europe, which we expect to be achieved in 2020. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. We analyzed the impact of Daiichi Sankyo’s terminating the agreement prior to Andexxa approval and determined that there were substantive non-monetary penalties to Daiichi Sankyo for doing so. We considered quantitative and qualitative factors to reach this conclusion.
F-11
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We determined that the transaction price of the 2014 Daiichi Sankyo Agreement and October 2016 amendment of this agreement was $34.0 million as of March 31, 2019 . In order to determine the transaction price, we evaluated all the payments to be received d uring the duration of the contract. As of March 31, 2019 , the transaction price include d $22 .0 million of upfront payments and $ 12 . 0 million in milestones already received up on achiev ement of specified events. As of March 31, 2019 , we ha d $ 5 .5 million of further milestone payments eligible to be included in the transaction price but have determined they are not probable of achievement and therefore constrained. As part of our evaluation of the constraint, we considered numerous factors, including wheth er receipt of the milestones is outside of our control and /or contingent upon success in a future clinical trial. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occu r.
For the three months ended March 31, 2019, we recognized $0.5 million as license and collaboration revenue under the combined 2014 Daiichi Sankyo Agreement and October 2016 amendment and recorded $1.1 million as deferred revenue under contract liabilities as of March 31, 2019 on the condensed consolidated balance sheets. There were no costs incurred to obtain or fulfill the contract.
For the 2016 Daiichi Sankyo Agreement, we determined that the transaction price of the 2016 Daiichi Sankyo Agreement was $15.5 million as of March 31, 2019 which includes routine updates for estimated reimbursable costs to be incurred in future periods. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2019, the transaction price included $5.0 million of upfront payment and $4.3 million of estimated variable consideration for cost-sharing payments from Daiichi Sankyo for agreed upon research and development services incurred and to be incurred outside of Japan including the ESS-study, and $6.2 million of estimated variable consideration for cost-sharing payments from Daiichi Sankyo associated with the development of Andexxa in Japan. As of March 31, 2019, we had $10.0 million of further regulatory milestone payments eligible for achievement, however, regulatory milestones have been fully constrained and thus are not included in the transaction price. In determining whether to constrain these milestones, we considered numerous factors, including whether receipt of the milestones is within our control and/or contingent upon success in future clinical trials. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
For the three months ended March 31, 2019, we recognized $0.6 million as license and collaboration revenue under the 2016 Daiichi Sankyo Agreement and recorded $3.0 million as Unbilled - collaboration and license revenue as of March 31, 2019 on the condensed consolidated balance sheets. None of the costs to obtain or fulfill the contract were capitalized.
Bayer Pharma, AG (“Bayer”) and Janssen Pharmaceuticals, Inc. (“Janssen”)
Agreement Terms
In January 2014, we entered into an agreement with Bayer and Janssen to study Andexxa as a reversal agent to rivaroxaban in our Phase 3 studies and to seek regulatory approval in the United States and Europe (the “2014 Bayer and Janssen Agreement”). We are responsible for the costs associated with this agreement.
Revenue Recognition
We assessed the 2014 Bayer and Janssen Agreement in accordance with ASC 606 and concluded that Bayer and Janssen are customers.
F-12
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the 2014 Bayer and Janssen Agreement, we determined that the duration of the contract begins on the effective date of the 2014 Bayer and Janssen Agreement and ends upon Andexxa approval in the United States and Europe for rivaroxaban, which was expected to be achieved in 2019. All the performance obligations under this agreement were delivered and we recognized all related revenues by the first quarter of 2019 . For the three months ended March 31, 2019, we recognized less than $0.1 million as license and collaboration revenue under the 2014 Bayer and Janssen Agreement . None of the costs to obtain or fulfill the contract were capitalized.
Bayer Pharma, AG (“Bayer”)
Agreement Terms
In February 2016, we entered into an agreement with Bayer to perform an ESS-Study of Japanese ethnicity, perform any further studies requested by the Japanese regulatory authorities and to deliver services, in connection with our collaboration agreement to commercialize Andexxa in Japan with BMS and Pfizer (the “2016 Bayer Agreement”). Bayer will reimburse us 33% of our costs and expenses incurred to conduct the ESS-Study and between 33% and 100% of costs and expenses we incur for other studies that involve rivaroxaban under the terms of the arrangement.
We are obligated to provide research and development services, to provide clinical drug supply and related manufacturing services and to provide regulatory approval services in exchange for an upfront nonrefundable fee of $5.0 million. We are also eligible to receive, one payment of $10.0 million which is payable upon the initial regulatory approval for Andexxa for rivaroxaban in Japan. The $10.0 million payment will be reduced to $7.0 million if Japanese regulatory approval is attained based only upon the ESS Study results.
Revenue Recognition
We assessed the 2016 Bayer Agreement in accordance with ASC 606 and concluded that Bayer is a customer.
We determined that the transaction price of the 2016 Bayer Agreement was $15.5 million as of March 31, 2019 which includes routine updates for estimated reimbursable costs to be incurred in future periods. In order to determine the transaction price, we evaluated all the payments to be received during the duration of the contract. As of March 31, 2019, the transaction price included a $5.0 million upfront payment, $4.3 million of estimated variable consideration for cost-sharing payments from Bayer for agreed upon research and development services incurred and to be incurred outside of Japan including the ESS-study and $6.2 million of estimated variable consideration for cost-sharing payments from Bayer associated with the development of Andexxa in Japan. As of March 31, 2019, we had $10.0 million of further regulatory milestone payments eligible for achievement, however, regulatory milestones have been fully constrained and thus are not included in the transaction price. In determining whether to constrain these milestones, we considered numerous factors, including whether receipt of the milestones is within our control and/or contingent upon success in future clinical trials. We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
For the three months ended March 31, 2019, we recognized $0.5 million as license and collaboration revenue under the 2016 Bayer Agreement and recorded $3.3 million as Unbilled - collaboration and license revenue as of March 31, 2019 on the condensed consolidated balance sheets. There were no costs incurred to obtain or fulfill the contract.
4. Fair Value Measurements
Financial assets and liabilities are recorded at fair value. The carrying amounts of certain of our financial instruments, including cash and cash equivalents, restricted cash, short-term investments, receivables from collaborations, prepaid and other current assets, accounts payable, accrued research and development, accrued and other liabilities and deferred revenue and approximate their fair value due to their short maturities. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
F-13
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Level 2 – Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of th e instrument’s anticipated life.
Level 3 – Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. Our embedded derivative liabilities are measured at fair value using a Monte Carlo simulation model or a discounted cash flow model and are included as a component of other long-term liabilities on the condensed consolidated balance sheets. The embedded derivative liabilities are subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of interest and other income, net, in our condensed consolidated statements of operations. The assumptions used in the Monte Carlo simulation model or the discounted cash flow model include: (1) our estimates of both the probability and timing of manufacturing regulatory approval of Andexxa and other related events; (2) the probability-weighted net sales of Andexxa; (3) our risk-adjusted discount rate that includes a company specific risk premium; (4) our cost of debt; (5) volatility; and (6) the probability of a change in control occurring during the term of the note. Our noncontrolling interest in SRX Cardio includes the fair value of the contingent milestone and royalty payments, which is valued based on Level 3 inputs. See Note 7, "Asset Acquisition and License Agreements", to these condensed consolidated financial statements for further information.
Our liability-classified Lonza AG (“Lonza”) award was measured at fair value using a Black-Scholes model until the settlement date during the first quarter of 2019. Change in the fair value of the liability-classified Lonza award was recognized as research and development expense in our condensed consolidated statements of operations. The assumptions used in the Black-Scholes model include: (1) expected risk free rate; (2) expected volatility; and (3) expected dividend yield rate. See Note 6, "Contract Manufacturing Agreements", to these condensed consolidated financial statements for further information.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Our noncontrolling interest in SRX Cardio includes the fair value of the contingent milestone and royalty payments, which is valued based on Level 3 inputs. See Note 7, “Asset Acquisition and License Agreements”, to these condensed consolidated financial statements for further information.
F-14
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table sets forth the fair value of our financial assets and liabilities (excluding restricted cash) allocated into Level 1 and Level 2 that were measured on a recurring basis (in thousands):
|
|
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
||
|
|
Fair Value |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||||||
|
|
Hierarchy |
|
Cost |
|
|
Gain |
|
|
(Loss) |
|
|
Value |
|
|
Cost |
|
|
Gain |
|
|
(Loss) |
|
|
Value |
|
||||||||
Money market funds |
|
Level 1 |
|
$ |
34,054 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
34,054 |
|
|
$ |
19,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,500 |
|
Corporate notes and commercial paper |
|
Level 2 |
|
|
168,707 |
|
|
|
2 |
|
|
|
(77 |
) |
|
|
168,632 |
|
|
|
166,363 |
|
|
|
1 |
|
|
|
(205 |
) |
|
|
166,159 |
|
U.S. Treasury bills and government agency securities |
|
Level 2 |
|
|
84,919 |
|
|
|
3 |
|
|
|
(9 |
) |
|
|
84,913 |
|
|
|
110,270 |
|
|
|
1 |
|
|
|
(81 |
) |
|
|
110,190 |
|
|
|
|
|
$ |
287,680 |
|
|
$ |
5 |
|
|
$ |
(86 |
) |
|
$ |
287,599 |
|
|
$ |
296,133 |
|
|
$ |
2 |
|
|
$ |
(286 |
) |
|
$ |
295,849 |
|
Classified as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
191,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
117,836 |
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,013 |
|
Total cash equivalents and investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
287,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
295,849 |
|
At March 31, 2019, the remaining contractual maturities of available-for-sale securities were less than one year. There have been no significant realized losses on available-for-sale securities for the periods presented. We do not intend to sell the investments with unrealized losses at March 31, 2019, and it is not more likely than not that we will be required to sell those investments with unrealized losses before recovery of their amortized cost bases, which may be maturity. Available-for-sale debt securities that were in a continuous loss position but were not deemed to be other than temporarily impaired were immaterial at both March 31, 2019 and December 31, 2018.
Level 3 liabilities are comprised of embedded derivative liabilities as described in Note 8, “Long Term Obligations”, to these condensed consolidated financial statements and includes liability-classified Lonza award. The estimated fair value of the Notes, long term royalty-based debt and long term debt are discussed in Note 8. The following table sets forth a summary of the changes in the estimated fair value of our embedded derivative liabilities and Lonza award during the three-month period ended March 31, 2019 (in thousands):
|
Embedded derivative liabilities |
|
|
Lonza award |
|
|
Total |
|
|||
Balance as of December 31, 2018 |
$ |
2,497 |
|
|
$ |
9,201 |
|
|
$ |
11,698 |
|
Net change in the fair value |
|
(472 |
) |
|
|
5,824 |
|
|
|
5,352 |
|
Addition of derivative related to 2019 Secured Term Loan |
|
2,372 |
|
|
|
— |
|
|
|
2,372 |
|
Settlement of Lonza award |
|
— |
|
|
|
(15,025 |
) |
|
|
(15,025 |
) |
Balance as of March 31, 2019 |
$ |
4,397 |
|
|
$ |
— |
|
|
$ |
4,397 |
|
F-15
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Inventories
Inventories consisted of the following (in thousands):
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Raw materials |
|
$ |
5,534 |
|
|
$ |
279 |
|
Work in process |
|
|
18,349 |
|
|
|
14,395 |
|
Finished goods |
|
|
2,594 |
|
|
|
2,844 |
|
Total inventories |
|
$ |
26,477 |
|
|
$ |
17,518 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet Classification |
|
|
|
|
|
|
|
|
Inventories |
|
$ |
2,672 |
|
|
$ |
7,873 |
|
Prepaid and other long-term assets |
|
|
23,805 |
|
|
|
9,645 |
|
Total inventories |
|
$ |
26,477 |
|
|
$ |
17,518 |
|
As of March 31, 2019, and December 31, 2018, long-term inventories of $23.8 million and $9.6 million, respectively are classified as prepaid and other long-term assets as these inventories are not expected to be sold within the next twelve months, and the amount is deemed recoverable.
As of March 31, 2019, and December 31, 2018, we have made prepayments to manufacturers for the purchase of inventories. These are classified as short and long-term assets based on when the inventories are expected to be utilized in the manufacturing process and/or sold within the next twelve months.
As of March 31, 2019, we maintain a reserve of $6.6 million for excess and obsolescence inventories. We recorded a related charge to cost of sales of $3.9 million during the three months ended March 31, 2019. In developing the estimate for inventory reserve, we used estimates of demand. If it is determined that inventory utilization will further diminish based on estimates of demand, additional inventory write-downs may be required.
Prepaid and Other Long-Term Assets
Prepaid and other long-term assets consist of the following (in thousands):
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Long-term inventories |
|
$ |
23,805 |
|
|
$ |
9,645 |
|
Prepaid manufacturing and others |
|
|
9,550 |
|
|
|
10,932 |
|
Total prepaid and other long-term assets |
|
$ |
33,355 |
|
|
$ |
20,577 |
|
As of March 31, 2019 and December 31, 2018, long-term prepaid manufacturing of $7.8 million and $10.9 million, respectively, are classified as prepaid and other long-term assets as these inventories are not expected to be utilized in the manufacturing process and/or sold within the next twelve months.
Accrued and Other Liabilities
Accrued and other liabilities consist of the following (in thousands):
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Manufacturing related |
|
$ |
8,571 |
|
|
$ |
5,465 |
|
Compensation and employee benefits |
|
|
7,412 |
|
|
|
10,794 |
|
Current portion of lease liability |
|
|
2,683 |
|
|
|
— |
|
Others |
|
|
9,747 |
|
|
|
6,051 |
|
Total accrued and other liabilities |
|
$ |
28,413 |
|
|
$ |
22,310 |
|
F-16
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
6. Contract Manufacturing Agreements
Lonza Manufacturing Services Agreement
In August 2017, we executed a Manufacturing Services Agreement with Lonza to develop our Gen 2 manufacturing process for Andexxa bulk drug substance. The manufacturing commitments included therein were contingent upon marketing approval by either the FDA or the EMA of Andexxa manufactured under the Gen 2 process and will remain in effect for a period of ten years. Additionally, the agreement provides Lonza with two separate rights to purchase shares of our common stock at a purchase price of $1.00 per share, contingent upon certain events. The first purchase right was earned by Lonza in the first quarter of 2019 upon the approval of the Gen 2 process and the commencement of process transfer activities to an additional new facility. The second purchase right will be earned by Lonza upon the approval of the drug substance manufactured at the new facility and the number of shares will be determined based on the achievement of specified performance metrics at the new facility. The number of shares subject to each of the first and the second purchase right will be capped at the lesser of either: (1) the number of shares with an aggregate market value of $15.0 million based on a 20 day trailing market value average from the date such purchase right is earned by Lonza, or (2) 500,000 shares.
The first purchase right was earned by Lonza during the first quarter ended March 31, 2019. The FDA approved Andexxa Gen2 on December 31, 2018 and, in February 2019, Lonza commenced process transfer activities to an additional new facility. During the first quarter of 2019, Lonza exercised their right to purchase 500,000 shares of our common stock at $1.00 per share. We marked to market the liability-classified award up to the settlement date using the valuation assumptions described in Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements and recognized $5.8 million of non-employee stock based compensation expense classified as research and development expense during the three months ended March 31, 2019.
As of March 31, 2019, we have not recognized any expense for the second tranche award because the related performance conditions were not considered probable.
7. Asset Acquisition and License Agreements
SRX Cardio, LLC
In December 2015, we entered into an option agreement with SRX Cardio to explore a novel approach to develop a drug in the field of hypercholesterolemia. This agreement provided us an option to enter into an exclusive license agreement as well as responsibility to lead and fund the development effort during the option period. We made an upfront payment of $0.5 million.
In September 2016, we exercised our right to enter into an exclusive license agreement. We determined that SRX Cardio is and continues to be a variable interest entity and that we hold a variable interest in SRX Cardio’s intellectual property assets and the related potential future product candidates these assets may produce. Due to the absence of other significant development programs at SRX Cardio, we concluded that the variable interest was in the entity as a whole. Given the stage of development, we concluded that SRX Cardio is not considered a business as they lack the processes required to generate outputs. Further, because we control those activities most significant to SRX Cardio, we are considered to be the primary beneficiary of SRX Cardio. Accordingly, SRX Cardio is subject to consolidation and we have consolidated the financial statements of SRX Cardio.
As of March 31, 2019, we have not provided financial or other support to SRX Cardio that was not previously contracted or required. We recorded SRX Cardio’s $29,000 and $ 30,000 of cash as restricted cash as of March 31, 2019 and December 31, 2018, respectively, because (a) we do not have any interest in or control over SRX Cardio's cash and (b) the agreement does not provide for these assets to be used for the development of the intellectual property assets developed pursuant to this agreement. We recorded $60,000 as net income attributable to noncontrolling interest (SRX Cardio) for the three months ended March 31, 2019 on our condensed consolidated statements of operations, reflecting the change in fair value of our contingent future payments liability to SRX Cardio as of March 31, 2019.
F-17
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
BMS and Pfizer Promissory Notes
In December 2016, we entered into a supplemental funding support agreement with BMS and Pfizer whereby we received $50.0 million in exchange for two promissory notes totaling $65.0 million that become due in December 2024 (“Notes”). We may reduce the repayment amount to $62.5 million if such amount is paid by December 31, 2023. The use of funds is restricted to development activities needed for regulatory approval of Andexxa by the FDA and the EMA as provided in the agreement. Pursuant to the terms of the agreement, we are required to pay down the Notes each quarter in an amount equal to 5% of net sales of Andexxa in the United States and the EU.
The upfront cash receipt of $50.0 million is recorded as Notes payable at issuance. We are accruing for interest over the term of the Notes. The carrying values of the Notes payable includes accrued interest of $8.4 million and $ 7.6 million at March 31, 2019 and December 31, 2018, respectively.
Our payment obligations for BMS and Pfizer Promissory Notes are as follows (in thousands):
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Total repayment obligations |
|
$ |
62,500 |
|
|
$ |
62,500 |
|
Less: interests to be accreted in future periods |
|
|
(7,828 |
) |
|
|
(8,643 |
) |
Less: payments made |
|
|
(1,198 |
) |
|
|
(497 |
) |
Carrying value of notes payable |
|
|
53,474 |
|
|
|
53,360 |
|
Less: current portion of royalties |
|
|
(6,614 |
) |
|
|
(5,062 |
) |
Non-current portion of notes payable |
|
$ |
46,860 |
|
|
$ |
48,298 |
|
We evaluated the features of the Notes and determined that certain features require acceleration of payments such as pursuant to a change of control. We determined that these features (embedded derivatives) require bifurcation and fair value recognition. We determined the fair value of each derivative using a Monte Carlo simulation model taking into account the probability of these events occurring and potential repayment amounts and timing of such payments that would result under various scenarios (see Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements). We will remeasure the embedded derivatives to fair value each reporting period until the repayment, termination or maturity of the Notes. For the three months ended March 31, 2019 and 2018, we recognized a gain of $0.5 million and a loss of $0.6 million, respectively, upon remeasurement of the embedded derivatives.
The estimated fair value of the Notes at March 31, 2019 and December 31, 2018 was $53.2 million and $53.2 million, respectively, and the fair value was measured using Level 3 inputs. The estimated fair market value was calculated using a Monte Carlo simulation model with inputs consistent with those used in determining the embedded derivative values as described in Note 4, “ Fair Value Measurements ”, to these condensed consolidated financial statements.
Royalty-based Financing
In February 2017, we entered into a purchase and sale agreement (the “Royalty Sales Agreement”) with HealthCare Royalty Partners and its affiliates (“HCR”) whereby HCR acquired a term royalty interest in future worldwide net sales of Andexxa. We received $50.0 million upon closing and received an additional $100.0 million following the U.S. regulatory approval of Andexxa in May 2018. We are required to pay royalties to HCR based on tiered net worldwide sales of Andexxa in a range of 8.46% to 4.19%. The applicable rate decreases starting at worldwide net annual sales levels above $150.0 million. Total royalty payments are capped at 195% of the funding received less certain transaction expenses, or $290.6 million.
Upon the closing of Royalty Sales Agreement in February 2017, we incurred a fee to HCR of $2.0 million and paid additional debt issuance costs totaling $0.6 million, which includes expenses that we paid on behalf of HCR and expenses incurred directly by us. Upon the subsequent funding of $100.0 million in May 2018, we incurred fees to HCR of $5.0 million. Fees and debt issuance costs have been netted against the debt and are being amortized over the estimated term of the debt using the effective interest method.
F-18
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The effective interest rate as of March 31, 2019 was 14.2% . We are accruing for interest over the term of the royalty-based debt. The carrying value o f the royalty-based debt includes accrued interest of $28.3 million and $22.9 million, net of unamortized debt discount of $6.6 million and $6.8 million, at March 31, 2019 and December 31, 2018, respectively .
Our payment obligations for HCR royalty-based debt are as follows (in thousands):
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
Total repayment obligations |
|
$ |
290,550 |
|
|
$ |
290,550 |
|
Less: interests to be accreted in future periods |
|
|
(120,431 |
) |
|
|
(125,851 |
) |
Less: payments made |
|
|
(2,001 |
) |
|
|
(816 |
) |
Carrying value of long term royalty-based debt |
|
|
168,118 |
|
|
|
163,883 |
|
Less: current portion of royalties |
|
|
(11,192 |
) |
|
|
(8,627 |
) |
Non-current portion of long term royalty-based debt |
|
$ |
156,926 |
|
|
$ |
155,256 |
|
We determined that certain feature, such as the variability in the royalty payments based upon the timing of regulatory approval, is an embedded derivative that requires bifurcation from the royalty-based debt instrument. Upon the Andexxa Gen2 FDA approval on December 31, 2018, it was determined that there was no longer a derivative associated with the debt contract. For the three months ended March 31, 2018, we recognized a gain of $2.2 million upon remeasurement of the embedded derivative.
The estimated fair value of royalty-based debt at March 31, 2019 and December 31, 2018 was $150.5 million and $154.2 million, respectively, and the fair value was measured using Level 3 inputs. The estimated fair market value was calculated using a Monte Carlo simulation model with inputs as described in Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements.
Secured Term Loan
In February 2019, we entered into a credit agreement (the “Credit Agreement”) with HCR and Athyrium Opportunities III Acquisition LP (“Athyrium”) whereby we received the first tranche of $62.5 million (“Secured Term Loan”) in March 2019 and we have access to the second tranche of $62.5 million at our option if we receive regulatory approval from the EMA for Ondexxya, brand name of andexanet alfa in the EU, and achieve a U.S. Andexxa net product revenue of $50.0 million for the nine-months period ended September 30, 2019. If we satisfy both conditions, we have until November 15, 2019 to access the second tranche.
All obligations under the Credit Agreement are due on February 28, 2025 with certain scheduled payments of the principal starting from March 31, 2022. The outstanding principal balance of the loan bears interest at 9.75% per annum. The loan is secured by substantially all of our assets. The Credit Agreement contains certain covenants that, among others, require us to deliver financial reports at designated times of the year and limit or restrict our ability to incur additional indebtedness or liens, acquire, own or make any investments, pay cash dividends or enter into certain corporate transactions, including mergers and changes of control, and require us to maintain $31.3 million of cash, such amount to be increased if we draw on the second tranche of funding. Violating covenants would put us in default and that the lenders would then have the option to demand repayment plus certain penalties or allow us to continue to service the loan but at the default interest rate of 12.75%. As of March 31, 2019, we were not in violation of any covenants.
For the three months ended March 31, 2019, coupon interest of $0.2 million was accrued. Upon the closing of Credit Agreement, we incurred fees of $2.8 million to HCR and Athyrium and other debt issuance cost of $0.5 million. Loan origination fees and debt issuance costs are netted against the loan balance and are amortized over the contractual term of the loan using the effective interest method. The effective interest rate as of March 31, 2019 was 11.3%.
As of March 31, 2019, the future principal maturities of our Secured Term Loan for each of the next five years are as follows (in thousands):
F-19
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
We evaluated the terms of the loan and determined that one feature could require acceleration of payments and a prepayment penalty (make-whole provision) upon a change of control if it occurs prior to the 30-month anniversary period from the funding date in March 2019. We determined that this feature (embedded derivative) requires bifurcation from the debt instrument and fair value recognition. We determined the fair value of the derivative using a discounted cash flow model taking into account the probability of a change of control occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements. We will remeasure the embedded derivative to fair value each reporting period until the feature with make-whole provision lapses after 30 months from the funding date in March 2019.
The estimated fair value of long-term debt at March 31, 2019 was $67.0 million, and the fair value was measured using Level 3 inputs. The estimated fair market value was calculated using a discounted cash flow model with inputs consistent with those used in determining the embedded derivative values as described in Note 4, “Fair Value Measurements”, to these condensed consolidated financial statements.
9. Stock Based Compensation
Stock Options
The following table summarizes stock option activity under our 2013 Equity Incentive Plan (the “2013 Plan”) and an Inducement Plan, and related information during the three months ended March 31, 2019:
|
|
Shares |
|
|
|
|
|
|
|
|
Subject to |
|
|
Weighted- |
|
||
|
|
Outstanding |
|
|
Average Exercise |
|
||
|
|
Options |
|
|
Price Per Share |
|
||
Balance at December 31, 2018 |
|
|
7,507,690 |
|
|
$ |
33.25 |
|
Options granted |
|
|
1,557,406 |
|
|
|
27.53 |
|
Options exercised |
|
|
(424,589 |
) |
|
|
17.84 |
|
Options canceled |
|
|
(309,175 |
) |
|
|
38.31 |
|
Balance at March 31, 2019 |
|
|
8,331,332 |
|
|
$ |
32.78 |
|
Performance Stock Options (“PSOs”)
In March 2019, the Compensation Committee of our Board of Directors approved a program to award up to 490,986 PSOs to the management team based on the achievement of certain net revenue goals. The following table summarizes PSO activities under our 2013 Plan and related information during the three months ended March 31, 2019:
|
|
Shares |
|
|
|
|
|
|
|
|
Subject to |
|
|
Weighted- |
|
||
|
|
Outstanding |
|
|
Average Exercise |
|
||
|
|
PSOs |
|
|
Price Per Share |
|
||
Balance at December 31, 2018 |
|
|
143,335 |
|
|
$ |
23.76 |
|
Options granted |
|
|
490,986 |
|
|
|
33.29 |
|
Options exercised |
|
|
(10,000 |
) |
|
|
23.76 |
|
Options canceled |
|
|
— |
|
|
|
— |
|
Balance at March 31, 2019 |
|
|
624,321 |
|
|
$ |
31.25 |
|
F-20
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Restricted Stock Units (“RSUs”)
The following table summarizes RSU activity under our 2013 Plan and Inducement Plan, and related information during the three months ended March 31, 2019:
|
|
Shares |
|
|
|
|
|
|
|
|
Subject to |
|
|
Weighted- |
|
||
|
|
Outstanding |
|
|
Average Grant Date |
|
||
|
|
RSUs |
|
|
Fair Value Per Share |
|
||
Balance at December 31, 2018 |
|
|
979,278 |
|
|
$ |
34.00 |
|
RSUs granted |
|
|
559,287 |
|
|
|
27.64 |
|
RSUs released |
|
|
(314,311 |
) |
|
|
35.29 |
|
RSUs canceled |
|
|
(44,774 |
) |
|
|
36.51 |
|
Balance at March 31, 2019 |
|
|
1,179,480 |
|
|
$ |
30.55 |
|
Performance Stock Units (“PSUs”)
The following table summarizes PSU activity under our 2013 Plan and related information during the nine months ended March 31, 2019:
|
|
Shares |
|
|
|
|
|
|
|
|
Subject to |
|
|
Weighted- |
|
||
|
|
Outstanding |
|
|
Average Grant Date |
|
||
|
|
PSUs |
|
|
Fair Value Per Share |
|
||
Balance at December 31, 2018 |
|
|
153,503 |
|
|
$ |
29.85 |
|
PSUs granted |
|
|
— |
|
|
|
— |
|
PSUs released |
|
|
(18,575 |
) |
|
|
32.66 |
|
PSUs canceled |
|
|
(26,801 |
) |
|
|
28.67 |
|
Balance at March 31, 2019 |
|
|
108,127 |
|
|
$ |
29.66 |
|
The table below sets forth the functional classification of stock-based compensation expense for the periods presented (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Research and development |
|
$ |
10,137 |
|
|
$ |
4,452 |
|
Selling, general and administrative |
|
|
7,999 |
|
|
|
6,528 |
|
Subtotal |
|
$ |
18,136 |
|
|
$ |
10,980 |
|
Capitalized stock-based compensation costs |
|
|
(242 |
) |
|
|
— |
|
Stock-based compensation expense included in total expenses |
|
$ |
17,894 |
|
|
$ |
10,980 |
|
F-21
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1 0 . Net Loss per Share Attributable to Portola Common Stockholders
Basic net loss per share attributable to Portola Common Stockholders has been computed by dividing the net loss attributable to Portola Common Stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss per share attributable to Portola Common Stockholders is calculated by dividing net loss attributable to Portola Common Stockholders by the weighted average number of shares of Common Stock and potential dilutive securities outstanding during the period. Since we were in a loss position for all periods presented, basic net loss per share attributable to Portola Common Stockholders is the same as diluted net loss per share attributable to Portola Common Stockholders as the inclusion of all potentially dilutive common shares would have been anti-dilutive.
The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to Portola Common Stockholders for the periods presented because including them would have been antidilutive:
|
|
As of March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Stock options to purchase common stock |
|
|
8,331,332 |
|
|
|
7,293,733 |
|
Performance stock options |
|
|
624,321 |
|
|
|
163,481 |
|
Common stock warrants |
|
|
1,500 |
|
|
|
1,500 |
|
Restricted stock units |
|
|
1,179,480 |
|
|
|
646,125 |
|
Performance stock units |
|
|
108,127 |
|
|
|
393,225 |
|
Employee stock purchase plan |
|
|
14,619 |
|
|
|
12,391 |
|
Up to 500,000 shares of our common stock may be contingently issued, if certain regulatory and performance conditions are met under an agreement with a contract manufacturer, as described in Note 6, “Contract Manufacturing Agreements”, to these condensed consolidated financial statements .
11. Leases
We have operating leases for our office facilities. Our leases have remaining lease terms of 1 year or less as of March 31, 2019. Our operating lease provides an option to renew for up to 3 years. Upon adoption of ASC 842, we did not elect to apply the hindsight expedient in evaluating our renewal option, and as such, we did not include the renewal period in our lease term because at the inception we were not reasonably certain that we would exercise the renewal option. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Our operating lease right-of-use asset and liability were recognized at the adoption date of ASC 842 based on the present value of lease payments over the remaining lease term at the adoption date. In determining the net present value of lease payments, we used our incremental borrowing rate based on the information available, including remaining lease term, at the adoption date of ASC 842.
The components of lease expense are as follows (in thousands):
|
|
|
Three months ended March 31, 2019 |
|
|
Operating lease cost |
|
|
$ |
459 |
|
Short-term lease cost |
|
|
|
89 |
|
Supplemental cash flow information related to leases are as follows (in thousands):
|
|
|
Three months ended March 31, 2019 |
|
|
Cash paid for amounts included in the measurement of lease liability: |
|
|
|
|
|
Operating cash flows from operating lease |
|
$ |
676 |
|
Supplemental balance sheet information related to leases are as follows (in thousands):
F-22
PORTOLA PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Classification |
|
As of March 31, 2019 |
|
||
Operating lease |
|
|
|
|
|
Lease right-of-use asset |
|
|
|
|
|
Non-current |
Prepaid and other long-term assets |
|
$ |
1,734 |
|
Lease liability |
|
|
|
|
|
Current |
Accrued and other liabilities |
|
$ |
2,683 |
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term |
|
|
|
|
|
Operating lease |
|
|
1 year |
|
|
|
|
|
|
|
|
Weighted Average Discount Rate |
|
|
|
|
|
Operating lease |
|
|
7.06% |
|
Maturity of a lease liability is as follows (in thousands):
|
|
|
Operating Lease |
|
|
Year ending December 31, |
|
|
|
|
|
2019 (excluding the three months ended March 31, 2019) |
|
|
$ |
2,088 |
|
2020 |
|
|
|
696 |
|
Total lease payments |
|
|
|
2,784 |
|
Less imputed interests |
|
|
|
(101 |
) |
Total lease liability |
|
|
$ |
2,683 |
|
F-23
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report and with the audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2018.
Special note regarding forward-looking statements
This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
OVERVIEW
Portola Pharmaceuticals, Inc. (the “Company” or “we” or “our” or “us”) is a biopharmaceutical company focused on the development and commercialization of novel therapeutics in the areas of thrombosis, other hematologic diseases and inflammation for patients who currently have limited or no approved treatment options. Our headquarters are located in South San Francisco, California. Our lead product is Andexxa® [coagulation factor Xa (recombinant), inactivated-zhzo] which we will market under the brand name of Ondexxya® in Europe, the first and only antidote approved by the FDA and the EC, respectively, for patients treated with rivaroxaban or apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. Bevyxxa® (betrixaban) is the first and only oral, once-daily Factor Xa inhibitor approved by the FDA for the prevention of venous thromboembolism (“VTE”) in adult patients hospitalized for an acute medical illness. Bevyxxa is currently being marketed in a limited manner and we are evaluating potential partnership opportunities for this product. We are advancing cerdulatinib, an investigational oral, dual spleen tyrosine kinase (“Syk”) and Janus kinase (“JAK”) inhibitor in development to treat hematologic cancers. We also have a number of other molecules in earlier stage and pre-clinical development.
Pipeline
|
Description |
Approved or Investigational Indication |
Stage |
Commercial rights |
Andexxa |
Reversal agent for certain Factor Xa (fXa) inhibitors |
Patients treated with rivaroxaban or apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding |
U.S. Approval E.U. Approval |
Worldwide excluding Japan |
Bevyxxa |
Oral fXa
|
Extended duration VTE prophylaxis in acute medically ill patients in-hospital and post discharge for 35-42 days |
U.S. Approval |
Worldwide |
Cerdulatinib |
Oral, dual Syk and JAK inhibitor |
Relapsed/refractory B- and T-cell malignancies |
Phase 2a |
Worldwide excluding topical formulation in non-oncology indications |
Approved Products:
1
Andexxa is approved by the FDA as a reversal agent for patients treated with rivaroxaban or apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. Andexxa was approved under the FDA’s Accelerated Approval pathway based on the change from baseline in anti-Factor Xa activity in healthy volunteers. Continued approval for this indication is contingent upon post-marketing study results to demonstrate an improvement in hemostasis in patients.
On December 31, 2018, the FDA approved our Gen 2 manufacturing process, which provides commercial scale volume that we believe is sufficient to support a global launch that can meet worldwide commercial demand for at least the next several years. In early January 2019, we began shipping Gen 2 product and commenced a full-scale commercial launch in the United States.
Andexanet alfa received conditional approval under the brand name Ondexxya by the EC on April 26, 2019. This conditional approval included several post-authorization requirements, including specific obligations to submit a final clinical study report for the randomized controlled trial of Andexxa (US)/Ondexxya (EU), a final clinical study report for the ANNEXA-4 study, and an obligation to provide some additional pharmacokinetic data.
Bevyxxa
Bevyxxa is the first and only anticoagulant approved in the U.S. for hospital and extended duration prophylaxis (35 to 42 days) of VTE in adult patients hospitalized for an acute medical illness who are at risk for thromboembolic complications due to moderate or severe restricted mobility and other risk factors for VTE. Bevyxxa was approved by the FDA in June 2017 and we commenced the commercial launch in the U.S. in January 2018.
Following the approval of Andexxa in May 2018, due to our limited resources, we greatly scaled back our commercial efforts for Bevyxxa in the second half of 2018 in order to focus on the commercial launch of Andexxa. We are re-evaluating our marketing strategy for Bevyxxa and also exploring potential partnership and other strategic options for Bevyxxa.
2
Cerdulatinib
Cerdulatinib is our investigational Syk and janus kinase (“JAK”) inhibitor that uniquely inhibits two key cell signaling pathways implicated in certain hematologic malignancies and autoimmune diseases. There is a rationale for inhibiting both Syk (B-cell receptor pathway) and JAK (cytokine receptors) in B-cell malignancies where both targets have been shown to promote cancer cell growth and survival. In addition, pre-clinical data suggest an important role for Syk and JAK in Peripheral T-Cell Lymphoma (“PTCL”) tumor survival.
There is a significant unmet need for the treatment of patients with relapsed/refractory PTCL. Current approved therapies for relapsed/refractory PTCL are all given via IV infusion and have limited activity with overall response rates of approximately 30%. In addition, most of these responses are partial responses. Based on the unmet need and on the activity to date with cerdulatinib, we have prioritized development in PTCL. Following our End of Phase 2 meeting with the FDA in January 2019, the FDA has requested additional data supporting the proposed dose and we have submitted the requested data. Pending the outcome of our discussions, we hope to start a registrational study. In addition, we remain focused on development in cutaneous T-cell lymphoma (“CTCL”) and Follicular Lymphoma and are exploring potential paths to approval in these diseases.
Other early stage programs
We have other early research and development programs including an exclusive in-license agreement with SRX Cardio LLC to explore a novel approach to developing a drug in the field of hypercholesterolemia and a collaboration with Ora for the topical Syk inhibitor PRT2761. PRT2761 was recently evaluated in a Phase 2 study for the treatment of allergic conjunctivitis where it met one of the two primary endpoints for the study. Based on these study results, we and Ora are currently exploring the potential to pursue PRT2761 in dry eye and other ocular inflammatory diseases.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, (“U.S. GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Except as noted below, there have been no significant or material changes in our critical accounting policies during the three months ended March 31, 2019, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019.
3
Recent Accounting Pronouncements
See Note 2 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements.
Results of operations
Comparison of the three months ended March 31, 2019 and 2018
Revenue
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2019 |
|
|
2018 |
|
|
Change |
|
|
% Change |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Andexxa |
|
$ |
20,285 |
|
|
$ |
— |
|
|
$ |
20,285 |
|
|
* |
|
|
Bevyxxa |
|
|
77 |
|
|
|
606 |
|
|
|
(529 |
) |
|
(87%) |
|
|
Total product revenue, net |
|
|
20,362 |
|
|
|
606 |
|
|
|
19,756 |
|
|
3260% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collaboration and license revenue |
|
|
1,807 |
|
|
|
6,038 |
|
|
|
(4,231 |
) |
|
(70%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
22,169 |
|
|
$ |
6,644 |
|
|
$ |
15,525 |
|
|
234% |
|
* Percentage not meaningful
The increase in total revenues during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily attributable to:
|
• |
commercial product revenue earned from U.S. net sales of Andexxa, which we began shipping to customers in May 2018 and more broadly in January 2019 following the FDA approval of our Gen 2 manufacturing process; offset by a decrease of Bevyxxa product revenue; further offset by |
|
• |
decrease in Phase 3 collaboration revenue from certain collaboration partners as related performance obligations have been mostly fulfilled by the fourth quarter of 2018. |
Cost of Sales
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2019 |
|
|
2018 |
|
|
Increase |
|
|
% Increase |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Cost of sales |
|
$ |
7,150 |
|
|
$ |
336 |
|
|
$ |
6,814 |
|
|
2028% |
|
During the three months ended March 31, 2019 and 2018, we recognized $7.2 million and $0.3 million, respectively, of cost of sales related to Andexxa and Bevyxxa. The increase is primarily attributable to Andexa launch we began shipping to customers in May 2018, and more broadly in January 2019 following the FDA approval of our Gen 2 manufacturing process, and the recording of an excess and obsolete inventory charge of $3.9 million in the first quarter of 2019. Cost of sales includes the costs associated with manufacturing Andexxa and Bevyxxa, as well as other routine periodic costs such as Bevyxxa net sales-based royalties payable to Millennium and amortization of an intangible asset associated with the approval of Bevyxxa. Additionally, we recorded provisions for excess and obsolete inventory of $3.9 million and zero during the three months ended March 31, 2019 and 2018, respectively.
Research and development expenses
4
|
(1) |
Amounts in all periods include costs for other potential product candidates. |
The program-specific expenses summarized in the table above include costs directly attributable to our product candidates. We allocate research and development salaries, benefits, stock-based compensation and indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses.
The decrease in research and development expenses during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily attributable to:
|
• |
decreased program costs of $21.0 million related to Andexxa, which was largely the result of capitalizing manufacturing expenses that were recorded as research and development expenses in 2018; and |
|
• |
decreased program costs of $7.7 million related to Bevyxxa, which was the result of overall decreased spending; offset by |
|
• |
increased program costs of $2.8 million related to Cerdulatinib, primarily due to increased manufacturing expenses. |
Selling, general and administrative expenses
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2019 |
|
|
2018 |
|
|
Increase |
|
|
% Increase |
|
||||
|
|
(in thousands, except percentages) |
|
|||||||||||||
Selling, general and administrative expenses |
|
$ |
53,034 |
|
|
$ |
31,541 |
|
|
$ |
21,493 |
|
|
68% |
|
Selling, general and administrative expenses consist primarily of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resources, audit and accounting services and sales and marketing expenses related to commercial launch preparation and execution.
The increase in selling, general and administrative expenses during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily attributable to:
|
• |
increased headcount-related costs of $16.5 million resulting from the hiring of our sales force and supporting commercial functions; and |
|
• |
increased external costs of $4.5 million associated with commercial and marketing initiatives to support the launch of Andexxa. |
We expect selling, general and administrative expenses to increase in the future as we incur additional expenses associated with expanding our sales force in the United States and overseas, as well as commercial infrastructure initiatives including information technology systems quality and compliance systems, and personnel support for the commercial organization.
Interest expense
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|||||
|
|
2019 |
|
|
2018 |
|
|
Increase |
|
|
% Increase |
|
||||
|
|
(in thousands, except percentages) |
|
|
|
|
|
|||||||||
Interest expense |
|
$ |
6,481 |
|
|
$ |
2,581 |
|
|
$ |
3,900 |
|
|
151% |
|
5
The $3.9 million increase in interest expense during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to:
|
• |
An additional $95.0 million of funding received in May 2018 under the Andexxa Royalty Sales Agreement with HCR; and |
|
• |
An additional $62.5 million of funding received in March 2019 under the Credit Agreement with HCR and Athyrium. |
Liquidity and capital resources
Due to our significant research and development and selling, general and administrative expenditures, we have generated significant operating losses since our inception. We have financed our operations primarily through sales of our equity securities, collaborations, including loans from our collaboration partners, a royalty-based financing arrangement, a secured term loan and sales of commercial and development rights to some of our product candidates. Our expenditures are primarily related to the global launch of Andexxa, including manufacturing and clinical trial costs required to satisfy post-marketing commitments required by the FDA and EMA, as well as research and development activities, including clinical trial costs associated with Andexxa label expansion and advancing our other product candidates. At March 31, 2019, we had cash, cash equivalents and investments of $322.8 million which includes the $31.5 million minimum cash holdings required by our secured term loan agreement (See Note 8, “Long Term Obligations”, to the Condensed Consolidated Financial Statements). Our cash, cash equivalents and investments are held in a variety of interest-bearing instruments, including investments backed by U.S. government agencies, corporate debt securities and money market accounts. Cash in excess of immediate requirements is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and degrees of risk.
We believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements for at least the next 12 months from the date of this filing. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development and commercialization sooner than planned. We currently have no credit facility or committed sources of capital other than the second tranche funding from the Credit Agreement with HCR and Athyrium and potential milestones receivable under our current collaboration and license agreements. Our future funding requirements will depend on many factors, including the following:
|
• |
the timing, receipt and amount of sales, profit sharing or royalties, if any, from our current and potential products; |
|
• |
the cost of manufacturing our current products and product candidates, including process improvements in order to manufacture product candidates at commercial scale, and establishing commercial supplies of our product candidates; |
|
• |
the cost and timing of establishing sales, marketing and distribution capabilities in the United States and abroad; |
|
• |
the terms and timing of any other collaborative, licensing and other arrangements that we may establish; |
|
• |
the receipt of any collaboration payments; |
|
• |
the number and characteristics of product candidates that we pursue; |
|
• |
the cost, timing and outcomes of regulatory approvals; |
|
• |
the scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities; |
|
• |
the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; |
|
• |
the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions; and |
|
• |
partnerships and other strategic options for our products and product candidates. |
6
If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one o r more of our clinical studies, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic al liances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with th ird parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we do raise additional capital through publi c or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capita l through debt financing, we may be subject to additional covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
The following table summarizes our cash flows for the periods indicated:
|
|
March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
|
(in thousands) |
|
|||||
Cash used in operating activities |
|
$ |
(63,635 |
) |
|
$ |
(88,420 |
) |
Cash provided by investing activities |
|
$ |
82,103 |
|
|
$ |
69,581 |
|
Cash provided by financing activities |
|
$ |
69,840 |
|
|
$ |
5,559 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
$ |
88,308 |
|
|
$ |
(13,280 |
) |
Cash used in operating activities
Cash used in operating activities for the three months ended March 31, 2019 includes payments made to our contract manufacturing organizations for the manufacture of Andexxa and Bevyxxa, totaling $14.1 million and $0.1 million, respectively, $41.7 million of disbursements to third-party vendors to support research and development and selling and general and administrative operations, and $26.4 million in payroll and related employee costs. These cash outflows were partially offset by cash receipts of $17.7 million associated with Andexxa and Bevyxxa commercial sales and $4.1 million from our Andexxa collaboration agreements.
Cash used in operating activities for the three months ended March 31, 2018 includes payments made to our contract manufacturing organizations for the manufacture of Andexxa and Bevyxxa totaling $40.3 million and $3.1 million, respectively, $35.2 million of disbursements to third party vendors to support routine research and development and selling and general and administrative operations, and $22.5 million in payroll and related employee costs. These cash outflows were partially offset by cash receipts of $15.7 million, which was primarily from $11.7 million in receipts from our Andexxa collaboration agreements and the receipt of $3.8 million associated with a milestone earned pursuant to our out-license of cerdulatinib in topical formulation.
Cash provided by investing activities
Cash provided by investing activities for the three months ended March 31, 2019 was primarily related to proceeds from maturities of investments of $124.1 million, partially offset by investment purchases of $41.7 million and fixed asset purchases of $0.4 million.
Cash provided by investing activities for the three months ended March 31, 2018 was primarily related to proceeds from maturities of investments of $148.1 million, partially offset by investments of $78.0 million.
Cash provided by financing activities
Cash provided by financing activities for the three months ended March 31, 2019 was primarily related to net proceeds from debt issuance of $59.2 million and $10.1 million in net proceeds from t he issuance of common stock pursuant to equity awards.
Cash provided by financing activities for the three months ended March 31, 2018 was primarily related to proceeds from purchases under our Employee Stock Purchase Plan of $1.5 million and exercises of stock options of $4.2 million.
Off-balance sheet arrangements and contractual obligations
In March 2019, we received $62.5 million of funding from HCR and Athyrium pursuant to the Credit Agreement. We have access to the second tranche of $62.5 million at our option which will be available until November 15, 2019 if we receive all regulatory approvals from the EMA for Ondexxya and achieve a revenue goal of $50.0 million for the nine-months period ended September 30,
7
2019 . See Note 8 , “Long Term Obligations”, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding this obligation.
There were no material changes during the three months ended March 31, 2019 outside of the ordinary course of business, and other than pursuant to the above-mentioned Credit Agreement with HCR and Athyrium, in our specified contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.
The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality. As of March 31, 2019, we had cash, cash equivalents and investments of $322.8 million consisting of cash and liquid investments deposited in highly-rated financial institutions in the United States. A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.
We contract for the conduct of certain clinical development, manufacturing, regulatory and commercialization activities with vendors in Europe. We made payments in the aggregate amount of €8.5 million and €26.6 million to our European vendors during the three months ended March 31, 2019 and 2018, respectively. We are subject to exposure due to fluctuations in foreign exchange rates in connection with these agreements and with our cash balance denominated in Euros and British Pounds, to a lesser extent. For the three months ended March 31, 2019 and 2018, respectively, the effect of the exposure to these fluctuations in foreign exchange rates was not material.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our co-principal executive officers and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2019. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2019, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are not currently a party to any material legal proceedings.
8
Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this report, including our financial statements and notes thereto, before you invest in our common stock. If any of the following risks actually materializes, our operating results, future prospects, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.
In assessing these risks, you should also refer to other information contained in this quarterly report on Form 10-Q, including our Condensed Consolidated Financial Statements and related Notes. We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our annual report on Form 10-K for the year ended December 31, 2018.
1) RISKS RELATED TO OUR FINANCIAL CONDITION AND NEED FOR ADDITIONAL CAPITAL
We have incurred significant operating losses, and expect to incur substantial losses in the near term as we continue to develop and commercialize our products and product candidates.
We are an early stage commercial biopharmaceutical company. We launched our two commercial products in 2018 and continue to incur significant expenses related to commercialization, our ongoing and planned future clinical studies, research and development activities, and selling, general and administrative activities. As of March 31, 2019, we had an accumulated deficit of approximately $1.6 billion.
To date, we have financed our operations primarily through sales of our equity securities, collaborations, including a loan from one of our collaboration partners, a sale of a royalty stream from future product sales, a term loan, sales of commercial and development rights to some of our product candidates, and to a lesser extent, government grants, equipment leases, venture debt and with the benefit of tax credits made available under a federal stimulus program supporting drug development. We have devoted substantially all of our efforts to product commercialization, research and development, including manufacturing and clinical studies. We anticipate that we will continue to incur substantial expenses as we:
|
• |
establish and scale-up manufacturing capabilities and a sales, marketing and distribution infrastructure to commercialize our products in the U.S. and abroad; |
|
• |
initiate or continue clinical studies, including a post-marketing randomized controlled trial of Andexxa; |
|
• |
continue the research and development of our product candidates; |
|
• |
seek to discover or in-license additional product candidates; |
|
• |
seek regulatory approvals for our product candidates that successfully complete clinical studies; and |
|
• |
enhance operational, compliance, financial, quality and information management systems. |
To be profitable in the future, we must succeed in commercializing our products and developing and commercializing other products with significant market potential. This will require us to be successful in a range of activities, including manufacturing, marketing and selling our products and any other products for which we may obtain regulatory approval, obtaining additional regulatory approvals and successfully completing clinical studies. We are only in the preliminary stages of some of these activities. We may not succeed in these activities and may never generate revenue that is sufficient to be profitable in the future. Even if we are profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to achieve sustained profitability would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product candidates, market our product candidates, if approved, or continue our operations.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.
Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year. Due to the recent approval by the FDA and the EC of our products and the absence of historical sales data, our product sales will be difficult to predict from period to period and as a result, you should not rely on sales results in any period as being indicative of future performance and sales may be below the expectation of securities analysts or investors in the future. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:
|
• |
the level of demand and market acceptance; |
|
• |
the results of our clinical trials; |
9
|
• |
our abilities to obtain desired regulatory approvals in the U.S., EU and other foreign jurisdictions; |
|
• |
the extent to which coverage and reimbursement is available from government and health administration authorities, private health insurers, managed care programs and other third-party payors; |
|
• |
rebates, discount, other pricing concessions and fees that we may provide to integrated delivery networks, group purchasing organizations, other purchasers and pharmacy benefits managers and other third-party payors; |
|
• |
the timing, cost and level of investment in our marketing efforts to support sales; |
|
• |
the timing, cost and level of investment in our research and development activities involving approved products and product candidates; |
|
• |
the cost of manufacturing, distribution and the amount of legally mandated discounts to government entities, other discounts and rebates, product returns and other gross-to-net deductions; |
|
• |
the risk/benefit profile, cost and reimbursement of existing and potential future drugs which compete with approved products; |
|
• |
the timing and amount of non-cash items such as stock compensation expenses, reserves, cost of goods sold and non-recurring charges such as inventory write-offs; and |
|
• |
expenditures that we will or may incur to acquire or develop additional product candidates and technologies. |
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.
We will need additional funds to support our operations, and such funding may not be available to us on acceptable terms, or at all, which would force us to delay, reduce or suspend our research and development programs and other operations or commercialization efforts. Raising additional capital may subject us to unfavorable terms, cause dilution to our existing stockholders, restrict our operations, reduce future profitability or require us to relinquish rights to our product candidates and technologies.
We will continue to require substantial funds to support commercial operations and pursue further research and development efforts. Our financing requirements will depend on many factors, some of which are beyond our control, including the following:
|
• |
product sales of Andexxa, and if approved for commercial marketing, our product candidates; |
|
• |
the costs of commercialization activities, including product sales, marketing, manufacturing and distribution and general corporate and commercial infrastructure; |
|
• |
the costs and timing of international expansion; |
|
• |
the timing of, and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities; |
|
• |
the possible development of additional product candidates, including through in-licensing and acquisitions; |
|
• |
the degree and rate of market acceptance of any products launched by us or partners; |
|
• |
our ability to enter into additional collaboration, licensing, commercialization or other financing arrangements and the terms and timing of such arrangements; |
|
• |
the rate of progress and cost of our clinical studies; and |
|
• |
the emergence of competing technologies or other adverse market developments. |
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other financing, marketing and distribution arrangements. Additional financing may not be available to us when we need it or it may not be available on favorable terms.
10
If we raise additional capital through financing, marketing and distribution arrangements or other collaborations, strategic alliances, licensing or other financial arrangements with third parties, we may have to relinquish certain valuabl e rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of o ur existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants l imiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and our repayment obligations may reduce future financial performance . If we are unable to obtain adequate fi nancing when needed, we may have to delay, reduce the scope of, or suspend one or more of our clinical studies, research and development programs or commercialization efforts.
Our obligations under our credit facility are secured by substantially all of our assets, so if we default on those obligations, the lenders could foreclose on our assets. As a result of these security interests, such assets would only be available to satisfy claims of our general creditors or to holders of our equity securities if we were to become insolvent at a time when the value of such assets exceeded the amount of our indebtedness and other obligations. Additionally, our credit facility contains restrictions and limitations that could significantly affect our ability to operate our business.
Pursuant to the Credit Agreement by and among us, the guarantor and lenders (“Lenders”) party thereto, and HCR Collateral Management, LLC, as Administrative Agent, dated February 28, 2019 (the “Credit Facility”), the Administrative Agent, in its capacity as Collateral Agent for the Lenders, has been granted a security interest in substantially all of our assets. As a result, if we default under our obligations to the Lenders, the Collateral Agent could foreclose on its security interest and liquidate some or all of these assets, which would harm our business, financial condition and results of operations.
In the event of a default in connection with our bankruptcy, insolvency, liquidation, or reorganization, the Collateral Agent would have a prior right to substantially all of our assets to the exclusion of our general unsecured creditors. In that event, our assets would first be used to repay in full all indebtedness and other obligations under the Credit Facility, resulting in all or a portion of our assets being unavailable to satisfy the claims of any unsecured indebtedness. Only after satisfying the claims of the Lenders and any unsecured creditors would any amount be available for our equity holders. Events of default under the Credit Facility include, among other things, our failure to pay any amounts due under the Credit Facility or any of the other loan documents, a breach of covenants under the Credit Facility, our insolvency, a material adverse effect occurring, the occurrence of certain defaults under certain other indebtedness for which we are obligated or certain final judgments against us.
The pledge of these assets and other restrictions imposed in the Credit Facility may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged to secure the Credit Facility obligations, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.
If we are unable to comply with certain financial and operating restrictions in the Credit Facility, we may be limited in our business activities and access to credit or may default under the Credit Facility.
Provisions in the Credit Facility impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to, among other things:
|
• |
Incur additional debt; |
|
• |
Make certain investments and acquisitions; |
|
• |
Guarantee the indebtedness of others or our subsidiaries; |
|
• |
Create liens or encumbrances; |
|
• |
Engage in new lines of business; |
|
• |
Enter into transactions with affiliates; |
|
• |
Pay cash dividends and make distributions; |
|
• |
Redeem or repurchase capital shares; |
11
|
• |
Prepay other indebtedness; and |
|
• |
Acquire new companies and merge or consolidate. |
The Credit Facility also contains other customary covenants, including covenants that require us to maintain a minimum cash balance of up to $31 million, dependent on borrowings and levels of sales of Andexxa. We may not be able to comply with these covenants in the future. Our failure to comply with these covenants may result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Credit Facility and would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we may not have sufficient funds then available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our indebtedness would result in the Collateral Agent foreclosing on all or a portion of our assets and possibly force us to curtail or cease our operations.
2) RISKS RELATED TO COMMERCIAL AND MARKETING OPERATIONS AND THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS AND PRODUCT CANDIDATES
Our products may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
Our success depends heavily on the launch and commercialization of our products. The commercial success of our products will depend upon their acceptance by the medical community and third-party payors as clinically useful, cost-effective and safe. The degree of market acceptance of any drug depends on a number of factors, such as:
|
• |
the prevalence and severity of any side effects; |
|
• |
efficacy and potential advantages compared to alternative treatments; |
|
• |
the price we charge for our products; |
|
• |
interpretations of the results of our clinical trials; |
|
• |
the willingness of physicians and healthcare organizations to change their current treatment practices; |
|
• |
the willingness of hospitals and hospital systems to include our products as treatment options; |
|
• |
convenience and ease of administration compared to alternative treatments; |
|
• |
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
|
• |
the willingness of the target patient population to pay for our products, including co-pays under their health coverage plans; |
|
• |
the strength of marketing and distribution support; and |
|
• |
the availability of third-party coverage and adequate reimbursement. |
Failure to attain market acceptance among the medical community and third-party payors may have an adverse impact on our operations and profitability. If we are not successful in commercializing Andexxa, our future product revenue will suffer, we may incur significant additional losses and our business will be materially harmed.
If we are unable to develop effective sales, marketing and distribution capabilities on our own or through collaborations or other marketing partners, we will not be successful in commercializing our products or our other future products.
We are still in the early stages of developing our sales and marketing infrastructure. To achieve commercial success for our products or any current or potential product candidate, we must continue to develop a sales and marketing organization or outsource these functions to third parties. We plan to market expand our hospital-based sales force in other major markets and work with partners in other parts of the world to commercialize our products globally. There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.
We also may not be successful entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively, which could damage our reputation. If we do
12
not establish sales and marketing capabilities successfully, either on our own or in collaboratio n with third parties, we will not be successful in commercializing our product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing competing products more successfully than we do.
The development and commercialization of new therapeutic products is highly competitive. We face competition with respect to commercializing our products and developing our current product candidates, and we will face competition with respect to any products that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.
While there are no therapies other than Andexxa approved specifically as antidotes for Factor Xa inhibitors, we are aware of at least one drug candidate that has been studied in early stage clinical trials as a potential antidote to Factor Xa inhibitors. In addition, Andexxa may compete with the off-label use of other treatments designed to enhance coagulation, such as Fresh Frozen Plasma (“FFP”), 4-factor Prothrombin Complex Concentrates (“PCCs”), recombinant activated Factor VII (“rFVIIa”) or whole blood. Although there is no approved indication for these products in patients taking Factor Xa inhibitors, physicians may choose to use them because of familiarity, cost or other reasons. In addition, we are aware that several companies have conducted preclinical research on compounds intended to be antidotes for Factor Xa inhibitors.
For Bevyxxa, several large pharmaceutical and biotechnology companies currently market and sell direct or indirect anticoagulants for use in various disease states, including injectable anticoagulants for the prevention of VTE in acutely ill medical patients. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Some of these competitors are or may be attempting to develop therapeutics for our target indications.
In addition, most of our competitors are large pharmaceutical companies that will have a greater ability to reduce prices for their competing drugs in an effort to gain or maintain market share and undermine the value proposition that we might otherwise be able to offer to payors. Bevyxxa is indicated for the prophylaxis of VTE in adult patients hospitalized for an acute medical illness who are at risk for thromboembolic complications due to moderate or severe restricted mobility and other risk factors. The current standard of care for VTE prophylaxis in acute medically ill patients in the United States is a 6- to 14-day administration of enoxaparin, marketed as Lovenox and also available in generic form. Enoxaparin is a low cost therapy that is widely accepted by physicians, patients and third-party payors. As a result of this and other factors, we have faced initial difficulties in marketing Bevyxxa in this patient population. Additionally, our competitors may have the financial and other resources to conduct additional clinical studies in an effort to obtain regulatory approval for use of their drugs for VTE prophylaxis in acutely ill medical patients. For example, Bayer and Janssen recently published results from their Phase 3 MARINER clinical trial evaluating the safety and efficacy of rivaroxaban for up to 45 days post hospital discharge (after enoxaparin in hospital) to reduce the risk of symptomatic VTE in medical ill patients. If the results of Bayer and Janssen’s clinical studies support a successful path to regulatory approval, Bevyxxa is expected to face increased competition in the marketplace from a drug that would be used as a different treatment strategy (post discharge only) in an overlapping patient population. Such treatment strategy would not require physicians, patients and third-party payors to replace enoxaparin with a new or higher priced therapy in the hospital.
There are also a number of products in clinical development for hematologic cancer, ophthalmological diseases, allergic rhinitis, allergic asthma and other inflammatory or autoimmune diseases that are potential indications for cerdulatinib or selective Syk inhibitors. Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that would render our product candidates obsolete or noncompetitive. Many competing products are in later stages of development than our products and, therefore, may obtain the FDA or other regulatory approval for their products before we obtain approval for ours.
Many of our competitors, including a number of large pharmaceutical companies that compete directly with us, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs.
* We obtained regulatory approval of Andexxa in the United States through an Accelerated Approval process and in the EU under a conditional approval. Continued approval is contingent upon post-marketing study.
The Accelerated Approval regulations allow drugs that are being developed to treat an unmet medical need to be approved substantially based on evidence of an effect on a biomarker endpoint that is considered reasonably likely to predict clinical benefit rather than a clinical endpoint such as survival or irreversible morbidity. Our approval of Andexxa was supported by data from two Phase 3 ANNEXA studies (ANNEXA-R and ANNEXA-A), which evaluated the safety and efficacy of Andexxa in reversing the
13
anticoagulant activity of the Factor Xa inhibitors rivaroxaban and apixaban in healthy volunteers, and interim patient data from our ongoing ANNEXA-4 single-arm, open-label study in patients on a Factor Xa inhibitor experiencing a life threatening or uncontrolled bleeding episode. However, these studies have inherent limitations as compared with a randomized controlled tr ial. As a condition to approval, the FDA and EMA have required us to conduct a post-marketing randomized controlled trial of Andexxa. This trial will randomize patients to receive either Andexxa or the type of care the enrolling institution would provide in the absence of Andexxa. This study has been opened to enrollment and we expect it to be reported in 2023. We expect the practical implementation and ethical considerations of a randomized controlled trial for Andexxa to present challenges, and we cannot be sure that we will be able to successfully conduct and enroll such a trial in a manner satisfactory , or within the time period required by the FDA and EMA . In addition to the post-marketing study, the EMA has also requested the final study reports for the Annexa-4 study and additional pharmacokinetic data. Further, if the randomized controlled trial is not successful, the FDA and/or EMA could modify or withdraw our marketing approval for Andexxa.
If clinical studies of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our future product candidates.
Before obtaining regulatory approval for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of our product candidates in humans. Clinical studies are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of one or more of our clinical studies could occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, clinical studies that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including the following:
|
• |
the number of patients required for clinical studies of our product candidates may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate or patients may drop out of these clinical studies at a higher rate than we anticipate; |
|
• |
clinical studies of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; |
|
• |
the cost of clinical studies or the manufacturing of our product candidates may be greater than we anticipate; |
|
• |
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
|
• |
we might have to suspend or terminate clinical studies of our product candidates for various reasons, including unanticipated serious side effects, other unexpected characteristics or unacceptable health risks; |
|
• |
regulators may not approve our proposed clinical development plans; |
|
• |
regulators or institutional review boards may not authorize us or our investigators to commence a clinical study or conduct a clinical study at a prospective study site; |
|
• |
regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; and |
|
• |
the supply or quality of our product candidates or other materials necessary to conduct clinical studies of our product candidates may be insufficient or inadequate. |
If we are required to conduct additional clinical studies or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical studies of our product candidates or other testing, if the results of these studies or tests are not positive or are only modestly positive or if there are safety concerns, we may:
|
• |
be delayed in obtaining marketing approval for our product candidates; |
|
• |
not obtain marketing approval at all; |
|
• |
obtain approval for indications that are not as broad as intended; |
|
• |
have the product removed from the market after obtaining marketing approval; |
|
• |
be subject to additional post-marketing testing requirements; or |
|
• |
be subject to restrictions on how the product is distributed or used. |
Our product development costs may also increase if we experience delays in testing or approvals. We do not know whether any anticipated clinical studies will begin as planned, or whether anticipated or ongoing clinical studies will need to be restructured or will be completed on schedule, or at all. Significant clinical study delays also could shorten any periods during which we may have the
14
exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which would impair our ability to commercializ e our product candidates and harm our business and results of operations.
* Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally. Following the negative decision by the European Commission, we will not obtain marketing approval to commercialize Bevyxxa in the EU at this time, or potentially ever.
In order to market Bevyxxa or our future products in the European Economic Area (“EEA”), and many other foreign jurisdictions, we must obtain separate regulatory approvals. Specifically, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization (“MA”). Before granting the MA, the EMA or the competent authorities of the member states of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.
The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. In addition, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to submit for regulatory approvals and even if we submit we may not receive necessary approvals to commercialize our products in any market.
In March 2018, the CHMP issued a negative opinion, recommending that the EMA reject the marketing application for Bevyxxa in the EU. We requested a re-examination of the initial opinion and in July 2018, we received a negative re-examination opinion from the CHMP. The European Commission adopted the CHMP decision in September 2018. Failure to obtain marketing approval of Bevyxxa in the EU will reduce the commercial potential of Bevyxxa and could also have a negative impact on our efforts to commercialize and obtain market acceptance for Bevyxxa in the US market.
If serious adverse side effects are identified with respect to any of our product candidates or either of our approved products, we may need to abandon our development of that product candidate or discontinue sale of that product.
It is impossible to guarantee when or if any of our product candidates will prove safe enough to receive regulatory approval. In addition, there can be no assurance that our clinical studies will identify all relevant safety issues. Known or previously unidentified adverse side effects can adversely affect regulatory approvals or marketing of approved products. In such an event, we might need to abandon marketing efforts or development of that product or product candidate or enter into a partnership to continue development.
While no serious adverse side effects have been observed in our completed healthy subject studies with Andexxa, adverse effects have been observed in our ANNEXA-4 study in bleeding patients. Additionally, there is a risk that adverse events may be reported in our post-marketing randomized controlled trial of Andexxa, additional clinical experience or repeat doses that are determined to have been caused by Andexxa. Some protein-based biologics have encountered problems with immunogenicity, that is, their tendency to trigger an unwanted immune response against themselves. To date, no neutralizing antibodies against Andexxa or antibodies to Factor X or Xa have been detected; however there is still a risk that such antibodies could be identified through our ANNEXA-4 patient study results, additional clinical experience or from repeat doses. In addition, in our ANNEXA-4 patient trial, reversing the anticoagulant activity of Factor Xa inhibitors in patients with life threatening or uncontrolled bleeding who have underlying medical conditions requiring anticoagulation has been associated with thromboembolic events, ischemic events, cardiac arrest and sudden deaths, and the FDA has included a boxed warning in the Andexxa label to this effect.
Bevyxxa, like all currently marketed inhibitors of Factor Xa, carries some risk of life-threatening bleeding. In addition, patients taking Bevyxxa in our clinical studies had an increased rate of gastrointestinal issues, such as diarrhea, nausea and vomiting, and other side effects such as back pain, dizziness, headaches, rashes and insomnia as compared to subjects taking a placebo or an active comparator.
If a regulatory agency discovers adverse events of unanticipated severity or frequency it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. Among other legal and administrative actions, a regulatory agency may:
|
• |
mandate modifications to product labelling or promotional materials or require us to provide corrective information to healthcare practitioners; |
|
• |
suspend any regulatory approvals; |
|
• |
suspend any ongoing clinical trials; |
|
• |
refuse to approve pending applications or supplements to approved applications filed by us, our partners or our potential future partners; |
15
|
• |
seize or detain products or require a product recall. |
In addition, the occurrence of any of the foregoing, even if promptly remedied, could negatively impact the perception of us or the relevant product among the medical community, patients or third-party payors.
Approval of Andexxa is limited to patients treated with rivaroxaban and apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding, and additional clinical studies and regulatory applications will be required to expand Andexxa indications. We can provide no assurances that such clinical studies or regulatory applications will be successful.
We are developing Andexxa as a universal antidote for patients receiving a Factor Xa inhibitor when reversal of anticoagulation is needed, such as in life-threatening or uncontrolled bleeding or for emergency surgery/urgent procedures. Our approval of Andexxa was limited to patients treated with rivaroxaban and apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. Our studies have not yet included patients requiring emergency surgery or urgent procedures and we do not anticipate obtaining this indication without clinical data. We expect that we will also be required to provide additional clinical data to support addition to our label of other Factor Xa inhibitors, including Bevyxxa, edoxaban and enoxaparin. Additional clinical studies will require additional time and expense and may not prove successful. Limitations in our label for Andexxa will reduce the number of patients for whom Andexxa is indicated and could reduce the size of the anticipated market and our financial prospects. In addition, our label for Andexxa includes a boxed warning that treatment with Andexxa has been associated with serious and life‑threatening adverse events, thromboembolic events, ischemic events, cardiac arrest and sudden deaths. This boxed warning may adversely impact market acceptance and the commercial potential of Andexxa. There can be no assurance that further clinical experience will provide a basis to remove this boxed warning.
3) RISKS RELATED TO OUR RELIANCE ON THIRD PARTIES
We rely on single source third-party contract manufacturing organizations to manufacture and supply Andexxa, Bevyxxa and our product candidates for us. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers. We may also face significant delays in the development and commercialization of our product candidates.
We do not own facilities for clinical-scale or commercial manufacturing of our product candidates and we rely on third-party suppliers to manufacture Andexxa, Bevyxxa and our product candidates. For example, we have contracted with Lonza to manufacture Andexxa bulk drug substance and Baxter International, Inc. to manufacture drug product to support our commercial launch. We rely on Hovione, Limited, to manufacture the active pharmaceutical ingredient for Bevyxxa and Patheon Inc. (part of Thermo Fisher Scientific) to manufacture drug product to supply Bevyxxa. We also rely or expect to rely on other third party providers for raw materials, packaging, labeling and supply chain warehousing and distribution. If we and our suppliers cannot agree to the terms and conditions for them to provide the drug supply necessary for our clinical and commercial needs, or if any single source supplier breaches an agreement with us, or terminates the agreement in response to an alleged breach by us or otherwise becomes unable to fulfill its supply obligations, we would not be able to manufacture and distribute the product candidate until a qualified alternative supplier is identified, which could also significantly disrupt, delay the development of, and impair our ability to commercialize, our product candidates. In addition, lead times for our manufacturing and contractual requirements of our third-party manufacturers require us to estimate product demand in advance. If our forecasts are not accurate, we may experience shortfalls or surplus of product. If we do not manufacture enough product, we may experience stock-outs and interruption of supply of our products. If we manufacture a surplus of product, we may experience spoilage from product expiration and incur manufacturing expenses which were not required. We have fixed manufacturing commitments with our third-party manufacturers which are on a “take-or-pay” basis which could require us to pay for manufacturing costs even if we eventually do not need the capacity forecasted at the time we entered into such commitments. The financial impact of either stock-outs or a product surplus could be significant with respect to financial commitments and the effect on our financial performance.
The manufacture of pharmaceutical products in compliance with U.S. and foreign regulatory manufacturing requirements, requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality assurance, including stability of the product candidate and quality control testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations and agreements, our ability to provide the drug supply necessary for our clinical studies and commercial needs would be jeopardized. Any delay or interruption in the supply of clinical study materials could delay the completion of our clinical studies, increase the costs associated with maintaining our clinical study programs and, depending upon the period of delay, require us to commence new studies at significant additional expense or terminate the studies completely.
16
All manufacturers of our product candidates must comply with regulatory manufactur ing requirements enforced by the U.S. and foreign regulatory authorities through their facilities inspection programs. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Manu facturers of our product candidates may be unable to comply with these manufacturing requirements and with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretation and enforcement of existing standards for manufacturing, packaging or testing of products. We have limited control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirem ents may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ fai lure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a del ay or interruption of clinical studies, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or adversely affect our reputation.
Although alternative sources of supply exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities to manufacture biologics is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which could have a material adverse effect on our business. New suppliers of any product candidate would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing the product candidate. Obtaining the necessary regulatory approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.
We rely on third parties to conduct our clinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.
We do not independently conduct clinical studies of our product candidates. We rely on third parties, such as contract research organizations (“CROs”), clinical data management organizations, medical institutions and clinical investigators, to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. We remain responsible for ensuring that each of our clinical studies is conducted in accordance with the general investigational plan and protocols for the study.
Moreover, the regulatory authorities require us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of patients in clinical studies are protected. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully develop our products and our product candidates.
We also rely on other third parties to store and distribute supplies for our clinical studies. Any performance failure on the part of our existing or future distributors could delay clinical development or regulatory approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We may enter into collaborations that place the development and commercialization of our products and product candidates outside our control, require us to relinquish important rights or may otherwise be on terms unfavorable to us, and if our collaborations are not successful, our product candidates may not reach their full market potential.
We may enter into additional collaboration agreements with third parties with respect to our product candidates for the commercialization of the candidates both inside and outside the United States, or for other purposes. For example, we have out-licensed development and commercial rights to Andexxa in Japan. In addition, depending on our capital requirements, development and commercialization costs, need for additional therapeutic expertise and other factors, it is possible that we will enter into broader development and commercialization arrangements with respect to our product candidates. Our likely collaborators for any distribution, marketing, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We will have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend in part on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates are subject to numerous risks, which may include the following:
17
|
• |
collaborators have significant disc retion in determining the efforts and resources that they will apply to any such collaborations; |
|
• |
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical study results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; |
|
• |
collaborators may delay clinical studies, provide insufficient funding for a clinical study program, stop a clinical study, abandon a product candidate, repeat or conduct new clinical studies or require a new formulation of a product candidate for clinical testing; |
|
• |
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; |
|
• |
a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution; |
|
• |
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; |
|
• |
disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our product candidates or that results in costly litigation or arbitration that diverts management attention and resources; |
|
• |
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and |
|
• |
collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property. |
Any termination or disruption of our collaboration with potential collaborators could result in delays in the development and commercialization of our product candidates, increases in our costs to develop and commercialize the product candidate, or the termination of development of a product candidate.
4) RISKS RELATED TO THE OPERATION OF OUR BUSINESS
Our future success depends on our ability to retain our key executives, and if we are not able to retain these members of our management, or retain or recruit additional management and other key personnel, our business will suffer.
Recruiting and retaining leadership and other key personnel is critical to our success. We are highly dependent on our President and Chief Executive Officer and the other principal members of our executive and leadership teams. We may not be able to attract and retain management and other key personnel in the future, due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the San Francisco Bay Area. We also may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of personnel from universities, research institutions and technology companies. In addition, we rely on consultants and advisors to assist us in formulating our business strategies. Our consultants and advisors may also perform services for companies other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.
Under the terms of their employment, our executives may terminate their employment with us at any time. The loss of the services of any of these people could impede the achievement of our research, development and commercialization objectives.
We expect to expand our development, regulatory and sales and marketing capabilities in the U.S. and Europe, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations, in the U.S. and Europe, particularly in the areas of drug development, regulatory affairs, quality, commercial compliance, medical affairs, and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and
18
financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience o f our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to sig nificant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to existing and new public company compliance and reporting regulations.
As a public company, we incur significant legal, accounting and other expenses. For example, the Sarbanes-Oxley Act, and rules of the Securities and Exchange Commission (“SEC”) and those of The Nasdaq Stock Market, or the Nasdaq, have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel have and will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations are continuously being revised, have increased and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting. Our compliance with Section 404 of the Sarbanes-Oxley Act, as applicable, requires us to incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.
Our ability to successfully implement our business plan and comply with Section 404 of the Sarbanes-Oxley Act, as applicable, requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.
Product liability lawsuits and claims against us could cause us to incur substantial liabilities and could limit product sales.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical studies, and the commercial manufacturing, distribution and sale of Andexxa and Bevyxxa. For example, the manufacturers of currently marketed Factor Xa inhibitors and other manufacturers of anticoagulants have faced substantial litigation due to certain alleged bleeding risks. In addition, in our ANNEXA-4 patient trial, reversing the anticoagulant activity of Factor Xa inhibitors in patients with underlying medical conditions requiring anticoagulation has been associated with thromboembolic events, ischemic events, cardiac arrest and sudden deaths, and the FDA has included a boxed warning in the Andexxa label to this effect. If we cannot successfully defend ourselves against claims that Andexxa, Bevyxxa or our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
|
• |
decreased demand for our products; |
|
• |
injury to our reputation and significant negative media attention; |
|
• |
withdrawal of patients from clinical studies or cancellation of studies; |
|
• |
significant costs to defend the related litigation; |
|
• |
substantial monetary awards to patients; |
|
• |
loss of revenue; and |
|
• |
the inability to commercialize any additional products that we may develop. |
19
We may not have sufficient insurance coverage for future product liability claims. We may not be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilitie s. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, harm our reputation in the industry, significantly increase our expenses, and r educe product sales. Product liability claims in excess of our insurance coverage would be paid out of cash reserves, harming our financial condition and operating results.
We may expend our limited resources to pursue a particular product, product candidate or indication and fail to capitalize on products, product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on sales, marketing and research programs and products and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other products or product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products.
If we do not accurately evaluate the commercial potential or target market for a particular product or product candidate, we may relinquish valuable rights through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials. In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our corporate headquarters is located in California near major earthquake faults. Our operations and financial condition could suffer in the event of a major earthquake, fire or other natural or manmade disaster.
A variety of risks associated with international operations could materially adversely affect our business. If any product candidates that we may develop are approved for commercialization outside the United States, we will be subject to additional risks related to entering into international business relationships, including:
|
• |
different regulatory requirements for drug approvals in foreign countries; |
|
• |
differing payor reimbursement regimes, governmental payors or patient self-pay systems and price control; |
|
• |
reduced protection for intellectual property rights; |
|
• |
unexpected changes in tariffs, trade barriers and regulatory requirements; |
|
• |
economic weakness, including inflation or political instability in particular foreign economies and markets; |
|
• |
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; |
20
|
• |
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; |
|
• |
workforce uncertainty in countries where labor unrest is more common than in the United States; |
|
• |
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
|
• |
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires. |
In connection with our Andexxa and Bevyxxa development, we are currently utilizing certain suppliers outside of the United States, which subjects us to certain of the above risks.
We may be subject to information technology system failures, network disruptions and breaches in data security.
We are increasingly dependent upon information technology systems and infrastructure to conduct critical operations and generally operate our business, which includes using information technology systems to process, transmit and store electronic information in our day-to-day operations, including customer, employee and company data. The size and complexity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion and random attack. We also store certain information with third parties. Our information systems and those of our third-party vendors are subjected to computer viruses or other malicious codes, unauthorized access attempts, and cyber- or phishing-attacks and also are vulnerable to an increasing threat of continually evolving cybersecurity risks and external hazards. Disruption, degradation, or manipulation of these systems and infrastructure through intentional or accidental means could impact key business processes. Cyber-attacks against the Company’s systems and infrastructure could result in exposure of confidential information, the modification of critical data, and/or the failure of critical operations. Likewise, improper or inadvertent employee behavior, including data privacy breaches by employees and others with permitted access to our systems, may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. Any such breach could compromise our networks, and the information stored therein could be accessed, publicly disclosed, lost or stolen. Such attacks could result in our intellectual property and other confidential information being lost or stolen, disruption of our operations, and other negative consequences, such as increased costs for security measures or remediation costs, and diversion of management attention. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical study data from completed or ongoing clinical studies for any of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed. In addition, with planned operations in EU, we will need to comply with the General Data Protection Regulation (“GDPR”) provisions relating to personal data, use of third party processors, data breach notifications and transfer of personal data out of the EU to the United States. The GDPR imposes large penalties for noncompliance and has the potential to increase our responsibility and liability in relation of personal data that we process, including in clinical trials, and we are required to put in place and maintain additional mechanisms to ensure compliance with the GDPR, including increased company and vendor technology and data management measures and cybersecurity investments.
5) RISKS RELATED TO INTELLECTUAL PROPERTY
If we fail to comply with our obligations in our intellectual property licenses from third parties, we could lose license rights that are important to our business.
We are a party to intellectual property license agreements with third parties, including with respect to Bevyxxa, cerdulatinib, and other early stage programs, and we expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that our future license agreements will impose, various supply, support, diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, our licensors may have the right to terminate these agreements or pursue other remedies, in which event we may not be able to develop and market any product that is covered by these agreements or be liable for damages. Termination of licenses or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms or our not having sufficient intellectual property rights to operate our business. The occurrence of such events could materially harm our business.
Our ability to successfully commercialize our technology and products may be materially adversely affected if we are unable to obtain and maintain effective intellectual property rights for our technologies and product candidates.
21
Our success depends in large part on our and our licensors’ abilit y to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and products. In some circumstances, we may not have the right to control the preparation, fil ing and prosecution of patent applications, or to maintain the patents, covering technology or products that we license from third parties. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner cons istent with the best interests of our business. In addition, if our current or future licensors, licensees, or collaboration partners fail to establish or maintain such patents and other intellectual property rights, or lose rights to those patents and oth er intellectual property rights, such rights may be reduced or eliminated.
We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing competing products and technologies.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unresolved. In recent years patent rights have been the subject of significant litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our technology or products or that effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, or vice versa. Further, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.
The Leahy-Smith America Invents Act, or the America Invents Act (“AIA”) implemented significant changes to United States patent law. The AIA could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We have been and may again become involved in opposition, derivation, reexamination, inter partes review , post-grant review, or other proceedings challenging our patent rights or the patent rights of our licensors, and the outcome of any proceedings are highly uncertain. For example, in November 2013, Zentiva k.s. and Günter SÖLCH separately filed papers with the European Patent Office opposing European Patent 2101760, assigned to Millennium to which we have an exclusive license. The European Patent Office decided in favor of revoking the European patent. Portola has appealed this revocation. Should any of these proceedings or appeals be unsuccessful, this could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner, or by successfully seeking to narrow or invalidate our patents or render them unenforceable. The issuance of a patent is not conclusive as to its inventorship scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us, and may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage.
22
If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our bu siness may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our owned or licensed U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the United States and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. For example, we have applied for patent term extensions at the U.S. Patent and Trademark Office (USPTO) within the applicable deadline after receiving approval for Andexxa and Bevyxxa, but have not yet received a final determination. If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request or we fail to choose the most optimal patents to extend, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.
Competitors or other parties may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our products and product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the proprietary rights or intellectual property of third parties. We may become party to, or be threatened with, future adversarial proceedings or litigation regarding third party intellectual property rights with respect to our products, product candidates, and technology, including interference proceedings before the USPTO. An interference proceeding is a proceeding before the USPTO to determine the priority among multiple patents or patent applications. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. Any litigation involving defense against claims of infringement, misappropriation or other violation of proprietary or intellectual property rights, regardless of the merit of such claims, would involve substantial litigation expense and would be a substantial diversion of management time. If we are found to infringe a third-party’s intellectual property rights, we could be required to pay substantial damages, including treble damages and attorneys’ fees if we are found to be willfully infringing a third party’s patents. We may also be required to indemnify parties with whom we have contractual relationships against such claims. If a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. We also could be required to obtain a license from such third-party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all.
Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. A finding of infringement could prevent us from commercializing our products or product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties can have a similar negative impact on our business.
We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.
In addition to our patented technology and products, we rely upon trade secrets, including unpatented know-how, technology and other proprietary information to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees and consultants that obligate them to assign their inventions to us. However, it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees, consultants or collaborators that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets
23
could be disclosed, misappropriated or otherwise become known or be independently discovered by our competitors. In addition, intellectual property laws in foreign countries may not protect our intellectual pro perty to the same extent as the laws of the United States. If our trade secrets are disclosed or misappropriated, it would harm our ability to protect our rights and have a material adverse effect on our business.
We may be subject to claims that our employees have wrongfully used or disclosed intellectual property of their former employers. Intellectual property litigation or proceedings could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual property-related proceedings could have a material adverse effect on our ability to compete in the marketplace.
6) RISKS RELATED TO GOVERNMENT REGULATION
The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We will not be permitted to market our product candidates in the United States until we receive approval of an NDA or a BLA, from the FDA. Obtaining approval of an NDA or BLA can be a lengthy, expensive and uncertain process that may not be successful. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including the following:
|
• |
warning letters; |
|
• |
civil or criminal penalties and fines; |
|
• |
injunctions; |
|
• |
suspension or withdrawal of regulatory approval; |
|
• |
suspension of any ongoing clinical studies; |
|
• |
voluntary or mandatory product recalls and publicity requirements; |
|
• |
refusal to accept or approve applications for marketing approval of new drugs or biologics or supplements to approved applications submitted by us; |
|
• |
restrictions on operations, including costly new manufacturing requirements; or |
|
• |
seizure or detention of our products or import bans. |
Prior to receiving approval to commercialize any of our product candidates in the United States or abroad, we must demonstrate with substantial evidence from well-controlled clinical studies, and to the satisfaction of the FDA and other regulatory authorities abroad, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical studies can be interpreted in different ways. Even if we and our collaboration partners believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Administering any of our product candidates to humans may produce undesirable side effects, which could interrupt, delay or cause suspension of clinical studies of our product candidates and result in the FDA or other regulatory authorities denying approval of our product candidates for any or all targeted indications.
24
Regulatory approval of an NDA or BLA is not guaranteed, and the approval process is expensive and may take several years. The regulatory authorities also have substantial discretion in the approval process. Despite the time and expense exerted , failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical studies, or perform additional preclinical studies and clinical studies. The number of preclinical studies and clinical studies that will be requi red for FDA approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address and the regulations applicable to any particular product candidate. The FDA can delay, limit or deny approval of a pr oduct candidate for many reasons, including, but not limited to, the following:
|
• |
a product candidate may not be deemed safe or effective; |
|
• |
FDA officials may not find the data from preclinical studies and clinical studies sufficient; |
|
• |
the FDA may find our manufacturing data insufficient to support approval |
|
• |
the FDA might not approve our or our third-party manufacturer’s processes or facilities; or |
|
• |
the FDA may change its approval policies or adopt new regulations. |
If any of our product candidates fails to demonstrate safety and efficacy in clinical studies or does not gain regulatory approval, our business and results of operations will be materially and adversely harmed.
Unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives in the U.S., Europe and other foreign jurisdictions could harm our business.
There is increasing pressure on biotechnology companies to reduce healthcare costs. In the U.S., these pressures come from a variety of sources, such as managed care groups, institutional, and government purchasers. Increased purchasing power of entities that negotiate on behalf of federal healthcare programs and private sector beneficiaries could increase pricing pressures in the future. Such pressures may also increase the risk of litigation or investigation by the government regarding pricing calculations. The biotechnology industry will likely face greater regulation and political and legal action in the future.
The regulations that govern marketing approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Some countries, including many EU member countries, require approval of the sale price of a product before it can be marketed. In many countries, including EU member countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. In some foreign markets, including the EU member countries, current standard of care and/or competitive products may be used as a benchmark or reference to determine pricing and reimbursement level for novel products such as Andexxa. To the extent that comparators are available at lower prices than our anticipated pricing for Andexxa, the pricing and reimbursement level of our products in the EU could be negatively impacted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country, or even reduce the commercial viability of the product to an extent that prevents the launch altogether.
Adverse pricing limitations may hinder our ability to recoup our investment in Andexxa, Bevyxxa or one or more product candidates, even if our product candidates obtain regulatory approval. Adverse pricing limitations prior to approval will also adversely affect us by reducing our commercial potential. Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments becomes available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels.
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We are engaged in ongoing negotiations with hospitals and third-party payors regarding coverage, reimbursement and formulary placement. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with products administered under the supervision of a physician. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.
25
There may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or regulatory authorities in other countries. Moreover, eligibility for reimbursemen t does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover o ur costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated in to existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payors for our existing or new products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our ov erall financial condition.
Healthcare reform measures could hinder or prevent the commercial success of our products or our product candidates.
In the United States, there have been and we expect there will continue to be a number of legislative and regulatory changes to the healthcare system in ways that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. Federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. Legislative proposals have been introduced by members of Congress to overhaul provisions of the Patient Protection and Affordable Care Act, to allow commercial-level re-importation of prescription medications from Canada or other countries and to enable Medicare to negotiate drug prices with biopharmaceutical manufacturers. Congressional focus on drug pricing has increased since the Democrats took control of the U.S. House of Representatives in November 2018. For example, in January 2019, the chair of the House Oversight and Reform Committee sent letters to twelve different biopharmaceutical manufacturers, seeking documents and detailed information about such companies’ drug pricing. Both that committee and the Senate Finance Committee held committee hearings in January 2019 on the topic of drug pricing and have indicated that further committee hearings on the topic are likely.
In addition, since January 2017, the President has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On January 22, 2018, the President signed a continuing resolution on appropriations for fiscal year 2018 delaying the implementation of certain Affordable Care Act-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018 (“BBA”), among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge, as well as the Presidential administration and the Centers for Medicare & Medicaid Services, or CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business. Moreover, several attempts have been made to reduce the length of exclusivity for biologic therapies, via federal government budget proposals and proposed legislation. For example, the Price Relief, Innovation, and Competition for Essential Drugs Act, introduced in 2016, would have reduced exclusivity for biological drugs from 12 to seven years. We cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011, or Budget Control Act, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, which triggered the legislation’s automatic reduction to several government programs, including aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in April 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
26
Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation d esigned to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the adminis tration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate t he price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. While some of these and other proposed measures may require additional a uthorization to become effective, Congress and the Presidential administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transpare ncy measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future or their full impact. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:
|
• |
our ability to set a price we believe is fair for our products; |
|
• |
our ability to generate revenue and achieve or maintain profitability; and |
|
• |
the availability of capital. |
If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
Pharmaceutical companies are heavily regulated by federal, state and local regulations in the countries in which business activities occur. Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to laws and regulations governing healthcare fraud and abuse, advertising and other promotional activities, data privacy and patient rights by both the federal government and the states in which we conduct our business, as well as by healthcare regulators in the EU and other foreign jurisdictions where we may market our products. The regulations that may affect our ability to operate include, without limitation:
|
• |
the federal Anti-Kickback Statute, which prohibits, among other things, any person or entity from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; |
|
• |
the federal Physician Payments Sunshine Act or Open Payments Program provisions and the implementing regulations which will require, among other things, extensive tracking of physician and teaching hospital payments, maintenance of a payments database, and public reporting of the payment data; |
|
• |
the federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government; |
|
• |
federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; |
|
• |
federal and state laws governing data privacy and the EU general data privacy regulation (“GDPR”); |
|
• |
the Foreign Corrupt Practices Act and similar statutes and regulations in foreign jurisdictions, which makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business; |
|
• |
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; |
|
• |
the Drug Quality and Security Act which requires manufacturers and other distribution parties to create systems to trace certain prescription drugs as they are distributed in the United States; |
27
|
• |
EU member states’ laws and the industry self-regulation codes of conduct governing promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. |
The Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to substantial penalties, including civil and criminal penalties, damages, fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, integrity oversight and reporting obligations to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.
The United Kingdom’s planned withdrawal from the EU may have a negative effect on our business, global economic conditions, and financial markets.
As a result of the United Kingdom’s vote to leave the EU, the EMA is relocating its headquarters from London to Amsterdam. Since a significant proportion of the regulatory framework in the United Kingdom is derived from EU directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of product candidates, disrupt the manufacture of our products and product candidates in the United Kingdom or the EU, disrupt the importation and export of active substances and other components of drug formulations, and disrupt the supply chain for clinical trial product and final authorized formulations. While negotiations continue regarding the terms of the United Kingdom’s withdrawal from the EU, the specific impact to the supervision, regulation and supply of medicines in the United Kingdom and Europe remain unclear. The cumulative effect of disruptions to the regulatory framework or supply chains may add considerably to the development lead time to, and expense of, marketing authorization and commercialization of products in the EU and/or the United Kingdom. In view of the uncertainty surrounding the Brexit implementation, we are unable to predict the effects of such disruption to the regulatory framework and supply chain in Europe.
7) RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
Our stock price may be volatile, and investors in our common stock could incur substantial losses.
Our stock price has fluctuated in the past and may be volatile in the future. The stock market in general, and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our stock. The market price for our common stock may be influenced by many factors, including the following:
|
• |
the timing and amount of revenues generated from sale of our products or product candidates; |
|
• |
our ability to meet the expectations of investors related to the commercialization of our products and product candidates; |
|
• |
regulatory actions or decisions, including the timing and outcome of any potential future FDA or EMA decision, or other products or product candidates, including those of our competitors; |
|
• |
inaccurate sales or cash forecasting of our products or product candidates; |
|
• |
changes in laws or regulations; |
|
• |
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
28
|
• |
results of clinical trials or regulatory actions with respect to our products or product candidates; |
|
• |
market conditions in the pharmaceutical and biotechnology sectors; |
|
• |
changes in the structure of healthcare payment systems; |
|
• |
actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally; |
|
• |
trading volume of our common stock; |
|
• |
sales of our common stock by us or our stockholders; |
|
• |
general economic, industry and market conditions; and |
|
• |
the other risks described in this “Risk factors” section. |
These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. In addition, following our update call on September 5, 2017, at least three plaintiffs’ securities litigation firms publicly announced that they are investigating potential securities fraud claims that they may wish to make against us. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts may cease to publish research on our company at any time in their discretion. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. In addition, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If our operating results fail to meet the forecasts of analysts, our stock price will likely decline.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include the following:
|
• |
our board of directors is divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; |
|
• |
our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
|
• |
our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the board of directors, the chairman of the board, the chief executive officer or the president; |
|
• |
our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
29
|
a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and |
|
• |
our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. |
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our agreements with our executive officers may require us to pay severance benefits to any of those persons who are terminated in connection with a change in control of us, which could harm our financial condition or results or discourage third parties from seeking business combinations.
Our executive officers are parties to agreements that contain change in control and severance provisions and acceleration of vesting of equity awards. The accelerated vesting of equity awards could result in dilution to our existing stockholders and harm the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gain.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of our existing debt agreement precludes us from paying dividends and future debt agreements or other restrictive covenants may also preclude us from paying dividends in the future. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.
On March 22, 2019 we issued 500,000 unregistered shares of our common stock to Lonza for a purchase price of $500,000 pursuant to the terms of our manufacturing services agreement with Lonza. These shares of common stock were sold in a private placement without registration pursuant to the SEC’s Regulation D.
None.
None.
None.
30
|
|
|
|
Incorporation By Reference |
||||||
Exhibit Number |
|
Exhibit Description |
|
Form |
|
SEC File No. |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Portola Pharmaceuticals, Inc. |
|
8-K |
|
001-35935 |
|
3.1 |
|
5/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
8-K |
|
001-35935 |
|
3.1 |
|
6/11/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
Amended and Restated Bylaws of Portola Pharmaceuticals, Inc. |
|
8-K |
|
001-35935 |
|
3.2 |
|
5/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
Form of Common Stock Certificate of Portola Pharmaceuticals, Inc. |
|
S-1 |
|
333-187901 |
|
4.1 |
|
5/17/2013 |
|
|
|
|
|
|
|
|
|
|
|
4.5 |
|
|
10-Q |
|
001-35935 |
|
4.7 |
|
11/06/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
|
10-Q |
|
001-35935 |
|
4.8 |
|
11/06/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
4.7 |
|
|
10-Q |
|
001-35935 |
|
4.9 |
|
11/06/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3*+ |
|
Portola Pharmaceuticals, Inc. 2013 Equity Incentive Plan and Amendment dated February 27, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.28*+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.47*† |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.48*+ |
|
Offer Letter by and between Portola Pharmaceuticals, Inc. and Ernie Meyer dated June 26, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.49*+ |
|
Offer Letter by and between Portola Pharmaceuticals, Inc. and Sheldon Koenig dated January 17, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.50*+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
XBRL Instance Document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH* |
|
XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
|
31
|
|
|
|
Incorporation By Reference |
||||||
Exhibit Number |
|
Exhibit Description |
|
Form |
|
SEC File No. |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
101.CAL* |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF* |
|
XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB* |
|
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE* |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
|
* |
Filed herewith |
+ |
Management contract or compensatory plan |
† |
Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. |
(1) |
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. |
32
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.
|
|
PORTOLA PHARMACEUTICALS, INC. |
||
|
|
|||
|
|
|||
Date: May 8, 2019 |
|
By: |
|
/s/ Mardi C. Dier |
|
|
|
|
Mardi C. Dier |
|
|
|
|
Chief Financial and Business Officer |
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
Date: May 8, 2019 |
|
By: |
|
/s/ Scott Garland |
|
|
|
|
Scott Garland |
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
(Principal Executive Officer) |
33
Exhibit 10.3
Portola Pharmaceuticals, Inc.
2013 Equity Incentive Plan
Adopted by the Board of Directors: January 30, 2013
IPO Date/Effective Date: May 21, 2013
(a) |
Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c). |
(b) |
Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan: |
(i) To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.
1 .
(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or at which cash or shares of Common Stock may be issued).
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under his or her then-outstanding Award without his or her written consent.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. If required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan. Except as otherwise provided in the Plan or an Award Agreement, no amendment of the Plan will materially impair that Participant’s rights under an outstanding Award without his or her written consent.
(vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding “incentive stock options” or (C) Rule 16b-3.
(viii) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more outstanding Awards. Except with respect to amendments that disqualify or impair the status of an Incentive Stock Option or as otherwise provided in the Plan or an Award Agreement, no amendment of an outstanding Award will materially impair that Participant’s rights under his or her outstanding Award without his or her written consent. To be clear, unless prohibited by applicable law, the Board may amend the terms of an Award without the affected Participant’s consent if necessary (A) to maintain the qualified status of the Award as an Incentive Stock Option, (B) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code, or (C) to comply with other applicable laws.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
2 .
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States.
(xi) To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash award and/or (6) award of other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company ; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Section 162(m) and Rule 16b-3 Compliance. The Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
3 .
3. Shares Subject to the Plan.
(c) |
Incentive Stock Option Limit. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that |
4.
may be issued pursuant to the exercise of Incentive Stock Options will be 81,000,000 shares of Common Stock (such shares of Common Stock subject to adjustment to reflect any stock split on or before the Effective Date) . |
(e) |
Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise. |
4. Eligibility.
(a) |
Eligibility for Specific Stock Awards . Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however , that Stock Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are granted pursuant to a corporate transaction such as a spin off transaction), (ii) the Company, in connection with its legal counsel, has determined that such Stock Awards are otherwise exempt from Section 409A of the Code, or (iii) the Company, in connection with its legal counsel, has determined that such Stock Awards comply with the distribution requirements of Section 409A of the Code. |
5 .
5. Provisions relating to Options and Stock Appreciation Rights.
Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however , that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:
(a) |
Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of ten years from the date of its grant or such shorter period specified in the Award Agreement. |
(b) |
Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents. |
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
(iv) if an option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock
6.
issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.
(e) |
Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply: |
(i) Restrictions on Transfer. An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order or official marital settlement agreement. If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise
7.
the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
(g) |
Termination of Continuous Service. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three months following the termination of the Participant’s Continuous Service and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR will terminate. |
8.
Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate. |
(l) |
Non-Exempt Employees . If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company's then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements. |
9 .
6. Provisions of Stock Awards other than Options and SARs.
(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii) Vesting. Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.
(v) Dividends. A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
10 .
(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(iii) Payment . A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(i) Performance Stock Awards . A Performance Stock Award is a Stock Award (covering a number of shares not in excess of that set forth in Section 3(d) above) that is payable (including that may be granted, vest or exercised) contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion. In addition, to the extent permitted by
11.
applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.
(ii) Performance Cash Awards . A Performance Cash Award is a cash award (for a dollar value not in excess of that set forth in Section 3(d) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion. The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.
(iii) Section 162(m) Compliance . Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with respect to an Award intended to qualify as “performance-based compensation” thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier of (a) the date 90 days after the commencement of the applicable Performance Period, and (b) the date on which 25% of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such relate solely to the increase in the value of the Common Stock). Notwithstanding satisfaction of any completion of any Performance Goals, the number of shares of Common Stock, Options, cash or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.
12 .
(a) |
Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Awards. |
(b) |
Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however , that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law. |
(c) |
No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award. |
8. Miscellaneous.
(a) |
Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Awards will constitute general funds of the Company. |
(b) |
Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement as a result of a clerical error in the papering of the Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement. |
(c) |
Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Award has been entered into the books and records of the Company. |
13 .
(e) |
Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced. |
(f) |
Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with the rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s). |
14.
place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. |
(i) |
Electronic Delivery . Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet. |
(j) |
Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law. |
15.
issued or paid before the date that is six (6) months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on the original schedule. |
(l) |
Clawback/Recovery . All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of Cause. |
9. Adjustments upon Changes in Common Stock; Other Corporate Events.
(b) |
Dissolution or Liquidation . Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however , that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. |
(c) |
Corporate Transaction. The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction: |
16 .
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board will determine (or, if the Board will not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;
(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;
(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.
The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants.
(d) |
Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur. |
10. Plan Term; Earlier Termination or Suspension of the Plan.
The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board (the “ Adoption Date ”), or (ii) the date the Plan is approved by the stockholders of the Company. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
17 .
11. Existence of the Plan; Timing of First Grant or Exercise.
The Plan will come into existence on the Adoption Date; provided, however , no Award may be granted prior to the IPO Date (that is, the Effective Date). In addition, no Stock Award will be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award, or Other Stock Award, will be granted) and no Performance Cash Award will be settled unless and until the Plan has been approved by the stockholders of the Company, which approval will be within 12 months after the date the Plan is adopted by the Board.
12. Choice of Law.
The law of the State of California will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
13. Definitions. As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) |
“ Affiliate ” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition. |
(b) |
“ Award ” means a Stock Award or a Performance Cash Award. |
(c) |
“ Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award. |
(d) |
“ Board ” means the Board of Directors of the Company. |
(e) |
“ Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment. |
18.
harm to the business of the Company; provided, however , that the action or conduct described in clauses (iii) and (iv) above will constitute “ Cause ” only if such action or conduct continues after the Company has provided the Participant with written notice thereof and thirty (30) days to cure the same. |
(g) |
“ Change in Control ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: |
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company; (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities; or (C) solely because the level of Ownership held by any Exchange Act Person (the “ Subject Person ”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
(iv) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a
19.
majority of the members of the Board; provided, however , that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
For purposes of determining voting power under the term Change in Control, voting power shall be calculated by assuming the conversion of all equity securities convertible (immediately or at some future time) into shares entitled to vote, but not assuming the exercise of any warrant or right to subscribe to or purchase those shares. In addition, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the term Change in Control will not include a change in the voting power of any one or more stockholders as a result of the conversion of any class of the Company’s securities into another class of the Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of Incorporation, and (C) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however , that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply. If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.
(h) |
“ Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder. |
(i) |
“ Committee ” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c). |
(j) |
“ Common Stock ” means, as of the IPO Date, the common stock of the Company, having one vote per share. |
(k) |
“ Company ” means Portola Pharmaceuticals, Inc., a Delaware corporation. |
(l) |
“ Consultant ” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services . However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person. |
20 .
(n) |
“ Corporate Transaction ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: |
(i) the consummation of a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) the consummation of a sale or other disposition of at least 50% of the outstanding securities of the Company;
(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
To the extent required for compliance with Section 409A of the Code, in no event will an event be deemed a Corporate Transaction if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
21 .
(p) |
“ Director ” means a member of the Board. |
(q) |
“ Disability ” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. |
(r) |
“ Effective Date ” means the IPO Date. |
(s) |
“ Employee ” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan. |
(t) |
“ Entity ” means a corporation, partnership, limited liability company or other entity. |
(u) |
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. |
(v) |
“ Exchange Act Person ” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities. |
(w) |
“ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows: |
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination , as reported in a source the Board deems reliable.
22 .
(ii) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
(x) |
“ Incentive Stock Option ” means an option granted pursuant to Section 5 of the Plan that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code. |
(y) |
“ IPO Date ” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering. |
(z) |
“ Non-Employee Director ” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“ Regulation S-K ”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3. |
(aa) |
“ Nonstatutory Stock Option ” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option. |
(bb) |
“ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act. |
(cc) |
“ Option ” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan. |
(dd) |
“ Option Agreement ” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan. |
(ee) |
“ Optionholder ” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. |
(ff) |
“ Other Stock Award ” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d). |
(gg) |
“ Other Stock Award Agreement ” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other |
23.
Stock Award grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan. |
(hh) |
“ Outside Director ” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code. |
(ii) |
“ Own, ” “ Owned, ” “ Owner, ” “ Ownership ” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. |
(jj) |
“ Participant ” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award. |
(kk) |
“ Performance Cash Award ” means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii). |
24.
regulatory body ap p roval with respect to products, studies and /or trials ; (xxxxii) patient enrollment ; (xxxxiii) budget management and ( xxxxiv ) and to the extent that an Award is not intended to comply with Section 162(m) of the Code, other m easures of performance selected by the Board. |
(mm) |
“ Performance Goals ” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item; (13) to exclude the effects of the timing of acceptance for review and/or approval of submissions to the Food and Drug Administration or any other regulatory body and (14) to exclude the effects of entering into or achieving milestones involved in licensing joint ventures. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award. |
(nn) |
“ Performance Period ” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board. |
25 .
(oo) |
“ Performance Stock Award ” means a Stock Award granted under the terms and conditions of Section 6(c)(i) . |
(pp) |
“ Plan ” means this Portola Pharmaceuticals, Inc. 2013 Equity Incentive Plan. |
(qq) |
“ Restricted Stock Award ” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a). |
(rr) |
“ Restricted Stock Award Agreement ” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan. |
(ss) |
“ Restricted Stock Unit Award ” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b). |
(uu) |
“ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. |
(vv) |
“ Securities Act ” means the Securities Act of 1933, as amended. |
(ww) |
“ Stock Appreciation Right ” or “ SAR ” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5. |
(xx) |
“ Stock Appreciation Right Agreement ” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan. |
(yy) |
“ Stock Award ” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award or any Other Stock Award. |
26.
(ii) any partnership , limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. |
(bbb) |
“ Ten Percent Stockholder ” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Affiliate. |
27 .
PORTOLA PHARMACEUTICALS, INC.
2013 Equity Incentive plan
Whereas , the Board of Directors (the “ Board ”) of Portola Pharmaceuticals, Inc. (the “ Company ”) previously approved and adopted the 2013 Equity Incentive Plan (the “ Plan ”);
Whereas , the Compensation Committee of the Board (the “ Committee ”) has determined that it is in the best interest of the Company to amend the Plan as set forth in this Amendment; and
Whereas , the Committee has the authority to amend the Plan pursuant to Section 2(b)(vi) of the Plan.
Now, Therefore , the Plan is hereby amended as follows:
1. Section 8(h) of the Plan is hereby amended and restated to read as follows:
(h) Withholding Obligations . Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local, or foreign tax withholding obligation or a request for withholding from the Participant relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment, including a payment that results from the sale of shares issued by the settlement of the Award(s) into the market; (ii) withholding shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant in connection with the Award; provided, however, that to avoid classification or reclassification of the Stock Award as a liability for financial accounting purposes, Common Stock withheld from the shares available to be issued under the terms of the Award cannot exceed a value determined by, and not to exceed, the highest marginal tax rate as provided by law in the Participant’s applicable jurisdictions in which the Company has a statutory requirement to withhold tax on the Participant’s share-based compensation, even if this rate exceeds the highest marginal rate that may be applicable to the specific Participant’s compensation; (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.
2. All other terms and conditions of the Plan shall remain in full force and effect.
3. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Plan.
I hereby certify that the foregoing Amendment to the Plan was duly adopted by the Compensation Committee of the Board of Directors of the Company as of February 27, 2019.
|
/s/John Moriarty |
|
John Moriarty Executive Vice President, General Counsel and Secretary |
28 .
Exhibit 10.28
Amended and Restated Portola Pharmaceuticals, Inc.
Inducement Plan
Adopted by the Board of Directors: July 9, 2017
Amended and Restated by the Board of Directors: December 14, 2018
(a) |
Administration by Board. The Board will administer the Plan; provided, however, that Awards may only be granted by either (i) a majority of the Company's Independent Directors or (ii) the Independent Compensation Committee . Subject to those constraints and the other constraints of the Inducement Award Rules, the Board may delegate some of its powers of administration of the Plan to a Committee, as provided in Section 2(c). |
1 .
(b) |
Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan and the Inducement Award Rules : |
(i) To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to an Award; provided, however, that Awards may only be granted by either (i) a majority of the Company's Independent Directors or (ii) the Independent Compensation Committee.
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.
(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or at which cash or shares of Common Stock may be issued).
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under his or her then-outstanding Award without his or her written consent.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, adopting amendments relating to nonqualified deferred compensation under Section 409A of the Code and/or making the Plan or Awards granted under the Plan exempt from or compliant with the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. If required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan. Except as otherwise provided in the Plan (including subsection (viii) below) or an Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Award without the Participant’s written consent.
2 .
(vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Rule 16b-3 of Exchange Act or any successor rule .
(viii) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more outstanding Awards. Except as otherwise provided in the Plan or an Award Agreement, no amendment of an outstanding Award will materially impair that Participant’s rights under his or her outstanding Award without his or her written consent. To be clear, unless prohibited by applicable law, the Board may amend the terms of an Award without the affected Participant’s consent if necessary (A) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code, or (C) to comply with other applicable laws or listing requirements.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by individuals who are foreign nationals or employed outside the United States.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Rule 16b-3 Compliance. The Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
(e) |
Cancellation and Re-Grant of Awards . Neither the Board nor any Committee will have the authority to: (i) reduce the exercise, purchase or strike price of any outstanding Option, or (ii) cancel any outstanding Option that has an exercise price or strike price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Awards |
3 .
under the Plan, unless the stockholders of the Company have approved such an action within twelve (12) months prior to such an event. |
3. Shares Subject to the Plan.
(c) |
Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise. |
4. Eligibility.
(a) |
Eligibility for Awards . Awards may only be granted to persons who are Eligible Employees described in Section 1(a) of the Plan, where the Award is an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules, provided however , that Awards may not be granted to Eligible Employees who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the stock underlying such Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Awards are granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal counsel, has determined that such Awards are otherwise exempt from or comply with the distribution requirements of Section 409A of the Code. |
4 .
(b) |
Approval Requirements. All Awards must be granted either by a majority of the Company’s independent directors or the Independent Compensation Committee . |
5. Provisions relating to Options.
Each Option will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be Nonstatutory Stock Options. The provisions of separate Options need not be identical; provided, however , that each Option Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Option Agreement or otherwise) the substance of each of the following provisions:
(a) |
Term. No Option will be exercisable after the expiration of 10 years from the date of its grant or such shorter period specified in the Option Agreement. |
(b) |
Exercise Price. The exercise or strike price of each Option will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than 100% of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code . |
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
(iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares
5 .
issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.
(d) |
Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options will apply: |
(i) Restrictions on Transfer. An Option will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, an Option may not be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, an Option may be transferred pursuant to the terms of a domestic relations order or official marital settlement agreement or other divorce or separation instrument.
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
(f) |
Termination of Continuous Service. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option (to the extent |
6 .
that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three months following the termination of the Participant’s Continuous Service and (ii) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option within the applicable time frame, the Option will terminate. |
7.
Agreement. If, after the Participant’s death, the Option is not exercised within the applicable time frame, the Option will terminate. |
(k) |
Non-Exempt Employees . If an Option is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option will not be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company's then current employment policies and guidelines), the vested portion of any Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Award will be exempt from the employee’s regular rate of pay, the provisions of this Section will apply to all Awards and are hereby incorporated by reference into such Award Agreements. |
6. Provisions Relating to Restricted Stock Unit Awards.
Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
(a) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
8 .
(b) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(c) Payment . A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(d) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
(e) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
(f) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(a) |
Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Awards. |
(b) |
Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however , that this undertaking will not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law. |
9 .
(c) |
No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award. |
8. Miscellaneous.
(a) |
Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Awards will constitute general funds of the Company. |
(b) |
Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement as a result of a clerical error in the papering of the Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement. |
(c) |
Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Award has been entered into the books and records of the Company. |
(d) |
No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. |
(e) |
Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject |
10 .
to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced. |
(f) |
Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Award has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. |
(h) |
Electronic Delivery . Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet. |
(i) |
Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an |
11 .
employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law. |
(j) |
Compliance with Section 409A. Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six (6) months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on the original schedule. |
(k) |
Clawback/Recovery . All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of Cause. |
9. Adjustments upon Changes in Common Stock; Other Corporate Events.
12 .
(b) |
Dissolution or Liquidation . Except as otherwise provided in the Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other t han Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fac t that the holder of such Award is providing Continuous Service; provided, however , that the Board may, in its sole disc retion, cause some or all Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfe iture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. |
(c) |
Corporate Transaction. The following provisions will apply to Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to Awards, contingent upon the closing or completion of the Corporate Transaction: |
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Award or to substitute a similar award for the Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii) accelerate the vesting, in whole or in part, of the Award (and, if applicable, the time at which the Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board will determine (or, if the Board will not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;
(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Award;
(v) cancel or arrange for the cancellation of the Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
13 .
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.
The Board need not take the same action or actions with respect to all Awards or portions thereof or with respect to all Participants.
(d) |
Change in Control. An Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Award Agreement for such Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur. |
10. Termination or Suspension of the Plan.
The Board may suspend or terminate the Plan at any time. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
11. Effective Date of the Plan.
The Plan will come into existence on the Effective Date. No Award may be granted prior to the Effective Date.
12. Choice of Law.
The law of the State of California will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
13. Definitions. As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) |
“ Affiliate ” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition. |
(b) |
“ Award ” means a Nonstatutory Stock Option or a Restricted Stock Unit Award. |
(c) |
“ Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award. |
(d) |
“ Board ” means the Board of Directors of the Company. |
(e) |
“ Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Award after the Adoption Date without the receipt of consideration by the Company through merger, |
14 .
consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment. |
(f) |
“ Cause ” means the occurrence of any one or more of the following: (i) the Participant’s commission of any crime involving fraud, dishonesty or moral turpitude; (ii) the Participant’s attempted commission of or participation in a fraud or act of dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (iii) the Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or any statutory duty that the Participant owes to the Company; or (iv) the Participant’s conduct that constitutes gross insubordination, incompetence or habitual neglect of duties and that results in (or might have reasonably resulted in) material harm to the business of the Company; provided, however , that the action or conduct described in clauses (iii) and (iv) above will constitute “ Cause ” only if such action or conduct continues after the Company has provided the Participant with written notice thereof and thirty (30) days to cure the same. |
(g) |
“ Change in Control ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: |
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company; (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities; or (C) solely because the level of Ownership held by any Exchange Act Person (the “ Subject Person ”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing
15 .
more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
(iv) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the members of the Board; provided, however , that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
For purposes of determining voting power under the term Change in Control, voting power shall be calculated by assuming the conversion of all equity securities convertible (immediately or at some future time) into shares entitled to vote, but not assuming the exercise of any warrant or right to subscribe to or purchase those shares. In addition, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the term Change in Control will not include a change in the voting power of any one or more stockholders as a result of the conversion of any class of the Company’s securities into another class of the Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of Incorporation, and (C) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however , that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply. If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.
(h) |
“ Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder. |
16 .
(i) |
“ Committee ” means a committee of one or more Independent Directors to whom authority has been delegated by the Board in accordance with Section 2(c) . |
(j) |
“ Common Stock ” means, as of the IPO Date, the common stock of the Company, having one vote per share. |
(k) |
“ Company ” means Portola Pharmaceuticals, Inc., a Delaware corporation. |
(l) |
“ Consultant ” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services . However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person. |
(m) |
“ Continuous Service ” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service ; provided, however , that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law. In addition, to the extent required for exemption from or compliance with Section 409A of the Code, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder). |
(n) |
“ Corporate Transaction ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: |
(i) the consummation of a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
17 .
(ii) the consummation of a sale or other disposition of at least 5 0% of the outstanding securities of the Company;
(iii) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
To the extent required for compliance with Section 409A of the Code, in no event will an event be deemed a Corporate Transaction if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
(o) |
“ Director ” means a member of the Board. Directors are not eligible to receive Awards under the Plan with respect to their service in such capacity. |
(p) |
“ Disability ” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. |
(q) |
“ Effective Date ” means July 9, 2017. |
(r) |
“ Employee ” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan. |
(s) |
“ Entity ” means a corporation, partnership, limited liability company or other entity. |
(t) |
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. |
(u) |
“ Exchange Act Person ” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in |
18 .
substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities. |
(v) |
“ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows: |
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination , as reported in a source the Board deems reliable.
(ii) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
(w) |
“ Non-Employee Director ” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“ Regulation S-K ”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3. |
(x) |
“ Nonstatutory Stock Option ” means any option granted pursuant to Section 5 of the Plan that does not qualify as an “incentive stock option” within the meaning of Section 422 of the Code. |
(y) |
“ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act. |
(z) |
“ Option ” means a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan. |
(aa) |
“ Option Agreement ” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan. |
19 .
(bb) |
“ Optionholder ” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. |
(cc) |
“ Own, ” “ Owned, ” “ Owner, ” “ Ownership ” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. |
(dd) |
“ Participant ” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award. |
(ee) |
“ Plan ” means this Portola Pharmaceuticals, Inc. Inducement Plan, as it may be amended. |
(ff) |
“ Restricted Stock Unit Award ” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b). |
(hh) |
“ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. |
(ii) |
“ Securities Act ” means the Securities Act of 1933, as amended. |
(jj) |
“ Subsidiary ” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. |
20 .
AMENDMENT TO
PORTOLA PHARMACEUTICALS, INC.
INDUCEMENT plan
Whereas , the Board of Directors (the “ Board ”) of Portola Pharmaceuticals, Inc. (the “ Company ”) previously approved and adopted the Inducement Plan (the “ Plan ”);
Whereas , the Compensation Committee of the Board (the “ Committee ”) has determined that it is in the best interest of the Company to amend the Plan as set forth in this Amendment; and
Whereas , the Committee has the authority to amend the Plan pursuant to Section 2(b)(vi) of the Plan.
Now, Therefore , the Plan is hereby amended as follows:
1. Section 8(g) of the Plan is hereby amended and restated to read as follows:
(g) Withholding Obligations . Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local, or foreign tax withholding obligation or a request for withholding from the Participant relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment, including a payment that results from the sale of shares issued by the settlement of the Award(s) into the market; (ii) withholding shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant in connection with the Award; provided, however, that to avoid classification or reclassification of the Stock Award as a liability for financial accounting purposes, Common Stock withheld from the shares available to be issued under the terms of the Award cannot exceed a value determined by, and not to exceed, the highest marginal tax rate as provided by law in the Participant’s applicable jurisdictions in which the Company has a statutory requirement to withhold tax on the Participant’s share-based compensation, even if this rate exceeds the highest marginal rate that may be applicable to the specific Participant’s compensation; (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.
2. All other terms and conditions of the Plan shall remain in full force and effect.
3. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Plan.
I hereby certify that the foregoing Amendment to the Plan was duly adopted by the Compensation Committee of the Board of Directors of the Company as of February 27, 2019.
|
/s/John Moriarty |
|
John Moriarty Executive Vice President, General Counsel and Secretary |
21 .
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Exhibit 10.47
Manufacturing Services Agreement
(the “Agreement”)
by and between
Lonza AG
Muenchensteinerstrasse 38
Ch-4002, Basel
Switzerland
- hereinafter “Lonza” -
and
Portola Pharmaceuticals, Inc.
270 E. Grand Avenue
South San Francisco, CA 94080
USA
- hereinafter “Customer” -
Effective as of 15 August, 2017 (the “Effective Date”)
1
Page
1 Definitions and Interpretation 3
2 Performance of Services 14
3 Project Management / Steering Committee 21
4 Visp Facility 23
5 Quality 23
6 Insurance 24
7 Minimum Order; Forecasting, Ordering, Rescheduling and Cancellation 24
8 Delivery and Acceptance 30
9 Price and Payment and Changes 32
10 Intellectual Property 37
11 Warranties 38
12 Indemnification and Liability 41
13 Confidentiality 43
14 Term and Termination 44
15 Force Majeure 49
16 Miscellaneous 49
Appendix A: Cell Line
Appendix B: Batch Price and Minimum Order
Appendix C: Bill of materials
Appendix D: [Reserved]
Appendix E: Stages of Work
Appendix F: Estimated Visp Facility Construction and Validation Timeline
Appendix G: Certain Process Validation Activities
Appendix H: Form Common Stock Purchase Agreement
2
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
WHEREAS, Customer and Lonza’s Affiliate Lonza Sales AG entered into the Manufacturing Services Agreement effective 8 October 2014, as amended (the “2014 Agreement”) for certain development services regarding the product known variously as PRT4445 and Andexanet alfa at Lonza’s facilities located in Slough, UK and certain development and manufacturing services regarding such product at Lonza’s facilities located in Porrino, Spain;
WHEREAS, Lonza has entered into joint venture agreement with a Third Party for the construction of a biologics manufacturing facility in Visp, Switzerland, in respect of which Lonza operates and is authorized to sell up to [*] of the Visp Facility’s manufacturing capacity, which will initially consist of [*] batches per year out of [*] at the [*] liter scale, [*];
WHEREAS, Customer wishes to engage Lonza for additional commercial scale manufacturing of the Product as described in this Agreement at Lonza’s facilities located in Visp, Switzerland and Porrino, Spain;
WHEREAS, Lonza, or its Affiliate, is prepared to perform such manufacturing services for Customer on the terms and subject to the conditions set out herein; and
WHEREAS, Customer and Lonza are entering into an amendment to the 2014 Agreement as of even date herewith.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the Parties intending to be legally bound, agree as follows:
1 Definitions and Interpretation
“Adjusted Minimum Order” |
has the meaning given in Clause 7.1.3. |
“Affiliate” |
means any company, partnership or other entity which directly or indirectly Controls, is Controlled by or is under common Control with the relevant Party. As used in this definition, “Control” means the ownership of more than fifty percent (50%) of the issued share capital or the legal power to direct or cause the direction of the general management and policies of the relevant Party. For the avoidance of doubt and notwithstanding the foregoing, neither the JV Entity nor the JV Partner shall be regarded or construed as an “Affiliate” of Lonza for the purposes of this Agreement. |
“Agreement” |
means this agreement incorporating all Appendices, as amended from time to time by written agreement of the Parties. |
3
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Governmental Authority in such jurisdictions and all applicable cGMP together with amendments thereto. |
“Approval” |
means marketing approval by the FDA, the EMA or MHLW, of Product manufactured at the Visp Facility for commercial supply (and the date of first Approval shall be the date on which the first of these approvals occurs). |
“Background Intellectual Property” |
means any Intellectual Property either: (i) owned or controlled by a Party or any of its Affiliates prior to the Effective Date; or (ii) developed or acquired by a Party or any of its Affiliates independently from the performance of the activities under this Agreement during the Term of this Agreement. For the avoidance of doubt Lonza’s Background Intellectual Property shall include Lonza Information and any and all applicable portions of the Manufacturing Process (in each case) owned, controlled, or developed prior to the provision of services to Customer by Lonza under the 2014 Agreement or developed or acquired independently of this Agreement and the 2014 Agreement. |
“Baseline Batches” |
has the meaning given in Clause 9.5.2. |
“Batch” |
means a batch of the Product produced during a single run of the Manufacturing Process in a [*] fermenter at the Visp Facility and in a [*] fermenter at the Porrino Facility, as applicable, purified and tested as a single batch as defined by the applicable Batch record, and which may be an Engineering Batch, a Process Validation Batch or a cGMP Batch. |
“Batch Price” |
means the Price of each Batch. |
[*] |
[*] |
“Campaign” |
means a series of cGMP Batches at either the Visp Facility or the Porrino Facility, as applicable. |
“Cancellation Fee” |
has the meaning given in Clause 7.5. |
“Cell Line” |
means the Customer’s cell line, particulars of which are set out in Appendix A. |
“Certificate of Analysis” |
means a document prepared by Lonza listing tests performed by Lonza or approved External Laboratories against the Specifications and the results of such tests. |
4
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
“cGMP” |
means those laws and regulations applicable in the U.S., European Union, Japan, and/or such other jurisdictions as the Parties may agree in writing, relating to the manufacture of medicinal products for human use, including, without limitation, current good manufacturing practices as specified in the ICH guidelines, including without limitation, ICH Q7A “ICH Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients”, US Federal Food Drug and Cosmetic Act at 21CFR (Chapters 210, 211, 600 and 610), JNDA and the Guide to Good Manufacturing Practices for Medicinal Products as promulgated under European Directive 91/356/EEC. For the avoidance of doubt, Lonza’s operational quality standards may be defined in internal cGMP policy documents. |
“cGMP Batch” |
means any Batches manufactured in accordance with cGMP after the completion of the Engineering Batches and which for clarity, shall include Process Validation Batches and Commercial Batches. |
“Change of Control” |
means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: |
5
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
“ Subject Person ” ) exceeds the designated percentage threshold of the outstanding voting shares as a result of a repurchase or other acquisition of voting shares by Customer reducing the number of shares outstanding, provided that if a Change of Control would occur (but for the operation of this sentence) as a result of the acquisition of voting shares by Customer, and after such share acquisition, the Subject Person becomes the owner of any additional voting shares that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting shares owned by the Subject Person over the designated percentage threshold, then a Change of Control shall be deemed to occur; |
|
(b) without the consent of the Board of Directors of Customer, any Exchange Act Person becomes the owner, directly or indirectly, of securities of Customer representing more than forty percent (40%) of the combined voting power of Customer’s then outstanding shares; |
|
(c) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) Customer and, immediately after the consummation of such merger, consolidation or similar transaction, the shareholders of Customer immediately prior thereto do not own, directly or indirectly, either (i) outstanding voting shares representing more than fifty percent (50%) of the combined outstanding voting rights in the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combined outstanding voting rights in the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their ownership of the outstanding voting shares of Customer immediately prior to such transaction; |
|
(d) the shareholders of Customer approve or the Board of Directors of Customer approves a plan of complete dissolution or liquidation of Customer, or a complete dissolution or liquidation of Customer shall otherwise occur, except for a liquidation into a parent corporation; or |
6
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
consolidated assets of Customer and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting shares of which are owned by shareholders of Customer in substantially the same proportions as their Customer ownership of the outstanding voting shares of Customer immediately prior to such sale, lease, license or other disposition. |
|
Notwithstanding the foregoing definition or any other provision of this Agreement, the term Change of Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of Customer, provided that such transaction is not carried out as part of, or in contemplation of any of the events set out on (a) to (e) above. |
|
In addition to all of the above, the term “Change of Control” shall also include a transaction in which the control of the Customer (where “Control” is the right to exercise more than 50% of the voting rights in the Customer) passes to any person or persons other than those who exercise Control immediately prior to the closing of such transaction. |
“Commencement Date” |
means the date of [*]. |
“Commercial Batches” |
means cGMP Batches which are not Process Validation Batches. |
“Comparison Batches” |
has the meaning given in Clause 9.5.2. |
“Confidential Information” |
means Customer Information and/or Lonza Information, as the context requires. |
“Contract Facility” |
means, in relation to the Visp Facility and the Services, the entity that is deemed the “contract facility” under the most current FDA Guidance for Industry: “Contract Manufacturing Arrangements for Drugs: Quality Agreements. |
“Customer Indemnitee(s)” |
has the meaning given in Clause 12.1. |
7
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
behalf of Customer to Lonza or any Affiliate of Lonza (or the JV Partner, JV Entity, or the Contract Facility, if different), under or in connection with this Agreement, including without limitation, any and all Customer know-how and trade secrets; (in each case whether disclosed under this Agreement, or to the extent that they are used pursuant to this Agreement, disclosed under the 2014 Agreement or any previous agreement). |
“Customer Materials” |
means any Raw Materials, components of Product, or other materials of any nature, in each case provided by Customer (whether provided under this Agreement, or to the extent that they are used pursuant to this Agreement, provided under the 2014 Agreement or any previous agreement) or on behalf of Customer. |
“Delay” |
has the meaning given in Clause 2.1. |
“Disclosing Party” |
has the meaning given in Clause 13.1. |
“EMA” |
means the European Medicines Agency, or any successor agency having substantially the same functions. |
“Engineering Batch” |
means a Batch that is intended to demonstrate the transfer of the Manufacturing Process to the Visp Facility as further defined in Clause 2.8.1. |
“ Exchange Act ” |
means the US Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. |
8
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
fifty percent (50%) of the combined voting power of Customer’s then outstanding securities. |
“Executive Committee” |
has the meaning given in Clause 3.4. |
“External Laboratories” |
means any Third Party instructed by Lonza, with Customer’s consent, to conduct activities required to complete portion(s) of the Services that are not customarily offered by Lonza or any of its Affiliates. |
“Failed cGMP Batch” |
has the meaning given in Clause 8.3.3. |
“FDA” |
means the United States Food and Drug Administration, or any successor agency having substantially the same functions. |
“Firm Order” |
means a Purchase Order submitted by Customer that has been accepted by Lonza and is binding on both Parties, in each case in accordance with this Agreement. |
“First Tranche Equity” |
has the meaning given in Clause 9.5.1. |
“Forecast” |
has the meaning given in Clause 7.2.2. |
“Gen 1” |
means the first generation Manufacturing Process. |
“Gen 2” |
means the second generation Manufacturing Process used at the Porrino Facility under the 2014 Agreement as of the Effective Date. |
[*] |
[*] |
“Governmental Authority” |
means any Regulatory Authority and any national, multi-national, regional, state or local regulatory agency, department, bureau, or other governmental entity in the US, the European Union, Japan, and/or such other jurisdiction as may be agreed in writing between the Parties. |
“Indemnitee” |
means, as the context dictates, a Customer Indemnitee or a Lonza Indemnitee. |
9
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
all rights and applications that are similar or equivalent to the rights and application described in the foregoing clauses (i) and (ii), which exist now, or which come to exist in the future, in any part of the world. |
“JV Entity” |
means the legal entity which will be incorporated with Lonza and the JV Partner as the only shareholders. |
“JV Partner” |
means [*]. |
“Losses” |
means claims, liabilities, loss, damages, costs and expenses (including reasonable attorney fees). |
“Lonza Indemnitee(s)” |
has the meaning given in Clause 12.2. |
“Lonza Information” |
means all information that is proprietary to Lonza or any Affiliate of Lonza and that is maintained in confidence by Lonza or any Affiliate of Lonza (or the JV Partner, JV Entity, or the Contract Facility, if different) and that is disclosed by Lonza or any Affiliate of Lonza (or the JV Partner, JV Entity, or the Contract Facility, if different) to Customer under or in connection with this Agreement or to the extent used pursuant to this Agreement or the 2014 Agreement or any other previous agreement between the Parties, or disclosed under the 2014 Agreement, or any other previous agreement between the Parties, and including without limitation, any and all Lonza know-how and trade secrets. |
“Lonza Responsibility” |
has the meaning given in Clause 8.3.3. |
“Manufacturing Process” |
means the production process for the manufacture of Product by Lonza, as such process may be improved or modified from time to time by agreement of the Parties in writing. |
“Master Batch Record” |
means the document, proposed by Lonza and approved by Customer, which defines the manufacturing methods, test methods and other procedures, directions and controls associated with the manufacture and testing of Product. |
“MHLW” |
means the Ministry of Health, Labour and Welfare of Japan, or any successor agency having substantially the same functions. |
10
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Lonza shall manufacture under both the 2014 Agreement and this Agreement during the Term, as scheduled in Appendix B. |
“New Customer Intellectual Property” |
has the meaning given in Clause 10.2. |
“New [*] Intellectual
Property” |
has the meaning given in Clause 10.3. |
“Notification” |
has the meaning given in Clause 9.9. |
“Party” |
means each of Lonza and Customer and, together, the “Parties”. |
“2014 Agreement” |
shall have the meaning set out in the first recital of this Agreement. |
“Porrino Approval” |
means marketing the first marketing approval by either the FDA or the EMA, of andexanet alfa manufactured at the Porrino Facility for commercial supply (and the date of “Porrino Approval” shall be the date on which the first of these such approvals occurs). |
“Porrino Facility” |
means the facility of Lonza’s Affiliate in Porrino, Spain. |
“Primary Supply” |
means those Commercial Batches to be made at the Porrino Facility which shall be no less than the greater of either: (i) [*] Batches at [*] scale; or (ii) [*] of the Firm Orders in any year of this Agreement, in each case, following the date of first Approval. |
“Price” |
means the price for the Services and Products as set out in Appendix B. |
“Process Validation Batch” |
means a Batch that is: (i) produced in a [*] fermentation vessel at the Visp Facility in compliance with cGMP; (ii) produced with the intent to show reproducibility of the Manufacturing Process; and (iii) required to complete process validation studies. |
“Product” |
means andexanet alfa bulk drug substance manufactured by Lonza at the Visp Facility in accordance with: (a) the Gen 2; and/or (b) [*] (as may be further agreed by the Parties). |
“Purchase Order” |
means a purchase order placed by Customer for the production and delivery of Batches or other Services. |
11
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Regulatory Authority or Applicable Laws, the quality agreement between Portola and the Contract Facility; in each case after the Effective Date, which will set out the responsibilities of the Parties and the Contract Facility in relation to quality at the Visp Facility as required for compliance with cGMP. |
“Raw Materials” |
means all ingredients, solvents, medias, feeds, bags, filters, flasks, bottles and other components of the Product required to perform the Manufacturing Process or Services set forth in the bill of materials detailing the same (including Resins but excluding any consumables or wearables). An initial bill of materials for the Gen 2 process is attached to this Agreement as Appendix C, which may be amended from time to time as agreed to in writing by the Parties. |
“Raw Materials Fee” |
means: (i) the acquisition cost of Raw Materials; and (ii) a procurement and handling fee in the amount of [*] of such acquisition costs for all Raw Materials other than: (a) [*]; (b) [*]; and (c) any and all Raw Materials which [*] . |
“Receiving Party” |
has the meaning given in Clause 13.1. |
“Regulatory Authority” |
means the FDA, EMA, MHLW, and any other similar regulatory authorities in such other jurisdictions as may be agreed upon in writing by the Parties. |
“Release” |
has the meaning given in Clause 8.1. |
“[*]” |
has the meaning given in Clause [*]. |
“Resin” |
means the chromatographic media and/or UF membranes intended to refine or purify the Product, as specified in the Master Batch Record. |
“Second Tranche Equity” |
has the meaning given in Clause 9.5.2. |
“Secondary Supply” |
means those Batches which are not manufactured at the Porrino Facility as part of the Primary Supply, but which are to be made at the Visp Facility following the date of first Approval of the Visp Facility. |
12
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
as quality control and quality assurance activities), particulars of which are set out in the applicable Stages of Work. |
“Specifications” |
means the specifications of the Product as approved by the Regulatory Authority at the applicable time. |
“Stages of Work” |
means the mutually agreed upon stages of work which are part of this Agreement and attached as Appendix E, describing the scope, Price, timeline and deliverables of Services, including any update and modification thereof to which the Parties may agree from time to time. |
“Steering Committee” |
has the meaning given in Clause 3.3. |
“Supply Terms” |
means, in relation to any Commercial Batches ordered under this Agreement and manufactured in the Porrino Facility, the terms and conditions of the 2014 Agreement that apply to such Batches. Specifically, the Supply Terms refer to the following provisions of the 2014 Agreement: Clauses 2.2, 2.6, 2.7, 2.8.3, 2.8.4, 2.10, 2.11, 2.12, 2.13, 3.5, 4, 5, 7.1, 7.2, 8.6, 11, 12 and 13. |
“Target Yield” |
has the meaning given in Clause 2.4.2. |
“Term” |
has the meaning given in Clause 14.1. |
“Termination Fee” |
shall mean the fees payable on termination in accordance with Clause 14.3. |
“Third Party” |
means any party other than Customer, Lonza and their respective Affiliates. |
“Visp Facility” |
means the facility to be built at Lonza’s site at Visp CH3930, Switzerland and which shall initially contain [*]. |
“Yield Minimum” |
has the meaning given in Clause 2.4.2. |
In this Agreement references to the Parties are to the Parties to this Agreement, headings are used for convenience only and do not affect its interpretation, references to a statutory provision include references to the statutory provision as modified or re-enacted or both from time to time and to any subordinate legislation made under the statutory provision, references to the singular include the plural and vice versa, and references to the word “including” are to be construed without limitation.
2.1A |
Lonza has entered into a joint venture agreement with the JV Partner for the construction and operation of the Visp Facility, which will be owned by the JV Entity. |
13
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
2.1 |
Construction . Subject to receiving the appropriate approvals, Lonza (and/or its Affiliate) shall procure the use of commercially reasonable efforts to complete the construction and validation of the Visp Facility in accordance with the estimated construction and validation schedule as set out in Appendix F (as amended from time to time), and transfer the Manufacturing Process to the Visp Facility pursuant to Clause 2.4 so that Lonza may manufacture and supply Secondary Supply of Product to Customer from the Visp Facility. If any necessary approval for the construction is not obtained, or if there are any material delays in the construction of the Visp Facility or successful technology transfer to the Visp Facility (as set forth in Clause 2.4) (each, a “Delay”), Lonza shall inform Customer and [*] Lonza shall manufacture and continue to supply to Customer using the Porrino Facility under the terms of the 2014 Agreement any and all Commercial Batches that cannot be manufactured at the Visp Facility at the scheduled time due to any Delay, which were either: (a) subject to a Firm Order placed by Customer to be manufactured at the Visp Facility under this Agreement; or (b) included in the Minimum Order. |
2.3 |
Timetables . Lonza shall use [*] to achieve the estimated timescales set out in Appendices F, G and H. |
2.4 |
Technology Transfer between Lonza Facilities . |
|
2.4.1 |
Lonza shall, [*], transfer the Manufacturing Process from the Porrino Facility to the Visp Facility pursuant to a schedule and timeline agreed by the Parties and set forth in the Stages of Work, and conduct any scale up activities and/or manufacture any pilot batches if necessary. Other than any activities which Lonza decides at its sole discretion to undertake at its sole risk and expense, the transfer of the Manufacturing Process shall not commence before the date of Porrino Approval. The Parties will commence development of a technology transfer plan following Porrino Approval, and shall complete a detailed technology transfer plan for such transfer prior to [*]. If Lonza believes that [*] and Customer does not agree then [*] shall have the right to make the final decision; provided that [*]. |
14
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
Porrino Facility in accordance with this Agreement and otherwise under the Supply Terms of the 2014 Agreement, but Lonza may commence manufacturing from the Visp Facility if Lonza subsequently achieves the Yield Minimum. |
|
2.4.3 |
In addition to Clause 2.4.2, if Lonza does not meet the Yield Minimum: |
|
(a) |
Lonza shall not proceed with the manufacturing of the Process Validation Batches unless and until Lonza can achieve the Yield Minimum; and |
|
(b) |
[*] additional work (including Raw Materials) to be conducted at the Visp Facility to achieve the Yield Minimum, including without limitation to manufacture any additional Engineering Batches, [*] such additional Engineering Batches in the event Lonza achieves at least [*] of the Target Yield [*]. |
|
(c) |
If Lonza is unable to achieve the Yield Minimum within [*] of determining the yield of such second Engineering Batch, then the Parties shall meet and agree to a plan to resolve such technology transfer failure. Unless and until such technology transfer failure is resolved, Lonza shall fulfill its Commercial Batch manufacturing obligations under this Agreement using the Porrino Facility under the Supply Terms of the 2014 Agreement. |
|
2.6.1 |
Lonza and Customer shall agree on the process validation activities to be performed. Lonza shall conduct those process validation activities as set out in Appendix G (and such other activities as may be agreed by the Parties) which shall be approved by Customer in advance (such approval to be in accordance with the agreed timeline) and for which Customer shall pay in accordance with the pricing set forth in such Appendix G. |
|
2.6.2 |
Any regulatory support activities (including pre-Approval inspection) required and agreed to by Customer to support the Approval of the Product from the Visp Facility shall [*]. All such regulatory support activities are [*], and shall be approved in advance by the Customer as part of the applicable Stage of Work, and the financial arrangements for such activities shall be as set forth in Clause 9.3. |
15
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
16
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
shall not be required to make any additional payment to Lonza for its technology transfer of the Manufacturing Process from Lonza’s Porrino Facility to the Visp Facility. In respect of such Engineering Batches, Customer shall be required to pay the Raw Materials Fee, shipping costs, the costs of any External Laboratories . If additional Engineering Batches are required pursuant to Clause 2.4.3 then the provisions of Clause 2.4 shall apply to such additional Engineering Batches. |
17
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
manufactured in accordance with cGMP and meeting the Specifications . |
|
2.8.5 |
Following the completion of each Batch (or, in the case of Batches that are manufactured as a Campaign, at the completion of such Campaign), the Parties shall hold a meeting of the Steering Committee to discuss and agree next steps with regard to the manufacture of any further Batches, including whether or not to proceed to Process Validation Batches (if applicable). |
|
2.9 |
Supply of Customer Information and Customer Materials . Customer shall supply to Lonza all materials in the bill of materials which are Customer Materials. Lonza shall not be responsible for any delays arising out of Customer’s failure to provide such Customer Materials, and Customer shall be responsible for all reasonable additional costs and expenses arising out of such delay in accordance with the terms of this Agreement after reasonable attempts to mitigate such costs by Lonza. Customer hereby agrees that any and all: (i) Customer Materials and Customer Information; and/or (ii) Customer Background Intellectual Property and any other information or materials or Intellectual Property; provided to Lonza (or any of its Affiliates) under the 2014 Agreement may be used for the purposes of this Agreement by Lonza and/or its Affiliates. |
|
2.10.1 |
Raw Materials. Lonza shall procure all required Raw Materials as well as consumables other than those Raw Materials that are Customer Materials and shall procure such Raw Materials and/or consumables at a reasonable price (taking into consideration efficiency of supply, quality and price). Lonza shall [*] to procure such Raw Materials [*]. [*] Customer shall pay for all Raw Materials and the Raw Materials Fee (including those required for Process Validation activities) as provided in this Agreement, provided that, for any and all Raw Materials Fee reimbursement under this Agreement [*]. In addition, Customer may, following completion of construction, visit the Visp Facility to conduct an audit of such costs (at its own cost). At any time during the Term, and subject always to any duties of confidentiality which Lonza or any of its Affiliates may have to any Third Party(ies), Customer shall have the right to elect to assume the responsibility to procure any Raw Materials and such Raw Materials shall then be deemed Customer Materials. For clarity, [*] which Customer purchases from an Affiliate of Lonza under a separate agreement shall be deemed to be Customer supplied Customer Materials. |
18
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
purpose other than conducting the Services, and without limiting the generality of the foregoing, will not analyze, characterize, modify or reverse engineer any Customer Materials or take any action to determine the structure or composition of any Customer Materials unless required pursuant to an agreed Stages of Work; and (d) to destroy or return to Customer all unused quantities of Customer Materials according to Customer’s written directions. Lonza shall not be responsible for any quality issues or defects (including any latent defect) in such Customer Materials existing as of the time Lonza takes possession of such Customer Materials. |
2.11 |
Waste Disposal . The generation, collection, storage, handling, transportation, movement and release of hazardous materials and waste generated by Lonza in connection with the Services will be the responsibility of Lonza at Lonza’s sole cost and expense, unless any special treatment, collection, storage, handling, transportation, movement or release of hazardous materials or waste is required by Customer or which is specific to the Product, Raw Materials required for the manufacture of Product or the Manufacturing Process at the Visp Facility, in which case the Parties shall discuss in advance and use reasonable endeavours to agree how such additional costs shall be borne. Without limiting other applicable requirements, Lonza will comply with local law at the Visp Facility in relation to waste disposal. |
2.12 |
Safety Procedures . Lonza will be solely responsible for implementing and maintaining health and safety procedures for the performance of Services and for its handling of any materials or hazardous waste used in or generated by the Services. Promptly following the signature of this Agreement, Customer shall supply (or cause to be supplied) to Lonza such information as Lonza may reasonably require (including full details of any hazards and the material safety data sheet for the Product, the Cell Line and any other Customer Materials, their storage and use). After review and approval by Lonza’s safety committee of such information and hazard information, Customer shall supply to Lonza such of the Customer Information and Customer Materials that may be required by Lonza for the performance of the Services. |
2.13 |
[*]. |
19
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
from the Porrino Facility, Lonza shall have [*] to decide whether it wishes to fulfill any Commercial Batches under Firm Order beyond the Primary Supply from the Visp Facility or the Porrino Facility. |
2.15 |
For clarity, in the event Customer cancels any Batch subject to a Firm Order under this Agreement, Customer shall be subject to the cancellation fees and other obligations under either this Agreement or the 2014 Agreement depending on where the Batch was to be manufactured. Any Commercial Batches manufactured at the Porrino Facility after the Effective Date shall be subject to the Supply Terms of the 2014 Agreement but otherwise subject to the terms and conditions of this Agreement. |
3 Project Management / Steering Committee
3.2 |
Project Management . Each Party will appoint a project manager who will be the person responsible for overseeing Services under this Agreement. |
The primary function of the Steering Committee is to ensure the ongoing communication between the Parties and discuss and resolve any issues arising under this Agreement. In addition to the primary function described above, the Steering Committee shall also take on the following responsibilities: (a) discuss and seek resolution of issues around management of the Services; (b) agree and monitor deadlines and milestones for the Services; (c) discuss and review forecasts and Lonza’s capacity as set forth in Clause 7.2.6; and (d) discuss and recommend any changes to the Services (although such changes will not take effect until they have been incorporated into a written agreement to modify the applicable Stage of Work which has been signed by the Parties).
3.4 |
Executive Committee. Each Party shall name a mutually agreed upon equal number of suitable senior representatives for the “Executive Committee,” which shall meet (whether by telephone or in person) as mutually agreed by the Parties, but in any event at least [*]. The role of the Executive Committee shall be to provide oversight and to act as a forum for (without limitation) the coordination of supply demand and capacity and for the prompt resolution of matters escalated from the Steering Committee. |
20
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
3.7 |
[*]. |
4.1 |
Construction and Ownership . As between the parties, Lonza shall own the Visp Facility and all equipment therein and shall be responsible for its construction, capital improvements, furbishing, and all other capital expenditures related thereto, all at Lonza’s expense. |
4.2 |
Construction Timeline . Planning and construction of the Visp Facility is currently scheduled to commence in [*] and proceed according to the estimated timeline set forth in Appendix F (as amended from time to time). Lonza shall provide Customer with regular updates regarding progress in the planning and construction of the Visp Facility, including prompt notifications of any significant deviations from the estimated timeline. Customer shall also have the right to review construction plans, and conduct a site visit, but shall not have the right to direct or coordinate construction and shall have no obligation with respect to capital expenditures related thereto. If a material delay in construction of the Visp Facility prohibits Lonza from completing delivery of Engineering Batches and Process Validation Batches under the obligations of this Agreement at the Visp Facility, then the provisions of Clause 2.1 shall apply. |
4.3 |
Operation . As between the Parties, Lonza shall be solely responsible for the operation of the Visp Facility at its own expense, including without limitation: (a) operational qualification of the Visp Facility; (b) start-up and validation of all manufacturing process equipment and utilities at the Visp Facility; (c) all technology transfer into the Visp Facility from other Lonza facilities, including the transfer of the Gen 2 manufacturing processes to the Visp Facility; and (d) the scaling-up of the Gen 2 and manufacturing processes for use in [*] fermenters. For clarity, Customer shall be responsible for the marketing approval of the Product, except that Lonza shall be responsible for carrying out its regulatory and manufacturing obligations set forth in this Agreement to support such marketing approval. |
4.4 |
Capacity . Subject to Clause 7.2, Lonza shall, at all times, have the right to use manufacturing capacity at the Visp Facility and the Porrino Facility not reserved for Customer pursuant to Clauses 7.1.1 or 7.2.1 to manufacture products other than andexanet alfa for Third Party customers. |
21
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
5.1 |
Responsibility for quality assurance and quality control of Product shall be allocated between Customer, Lonza and the Contract Facility as set forth in the Quality Agreement and in Lonza standard operating procedures. If there is a conflict between the terms and conditions of this Agreement and the Quality Agreement, the terms and conditions of this Agreement shall prevail except for matters pertaining to quality and disposition of the Product, in which case the Quality Agreement shall prevail. Lonza shall be responsible for the Contract Facility’s performance under the Quality Agreement. |
5.2 |
Provisions regarding inspections by Regulatory Authorities and audits shall be set out in the Quality Agreement. |
7 Minimum Order; Forecasting, Ordering, Rescheduling and Cancellation
|
7.1.1 |
Minimum Order. |
|
(a) |
Customer shall place Purchase Orders, which Lonza shall accept as Firm Orders, for [*] Engineering Batches to be manufactured in the Visp Facility in [*], or such other date as may be agreed in the Project Plan, but in no event shall Customer be required to place such Purchase Orders prior to the date of Porrino Approval; |
|
(b) |
Customer shall place Purchase Orders, which Lonza shall accept as Firm Orders, for [*] Process Validation Batches to be manufactured in the Visp Facility in [*], or such other date as may be agreed in the Project Plan, but in no event shall Customer be required to place such Purchase Orders prior to the date of Porrino Approval; |
22
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
(d) |
Purchase Orders for the Engineering Batches and Process Validation Batches (referred to in Clause 7.1.1 (a) and (b)) shall be placed, and accepted by Lonza as Firm Orders, promptly following the date of Porrino Approval. Each Purchase Order for Commercial Batches referred to in Clause 7.1.1(c) (other than those purchase orders that have been submitted by Customer under the 2014 Agreement at the date of Porrino Approval, which shall count towards the Minimum Order under this Agreement for the applicable year) is to be placed, and accepted by Lonza as a Firm Order, at least [*] prior to the Commencement Date for the first Batch of the Campaign; |
Customer shall be obligated to place Purchase Orders, which Lonza shall be obligated to accept as Firm Orders, for Batches no fewer than the portion of the Minimum Orders not already under a firm order under the 2014 Agreement. Customer shall be deemed to have placed a Purchase Order which Lonza shall be deemed to have accepted as a Firm Order, for each such Batch under Clause 7.1.1 at the time Customer is obligated to place the Purchase Order for such Batch, whether or not Customer takes the affirmative action to place such Purchase Order, or Lonza takes affirmative action to accept as Firm Orders, provided that, Customer’s obligation to place Purchase Orders for such Minimum Order (either affirmatively or automatically as described above) shall not apply: (i) during the notice period after either Party has provided the other Party with a termination notice pursuant to Clause 14.2.2(a); or (ii) after the Parties have agreed to terminate this Agreement and have agreed to waive such Minimum Orders.
|
7.1.3 |
Reduction of Minimum Order. If, at any time on or after [*], [*] reasonably demonstrates that [*], then the Parties shall meet to discuss and use reasonable endeavours to agree to a mechanism to reduce the Minimum Order, any such revisions to this Agreement being subject to [*] and [*] (“Adjusted Minimum Order”), under reasonable commercial terms to be agreed by the Parties. By way of example (and without limitation), such reasonable commercial terms may include [*] or [*] or [*]. If the Parties are unable to agree to reasonable business terms with respect to the Adjusted Minimum Order within [*] of initiating such negotiations, Customer shall have the right to terminate this Agreement in accordance with Clause 14.2.1(c) and following such termination any future orders for Product to be manufactured by Lonza shall be placed under, and be subject to, the 2014 Agreement. |
23
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
shall be made in accordance with this Agreement (although the actual manufacture of such Batches shall be made pursuant to this Agreement or the Supply Terms of the 2014 Agreement depending on the location of the manufacture), and, subject to the obligations regarding Engineering Batches, Process Validation Batches, Primary Supply under Clause 7.7 and Lonza’s obligation to manufacture Commercial Batches that are either part of the Minimum Order or otherwise under Firm Orders, Lonza [*] the Porrino Facility or the Visp Facility to fulfil Customer’s demand. |
|
7.2.4 |
If the Forecast submitted by Customer consists of additional Commercial Batches in excess of the Minimum Order, [*] Customer has placed a binding Purchase Order in accordance with Lonza’s response to such Forecast, and Lonza has accepted such Purchase Order as a Firm Order. However, [*] the number of Commercial Batches referred to in the Forecast at either the Visp Facility or the Porrino Facility (at Lonza’s discretion), provided always that the Primary Supply [*]. Customer’s ability to reserve, Lonza’s obligation to provisionally schedule or accept, such additional Commercial Batches shall depend on [*] at the time of the Forecast or of placing a Purchase Order (as applicable). |
24
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
7.2.6 |
Forecasting and Lonza’s capacity will be reviewed on [*] basis or as otherwise agreed by the Steering Committee. |
|
7.2.7 |
Lonza shall provide Customer with a non-binding indication as to the availability of manufacturing slots in the Visp Facility and the Porrino Facility for the [*] period following the period covered by the Forecast. |
|
7.2.8 |
At all times, Customer shall be solely responsible for generating the Forecast based on its estimated market demands of the Product. |
|
(a) |
Customer shall place Purchase Orders for the Minimum Order in accordance with Clause 7.1 (whether affirmatively or automatically), plus Customer shall place Purchase Orders for any other Batches it wishes to order in accordance with this Clause 7.3.2, and taking into consideration Lonza’s most recent response to the Forecast or in accordance with a manufacturing schedule as agreed in writing between the Parties after the date of this Agreement. All Purchase Orders must be placed at least [*] prior to the commencement of such order, or earlier as set forth in Clauses 7.2.4 and 7.2.5. |
|
(b) |
Customer may place Purchase Orders under this Agreement for Batches in addition to the Minimum Orders, provided that Lonza has received a Forecast for such additional Batches and Lonza has issued a production schedule for such additional Batches. Subject to Lonza’s obligations under Clauses 7.2.4 and 7.2.5, Lonza shall have no obligation to accept Purchase Orders for such additional Batches or to reserve capacity prior to accepting such Purchase Orders. |
|
(c) |
Each Purchase Order shall be signed by Customer and shall authorize Lonza to manufacture such Batches of the Product as are set forth therein, and Lonza shall notify Customer of its acceptance of such Purchase Order within [*] after its receipt, provided that Lonza shall not reject any Purchase Orders placed pursuant to this Agreement for any Batch included in the Minimum Order or Commercial Batches in excess of the Minimum Order under Clause 7.2.5. |
25
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
(e) |
Any additional or inconsistent terms or conditions of any Customer Purchase Order, acknowledgement or similar standardized form given or received pursuant to this Agreement shall have no effect and such terms and conditions are hereby rejected. All ordered Batches in a single Firm Order shall be scheduled in single Campaigns at the Porrino Facility and/or the Visp Facility, as applicable, unless otherwise agreed in writing by both Parties. |
|
7.4.1 |
[Intentionally left blank]. |
|
(a) |
With the prior written consent of Customer, not to be unreasonably withheld or delayed, Lonza will have the right to reschedule the Commencement Date of any Firm Order for a Batch, but only [*], by no more than [*] to manage the Visp Facility capacity or the Porrino Facility capacity (as applicable) (or [*] so long as Lonza notifies Portola in advance in writing, and Portola confirms that such additional variation in timing [*] and/or [*]), but Lonza will not otherwise alter any Firm Order. |
|
(b) |
Either Party may reschedule (with the agreement of the other Party, not to be unreasonably withheld), an Engineering Batch, or a Process Validation Batch, or a Commercial Batch for technical or other material reasons, such as if the preceding Stage of Work or preceding Batch was not successfully completed. |
|
(c) |
Customer shall have the right to request in writing to reschedule a Batch, and Lonza shall use reasonable endeavours to determine as to whether or not it agrees to such request to reschedule. [*] accept any request for rescheduling if [*] or [*]. |
|
7.5.1 |
[Intentionally left blank]. |
26
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
otherwise) [*], then [*] of the Batch Price of each such Batch cancelled is payable by Customer as a Cancellation Fee plus, subject to Lonza’s obligation to provide itemized invoice as set forth in Clause 2.10.1 and the last sentence of Clause 2.10.1, Customer shall pay the Raw Materials Fee in respect of any Raw Materials which were acquired by Lonza for such cancelled Batch and which Lonza cannot use for another customer project and any non-cancellable commitments of subcontractors and External Laboratories in each case to the extent not already included in the calculation of the Batch Price. |
|
7.5.4 |
Notwithstanding Clause 7.5.2 and Clause 7.5.3, with respect to [*], in the event that [*], Customer shall have the right to cancel [*] without being subject to any Cancellation Fee. |
|
7.5.5 |
Notwithstanding Clause 7.5.2 and Clause 7.5.3, if [*], then Customer shall have the right to cancel [*] without being subject to any Cancellation Fee. |
|
7.7 |
Facility Flexibility . At all times, subject to Clause 2.14 regarding the Primary Supply and the Secondary Supply, and the obligations regarding the Engineering Batches and Process Validation Batches manufactured at the Visp Facility, Lonza [*] whether to manufacture Batches from the Visp Facility or from the Porrino Facility; provided that once a Batch is subject to a Firm Order, Lonza may not change the place of manufacture without the prior written approval of Customer. |
27
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Product, title and risk of loss shall transfer to Customer upon Release in accordance with this provision. |
|
8.2.2 |
Unless otherwise requested in writing by Customer, Lonza will (acting as agent for Customer) arrange for insurance of Product whilst held by Lonza after Release (awaiting transportation) for a maximum of [*] on terms equivalent to those under which Lonza insures Product prior to Release. All reasonable costs and expenses incurred by Lonza in arranging such insurance shall be charged to Customer in addition to the Price. |
|
8.2.3 |
Lonza shall not be required to store any Batch (including any Engineering or Process Validation Batch and whether or not such Batch was successful) for more than [*]. However, if Customer requires storage and Lonza is able to provide this, then Lonza and Customer shall discuss and agree the terms of an amendment to this Agreement to provide for such storage. |
28
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
of such latent defect within [*] after its discovery, provided that such latent defect is discovered within [*] of the date of Release. |
|
8.3.2 |
In the event that Lonza believes that a cGMP Batch has been incorrectly rejected, Lonza may require that Customer provide to it cGMP Batch samples for testing. Lonza may retain and test the samples of such cGMP Batch. In the event of a discrepancy between Customer’s and Lonza’s test results such that Lonza’s test results fall within relevant Specifications, or there exists a dispute between the Parties over the extent to which such failure is attributable to a given Party, the Parties shall cause an independent laboratory promptly to review records, test data and perform comparative tests and/or analyses on samples of the Product that allegedly fails to conform to Specifications. Such independent laboratory shall be mutually agreed upon by the Parties. The independent laboratory’s results shall be in writing and shall be final and binding save for manifest error. Unless otherwise agreed to by the Parties in writing, the costs associated with such testing and review shall be borne by the Party against whom the independent laboratory rules. |
9 Price and Payment and Changes
29
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
9.3.1 |
Lonza shall be solely responsible for all regulatory activities conducted by or on behalf of Lonza under Clause 2.7 in connection with the Approval by the FDA, EMA and MHLW, at its sole cost and expense. On each achievement of each of the Approvals by FDA, EMA and MHLW, Customer shall pay Lonza (for each Approval) the sum of [*] ([*] in total if all approvals are achieved). |
|
9.3.2 |
Customer shall reimburse Lonza for the equivalent regulatory activities to be conducted by Lonza, if any, in connection with the approval by any other Regulatory Authority agreed by the Parties. Lonza shall issue an invoice for such payment on a monthly basis for such activities conducted in the preceding calendar month, and Customer shall pay such invoice within [*] of receipt of such invoice. |
|
9.4 |
Currency . All payments for Services (including manufacture of Batches) provided at the Visp Facility shall be invoiced and paid in [*], and all payments for Services (including manufacture of Batches) provided at the Porrino Facility shall be invoiced and paid in [*]. |
|
9.5.1 |
First Tranche . When Customer has received Porrino Approval and Lonza has initiated technology transfer of the Gen 2 process to the Visp Facility, unless Customer has terminated this Agreement under Clause 14.2.1(b)(i) on or before such date, Lonza (or an Affiliate of Lonza) shall have the right to purchase, at a purchase price per shares of one dollar USD ($1.00), the lesser of either: (i) five hundred thousand (500,000) shares of Customer’s common stock; or (ii) the maximum number of shares of Common Stock with an aggregate value that does not exceed $15,000,000USD, such value calculated based on the average closing price of Customer’s common stock as reported on the Nasdaq Global Select Market for the twenty (20) trading days prior to the date that the First Tranche purchase right is triggered (the “First Tranche Equity”). The sale of the First Tranche Equity shall be made pursuant to a Common Stock Purchase Agreement in the form set forth in Appendix H. |
30
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
the Second Tranche purchase right is triggered(the “ Second Tranche Equity ”). The sale of the Second Tranche Equity shall be made pursuant to a Common Stock Purchase Agreement in the form set forth in Appendix H. The precise number of shares to be sold shall be calculated according to the average amount of Product yielded from the Comparison Batches (as defined below) compared with the Baseline Batches (as defined below), as follows: |
“Baseline Batches” shall mean the first [*] batches delivered from the Porrino Facility under the 2014 Agreement, which shall include: (a) all of the engineering batches; and (b) all of the process validation batches and such number of cGMP Batches as needed to make up a total of [*] Batches.
“Comparison Batches” shall mean the first [*] Batches delivered from the Visp Facility which shall include: (a) [*], all of the Engineering Batches; and (b) all of the Process Validation Batches and such number of cGMP Batches as needed to make up a total of [*] Batches.
Any [*] Batches shall be excluded from the calculation of the average yield from the Baseline Batches or the average yield from the Comparison Batches and shall not count towards the [*] Batches. Any [*] Batches, any Batch [*], or any Batches [*] shall be excluded from the calculation of the average yields only if [*].
31
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
and/or Second Tranche Equity in accordance with above, then if and when Lonza earns entitlement to the First Tranche Equity and/or the Second Tranche Equity in accordance with above, Lonza shall receive, in lieu of the First Tranche Equity and/or Second Tranche Equity, as applicable, the monetary value of the First Tranche Equity and/or the percentage to which Lonza is entitled pursuant to Clause 9.5.2 of the Second Tranche Equity, with the value of such payments (including the number of shares of Customer Common Stock included in the First Tranche Equity and Second Tranche Equity) determined based on the average closing price of Customer Common Stock on the Nasdaq Global Select Market for the five (5) trading days prior to the consummation of such Change of Control or assignment rather than the twenty (20) trading day periods set forth in Clauses 9.5.1 and 9.5.2. |
|
9.6 |
Changes to Stages of Work, Manufacturing Process and Specifications . |
|
(a) |
a modification is required to a Stage of Work, or |
|
(b) |
an additional Stage of Work is required, or |
|
(c) |
Lonza needs to use any Raw Material which requires any special treatment, handling or disposal, or |
|
(d) |
any changes are required to the technology transfer or the process validation activities (notwithstanding any other provision in this Agreement). |
the identifying Party will notify the other Party in writing as soon as reasonably possible. Lonza will provide Customer with a change request containing a description of the required modifications and their effect on the scope, any additional costs or fees (for clarity [*]), Price and timelines for such Scope of Work or change, and will use reasonable efforts to do so within [*] of receiving or providing such notice, as the case may be. No such change or change of scope will be effective unless and until it has been agreed to by the Parties in writing. In addition in the case of (c) above, the Parties shall agree whether Lonza is required to achieve the Specification and/or cGMP in relation to the first Batch following such change.
|
9.6.2 |
Any change or modification to the Manufacturing Process or Specifications for or in relation to the Product must be approved in advance by Customer and will be made in accordance with the change control provisions of the applicable Quality Agreement, provided that neither Party shall withhold its approval for any change or modification required by a Regulatory Authority or Applicable Law. |
32
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
any government or public authority and all of any such charges applicable to the Services shall be paid by Customer. |
|
9.10 |
Other Price Adjustments . |
|
(b) |
In addition to the right to increase the Price as set out in Clause 9.10(a), Lonza shall have the right to increase the Price to the extent resulting from [*]. The Parties shall, prior to a change being implemented, discuss and use reasonable endeavours to agree any change to the Price to the extent resulting from [*] which [*], save that [*]. To the extent [*] and [*], Lonza shall [*] in a reasonable manner [*]. |
33
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
10.1 |
Neither Party nor their Affiliates will, as a result of this Agreement, acquire any right, title, or interest in any Background Intellectual Property of the other Party or any of its Affiliates. |
|
10.4 |
Lonza hereby assigns to Customer all of its right, title and interest in any New Customer Intellectual Property. Lonza shall execute, and shall require its personnel as well as its Affiliates, External Laboratories or other contractors or agents and their personnel involved in the performance of the Services to execute, any documents reasonably required to confirm Customer’s ownership of the New Customer Intellectual Property, and any documents required to apply for, maintain and enforce any patent or other right in the New Customer Intellectual Property. |
34
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
(by itself or through such Third Party(ies)) such Manufacturing Process so transferred for the manufacture of Andexanet alfa (and, Lonza shall grant a licence subject to the following proviso); provided however to the extent that such technology transfer [*], such technology transfer shall be subject to (i) [*] and (ii) [*]. Lonza shall provide reasonably necessary documents (including the Product specific batch records and release reports, technology transfer guidance and summary report and process protocols) to complete such technology transfer and Customer shall reimburse Lonza for any activities at the agreed rates (based on a full-time employee rate for such support) and expenses reasonably incurred in connection with such transfer. If Portola assigns this Agreement pursuant to Clause 16.4, then the transfer of Manufacturing Process to such assignee, or a Third Party of such assignee, shall be [*]. Inter alia, [*]. The Parties hereby acknowledge and agree that, subject always to the terms of this Clause 10.7, as of the Effective Date, [*]. |
|
11.1.1 |
it has the full power and right to enter into this Agreement and that there are no outstanding agreements or requirements that would prevent it from complying with the provisions of this Agreement; |
|
11.1.2 |
the execution and delivery of this Agreement by Lonza has been authorized by all requisite corporate or company action and this Agreement is and will remain a valid and binding obligation of Lonza, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors; |
|
11.1.3 |
the Services will be performed with requisite care, skill and diligence, by individuals who are appropriately trained and qualified; and in accordance with Applicable Law and generally accepted industry standards. |
|
11.1.4 |
it has requisite authority to fulfill its obligations under this Agreement [*]; |
|
11.1.5 |
as of the date of this Agreement and to the best of its knowledge, the conduct and provision of Services will not infringe or misappropriate any patent, trade secret or other proprietary or Intellectual Property rights of any Third Party; provided that it shall not be a breach of this warranty to the extent such infringement arises as a result of the use of Customer Background Intellectual Property, Customer Materials, the Cell Line, Customer Information, and/or any other information or Intellectual Property provided by or on behalf of Customer, or the combination of any of the aforementioned with any Lonza Background Intellectual Property or Lonza Information and it will promptly notify Customer in writing should it become aware of any claims asserting such violation; |
|
11.1.6 |
save as otherwise set out in this Agreement and save in relation to Engineering Batches: at the time of Release to Customer, the Product manufactured as part of a cGMP Batch under this |
35
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
Agreement: (a) will have been manufactured in accordance with cGMP and the applicable Quality Agreement, and Specifications; (b) will not be adulterated or misbranded, as determined under any Applicable Law; and (c) will not have been produced in violation of any applicable provisions of the United States Fair Labor Standards Act, as amended; and |
|
11.1.7 |
[*]. |
|
11.2 |
Customer represents, warrants and covenants that: |
|
11.2.1 |
it has the full power and right to enter into this Agreement and that there are no outstanding agreements, assignments, licenses, encumbrances or rights held by other parties, private or public, that would prevent it from complying with the provisions of this Agreement; |
|
11.2.2 |
the execution and delivery of this Agreement by Customer has been authorized by all requisite corporate or company action and this Agreement is and will remain a valid and binding obligation of Customer, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors; |
|
11.2.3 |
as of the date of this Agreement and to the best of Customer’s knowledge, Customer has all the rights: |
|
(a) |
related to Product to permit Lonza and its Affiliates, Lonza’s subcontractors and/or External Laboratories to perform the Services and to use the Customer’s Cell Line, Customer Materials, Customer Information, Customer’s Background Intellectual Property, and/or any other information or Intellectual Property provided by or on behalf of Customer, without infringing the intellectual property rights of a Third Party; |
|
(b) |
necessary to provide to Lonza the Customer’s Cell Line, Customer Materials, Customer Information, Customer’s Background Intellectual property, and/or any other information or Intellectual Property provided by or on behalf of Customer and to permit Lonza, Lonza’s Affiliates, Lonza’s subcontractors and/or External Laboratories to perform the Services without infringing the Intellectual Property rights of any Third Party; |
|
11.2.4 |
as of the date of this Agreement and to the best of Customer’s knowledge, the use by Lonza and Lonza’s Affiliates and/or by the External Laboratories or any subcontractor of Customer’s Cell Line, Customer Materials, Customer Information and Customer’s Background Intellectual Property for the Services (including without limitation the manufacture of the Product) as contemplated in this Agreement will not infringe or misappropriate any Intellectual Property rights of any Third Party; and |
36
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
Lonza’s use thereof as part of in the Services infringes or misappropriates any Intellectual Property or other rights of any Third Party. |
|
11.3 |
DISCLAIMER : THE WARRANTIES AND CONDITIONS EXPRESSLY SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES AND CONDITIONS, AND ALL OTHER WARRANTIES AND CONDITIONS, BOTH EXPRESS AND IMPLIED, ARE EXPRESSLY DISCLAIMED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. |
12 Indemnification and Liability
37
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
written notice to the indemnitor of any claim, to the extent prejudicial to its ability to defend such claim, shall relieve the indemnitor of any obligation to the Indemnitee under this Clause 12. The Party seeking indemnification shall not settle or agree to settle any claim for which it will seek indemnification from the other Party without the prior written consent of indemnifying Party. |
12.6 |
Nothing shall limit or reduce Customer’s obligation to pay invoices or the Cancellation Fees or Termination Fees or to make payments under clause 9.5.3. |
12.7 |
Nothing in this Agreement shall exclude or limit the liability of either Party or their Affiliates for gross negligence or intentional misconduct, for fraud, for death or personal injury, a breach of Clause 13, or for any other liability that cannot be excluded or limited as a matter of the governing law of this Agreement. |
38
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Receiving Party under this Agreement, which the Receiving Party knows or reasonably should know is confidential or proprietary . |
13.2 |
Notwithstanding the foregoing, Receiving Party may disclose to any courts and/or other authorities Confidential Information of the Disclosing Party which is required pursuant to applicable governmental or administrative or public law, rule, regulation or order. In such case the Receiving Party will, to the extent legally permitted, inform the other Party promptly in writing and reasonably cooperate with the Disclosing Party in seeking to minimize the extent of Confidential Information which is required to be disclosed to the courts and/or authorities and/or in seeking a protective order. |
13.3 |
The obligation to maintain confidentiality under this Agreement does not apply to Confidential Information of the Disclosing Party, which: |
|
13.3.1 |
at the time of disclosure was publicly available through no breach of this Agreement by the Receiving Party; or |
|
13.3.2 |
becomes publicly available after the time of disclosure other than as a result of a breach of this Agreement by the Receiving Party; or |
|
13.3.4 |
is supplied to a Receiving Party by a Third Party which was not in breach of an obligation of confidentiality to Disclosing Party or any Third Party; or |
|
13.3.5 |
is developed by the Receiving Party independently from and without use of the Disclosing Party’s Confidential Information, as evidenced by competent evidence. |
39
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
misuse of the other Party’s Confidential Information by any person to whom the Receiving Party discloses it. |
13.6 |
Customer may disclose the terms of this Agreement to any actual or potential partner with which it enters into any form of partnering arrangement, provided that: (i) such disclosure is solely for the purpose of such Third Party evaluating a partnering arrangement with Customer; (ii) it redacts the financial terms of this Agreement (but Customer shall have the right to disclose the Batch Prices to any bona fide potential or actual partner who would bear and/or share the Batch Prices for the Product, provided that Customer notifies Lonza in confidence of the identity(ies) of such partner(s) receiving such Batch Prices information); (iii) it enters into a confidentiality agreement with such Third Party on terms no less onerous and no less protective than those contained in this Clause 13; and (iv) it shall at all times be responsible for any breach of confidentiality by such Third Party. |
13.7 |
The Receiving Party shall at all times be fully liable for any and all breaches of the confidentiality obligations in this Clause 13 by any of its Affiliates or the officers, employees, consultants and representatives of itself or its Affiliates. |
13.8 |
Each Party hereto expressly agrees that any breach or threatened breach of the undertakings of confidentiality provided under this Clause 13 by a Party may cause irreparable harm to the Disclosing Party and that money damages may not provide a sufficient remedy to the Disclosing Party for any breach or threatened breach. In the event of any breach and/or threatened breach, then, in addition to all other remedies available at law or in equity, the Disclosing Party shall be entitled to seek injunctive relief and any other relief deemed appropriate by the Disclosing Party. |
13.9 |
Neither Party shall provide access to any sharepoint site or intranet site established for the purpose of exchanging data and information in relation to this Agreement to any Third Party without: (a) the prior written consent of the other Party; and (b) such Third Party entering into a separate confidentiality agreement with such other Party in a form reasonably agreed by such other Party. |
13.10 |
Neither Party may use or disclose any Confidential Information of the other Party or any of their Affiliates in any patent application. |
14.2 |
Termination . This Agreement may be terminated as follows: |
|
(a) |
by providing no less than [*] prior written notice, such written notice to be issued not earlier than the [*] (for clarity if this Agreement was terminated pursuant to this Clause 14.2.1(a) the earliest date on which it would terminate would be [*]). During such notice period Customer shall continue to be bound by the obligation to place Purchase Orders for the Minimum Order under Clause 7.1.1 and pay for such Firm Orders; |
40
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
14.2.2 |
by either Party: |
|
(c) |
immediately by written notification for any persisting force majeure event as described in Clause 15.1; or |
|
14.2.3 |
By either Party upon written notice to the other Party if Porrino Approval is not obtained by [*]. |
14.3 |
Effect of Termination . |
41
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
respect thereof to the extent that Lonza cannot use them for another customer project and any non-cancellable commitments of subcontractors and External Laboratories; (b) for all Services provided but not paid as of the effective date of termination (including a pro-rata proportion of the Price for any stage of the Services which is in progress at the date of the termination); and (c) in addition, in the event of such termination, Customer shall pay to Lonza an early Termination Fee of [*], in accordance with the following schedule: Customer will pay the early termination fee of [*], beginning on the effective date of termination and [*] thereafter until all payments [*] are received by Lonza. |
|
14.3.2 |
Termination by Customer under Clause 14.2.2(a)-(c), or by Lonza under Clause 14.2.2(c) . Upon termination of this Agreement by Customer under Clause 14.2.2(a)-(c), or by Lonza under Clause 14.2.2(c), all Firm Orders shall be deemed cancelled without any Cancellation Fees or early termination fees and Customer shall have no further obligation to Lonza under this Agreement, except that Customer shall pay to Lonza: (a) for all Services provided but not paid as of the effective date of termination (including a pro-rata proportion of the Price for any stage of the Services which is in progress at the date of the termination); and (b) the applicable Raw Materials Fee for any Raw Materials paid for by Lonza and the costs of any non-cancellable commitments of subcontractors and External Laboratories and either (i) used in the provision of such Services, or (ii) purchased specifically for the provision of such Services and which Lonza cannot return for credit or use for any other customers; and (c) all expenses reasonably incurred by Lonza in giving effect to such termination, in each case after reasonable efforts to mitigate all such expenses, including the costs of terminating any non-cancellable commitments entered into under the Agreement that cannot be cancelled despite reasonable efforts to do so or cannot be re-purposed for other customers. |
|
14.3.3 |
T ermination by Customer under Clause 14.2.1 . Upon termination of this Agreement by Customer under Clause 14.2.1, subject to Lonza’s obligations under Clause 14.6.1 and Clause 14.6.4, Customer shall pay Lonza Termination Fees of [*] in effect on the notification date of such termination (including Firm Orders for Batches), plus any applicable Raw Materials Fee and any non-cancellable commitments of subcontractors and External Laboratories. Customer shall also pay for all Services provided but not paid as of the effective date of termination (including a pro-rata proportion of the Price for any stage of the Services which is in progress at the date of the termination); |
|
14.3.4 |
Termination under Clause 14.2.3. Upon termination of this Agreement by Customer under Clause 14.2.3, the terms of the 2014 Agreement shall continue to apply for the duration of the term of that agreement and Clauses 3 and 6 of the 2014 Agreement shall be deemed re-instated and shall be applicable to Customer’s demand for Batches. |
14.4 Not used.
14.5 |
Not used . |
42
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
(a) |
immediately cancel, to the greatest extent possible, any Third Party obligations in relation to this Agreement; |
|
(b) |
promptly inform Customer of any irrevocable commitments made in connection with this Agreement prior to termination; |
|
(c) |
to the extent possible or practicable, promptly return to the vendor for a refund all unused, unopened materials in Lonza’s possession that are related to this Agreement; provided, that Customer will have the option, but not the obligation, to take possession of any such materials (subject to Customer paying Lonza in full for such items); |
|
(d) |
promptly inform Customer of the cost of any remaining unused, unreturnable materials ordered pursuant to this Agreement, and, subject to Customer paying Lonza the applicable Raw Materials Fee for them in full, either deliver such materials to Customer (or its designee) or properly dispose of them, as instructed by Customer; and |
|
(e) |
perform only those services and activities mutually agreed upon by Customer and Lonza as being necessary or advisable in connection with the close-out of this Agreement. |
43
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
14.6.5 |
Survival. Notwithstanding anything else in this Agreement, expiration or termination of this Agreement for any reason will not relieve either Party of any liabilities, rights or obligations accruing prior to such expiration or termination. Further, the provisions of Clauses 1 (Definitions); 2.8.4 (Customer use of Batches), 2.10.3, 2.10.4 (Handling and Ownership of Customer Materials); 6.1 (Insurance); 8.1 (Delivery); 8.2 (Storage); 8.3 (with respect to any Batch Released during the Term); 9.4 (Currency); 9.7 (Taxes); 9.9 (Payment Default); 10 (Intellectual Property); 11 (Warranties); 12 (Indemnification and Liability); 13 (Confidentiality); 14.3, 14.4, 14.6 (Effects of Termination); 15 (Force Majeure); and 16 (Miscellaneous) will survive any termination or expiration of this Agreement. |
|
15.2 |
“Force Majeure” shall be deemed to include any reason or cause beyond Lonza’s reasonable control affecting the performance by Lonza or its Affiliates of its obligations under the Agreement, including, but not limited to, any cause arising from or attributable to acts of God, strike, lockouts, labour troubles, restrictive governmental orders or decrees, riots, insurrection, war, interruption of energy supplies, or terrorists acts. |
44
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
required by applicable law or the rules of any stock exchange or listing entity, shall be provided to the other party for comment prior to it being made, and the terms of this Agreement or any other document relating to the Services shall not be disclosed until each Party has redacted any confidential or proprietary information from it, to the extent permitted by law. Upon the execution of this Agreement, Lonza has the right to issue a mutually agreed press release regarding the execution of this Agreement. |
|
16.3 |
Amendments . Modifications and/or amendments of this Agreement must be in writing and signed by the Parties. |
|
16.5 |
Notice . All notices must be written and sent to the address of the Party first set forth above. All notices must be given: (a) by personal delivery, with receipt acknowledged; or (b) by prepaid recognized next business day delivery service. Notices will be effective upon receipt or at a later date stated in the notice. |
45
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
16.8 |
Entire Agreement . This Agreement contains the entire agreement between the Parties as to the subject matter hereof and supersedes all prior and contemporaneous agreements with respect to the subject matter hereof. For clarity, the 2014 Agreement is independent of this Agreement and shall survive on its own terms and conditions. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. Each party acknowledges that an original signature or a copy thereof transmitted by facsimile or by .pdf shall constitute an original signature for purposes of this Agreement. |
|
16.9 |
Rights of Third Parties . The Parties do not intend that any term of this Agreement should be enforceable by any person who is not a Party to it. |
[Remainder of page left blank intentionally]
46
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
IN WITNESS WHEREOF , each of the Parties hereto has caused this Agreement to be executed by its duly authorized representative effective as of the date written above.
PORTOLA PHARMACEUTICALS, INC.
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Cell Line
The Cell Line known as [*] expressing the Product.
48
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Batch Price and Minimum Order
Batch Prices – Visp
Batch Type |
Price |
Engineering Batch |
[*]
|
Process Validation Batch |
[*]
|
cGMP Batch (other than Process Validation Batches) |
[*] |
Note: All Prices are subject to review in accordance with Clause 9.
Batch Prices – Porrino
Batch prices for Porrino are as set forth in the 2014 Agreement and Firm Orders thereunder.
[*]
Minimum Order
[*]
Portola Forecast [*] (All batch numbers below listed in [*]), based upon [*] |
|
|||||||||||
Andexxa estimated demand |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
Minimum Order* |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
Low |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
High |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
[*] |
*[*]
In accordance with Clause 2.14 - Lonza [*].
49
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Bill of Materials
For information purposes only, set out below is the estimated Bill of Materials as of 27July2015. The Bill of Materials for this Agreement shall be based on this, but shall be updated on completion of the Engineering Batch and again on completion of the Process Performance Qualification batches and thereafter as may be mutually agreed by the Parties.
Item |
Material Description |
Estimated Qty per run |
UoM |
[*] |
[*] |
[*] |
[*] |
50
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
[Reserved]
51
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Stages of Work
52
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Estimated Visp Facility Construction and Validation Timeline
[*]
53
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Certain Process Validation Activities
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Appendix H
Form Common Stock Purchase Agreement
portola pharmaceuticals, inc.
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made as of [___________] (the “ Effective Date ”) by and between Portola Pharmaceuticals, a Delaware corporation (the “ Company ”), and Lonza AG (the “ Purchaser ”).
RECITALS
WHEREAS, the Company and the Purchaser have entered into that certain Manufacturing Services Agreement, dated _______, 2017 (the “ Services Agreement ”);
WHEREAS, pursuant to Section 9.5 of the Services Agreement, the Company has agreed to issue and sell to Purchaser 500,000 shares of the Company’s Common Stock from the Company at a per share purchase equal to $1.00 upon the achievement of the criteria set forth in Section [9.5.1][9.5.2] of the Services Agreement; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, 500,000 shares of the Company’s common stock, $0.001 par value per share (the “ Shares ”).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows:
Purchase and Sale of Stock.
Sale and Issuance of Common Stock. On the basis of the representations and warranties herein, and upon the terms and subject to the conditions hereof, the Purchaser agrees to purchase from the Company and the Company agrees to issue and sell to the Purchaser the Shares at the price of $1.00 per share. The Shares shall be of the same class of common stock of the Company as is authorized and outstanding as of the date of this Agreement, with such rights, preferences and privileges as set forth in the Company’s Amended and Restated Certificate of Incorporation, as filed with the Delaware Secretary of State and as an exhibit to Customer’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 1, 2017.
Closing. Subject to the satisfaction or waiver of the conditions set forth herein, the purchase and sale of the Shares pursuant to this Agreement (the “ Closing ”) shall take place at the
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
offices of the Company within three business days following the date hereof (the date on which the Closing actually takes place is referred to herein as the “ Closing Date ”). At such time, the Company shall cause its transfer agent to deliver to the Purchaser a certificate representing the Shares against payment therefor, which payment shall be made in U.S. dollars by wire transfer of immediately available funds to an account designated by the Company.
Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as of the Effective Date as follows:
Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business. The Company is duly qualified to transact business as a corporation and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect upon the Company’ ability to perform its obligations under this Agreement.
Authorization; Due Execution. Assuming the accuracy of the Purchaser’s representation in Section 3.6 below, the Company has the requisite corporate power and authority to enter into this Agreement and to perform its obligations under the terms of this Agreement, and all corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement has been taken. This Agreement has been duly authorized, executed and delivered by the Company and, upon due execution and delivery by the Purchaser of this Agreement, this Agreement will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles.
Valid Issuance of Stock. The Shares, when issued, sold and delivered in accordance with the terms hereof and of the Services Agreement for the consideration and on the terms and conditions set forth herein and in the Services Agreement, will be duly and validly authorized and issued, fully paid and nonassessable and, based in part upon the representations of the Purchaser in this Agreement, will be issued in compliance with all applicable federal and state securities laws or applicable exemptions therefrom.
Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, local or provincial governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for such approvals or consents as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and such other notices required or permitted to be filed with certain state and federal securities commissions after the Effective Date, which notices will be filed on a timely basis.
No Conflict. The Company’s execution, delivery and performance of this Agreement does not (i) violate any provision of the Company’s Certificate of Incorporation or Bylaws, each as amended as of the Effective Date (copies of which have been filed with the Securities and Exchange Commission (the “ SEC ”)), (ii) violate any provision of any order, writ, judgment, injunction, decree, determination or award to which the Company is a party or by which it is bound,
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
(iii) conflict with, result in a breach of or constitute a default under any provision of any material agreement or instrument to which the Company is a party and by which it is bound that is filed with the SEC or (iv) to the Company’s knowledge, any law, rule or regulation currently in effect having applicability to the Company.
Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as of the Effective Date as follows:
Authorization; Due Execution. The Purchaser has the requisite power and authority to enter into this Agreement and to perform its obligations under the terms of this Agreement. All action on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement has been taken. This Agreement has been duly authorized, executed and delivered by the Purchaser, and, upon due execution and delivery by the Company, this Agreement will be a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by equitable principles.
Purchase Entirely for Own Account. The Shares purchased by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the immediate resale or distribution of any part thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same (provided that this shall not prevent the Purchaser from selling, granting any participation in, or otherwise distributing the same in the future in accordance with the requirements of the Securities Act (as defined below)). The Purchaser does not have any contract, undertaking, agreement or arrangement with any person other than an affiliate of the Purchaser to sell, transfer or grant participation to such person or to any third person, with respect to the Shares, if issued.
Disclosure of Information. The Purchaser has received all the information that it has requested and that it considers necessary or appropriate for deciding whether to enter into this Agreement and to acquire the Shares. The Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares.
Investment Experience. The Purchaser acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. The Purchaser has not been organized solely for the purpose of acquiring the Shares.
Accredited Investor. The Purchaser is an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended (the “ Securities Act ”).
Nasdaq Limitation. The issuance of the Shares to the Purchaser will not result in the Purchaser beneficially owning, immediately following the issuance, in excess of 19.99% of the outstanding Common Stock or voting power of the Company.
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Rule 144. The Purchaser understands that the Shares will not be registered under the Securities Act by reason of a specific exemption therefrom and acknowledges and agrees that the Shares to be purchased hereunder are “restricted securities” as defined in Rule 144 under the Securities Act as in effect from time to time and must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Purchaser has been advised or is aware of the provisions of Rule 144, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations. The Purchaser further understands that after the prescribed holding period as set forth in the in the Securities Act (as defined below), such restrictions on its rights to sell the Shares may expire (in accordance with Section 4.3 below).
Restrictive Legend. The Purchaser acknowledges and agrees that each certificate representing the Shares purchased hereunder shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Legend Removal. The Company will instruct its transfer agent not to register the transfer of the Shares (or any portion thereof) unless the conditions specified in the foregoing legend(s) are satisfied, until such time as a transfer is made, pursuant to the terms of this Agreement, and in compliance with Rule 144 under the Securities Act or pursuant to a registration statement or, if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act or this Agreement, until such opinion of counsel (satisfactory to the Company and its counsel) has been received by the Company. Notwithstanding the foregoing, the Company will act reasonably in requesting the removal of the restrictive legend after the Purchaser has satisfied the requirements of the Securities Act and provide the opinion described above if requested.
Miscellaneous.
Successors and Assigns. This Agreement may not be assigned by either party without the prior written consent of the other party. Subject to the preceding sentence, this Agreement will be binding upon the parties and their respective successors and assigns.
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.
Counterparts; Facsimile. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile and electronic (PDF) signatures shall be as effective as original signatures.
Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed facsimile or email if sent during normal business hours of the recipient, and if sent other than during normal business hours of the recipient, on the next business day; (iii) five calendar days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the other party hereto at such party’s mailing address, facsimile number or email address set forth on the signature page hereto, or at such other mailing address, facsimile number or email address as such party may designate by 10 days’ advance written notice to the other party hereto.
Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.
Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of both the Company and the Purchaser.
Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
Entire Agreement. This Agreement and the other documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.
[Signature Page Follows]
[*] = Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
In Witness Whereof, the parties hereto have executed this Agreement as of the date first written above.
Portola Pharmaceuticals, Inc.
By:
Mardi C. Dier
Executive Vice President and Chief Financial Officer
Address: Portola Pharmaceuticals, Inc.
270 East Grand Avenue
South San Francisco, California 94080
Attn: Chief Financial Officer
Facsimile: [*]
Email: [*]
Lonza AG
By:
Name:
Title:
Address: Lonza Sales AG
Münchensteinerstrasse 38
CH-4002 Basel
Switzerland
Attn:
Facsimile:
Email:
Exhibit 10.48
|
|
|
|
info@portola.com |
T: 650.246.7000 |
270 East Grand Avenue |
|
|
www.portola.com |
T: 650.246.7376 |
South San Francisco, CA 94080 |
Innovative Science. Patient Focused.
J une 26, 2018
Ernie Meyer
VIA EMAIL
Dear Ernie,
On behalf of Portola Pharmaceuticals, Inc. (‘‘Portola” or the ‘‘Company”), I am pleased to offer you an exempt position of Executive Vice President, Chief Human Resources Officer, reporting to John Curnutte, Co-President and Executive Vice President, R&D. Upon the arrival of the new Chief Executive Officer, you will report to the Chief Executive Officer. Your start date for this position is Monday, August 20, 2018.
Annual Salary
Your salary will be paid at the rate of $35,000.00 per month ($420,000.00 annualized) less payroll deductions and all required withholdings.
Target Bonus
You will be eligible to receive an annual bonus target of 45% of your base salary. Whether Portola awards bonuses for any given year, the allocation of the bonuses, if awarded, will be in the sole discretion of the Company as determined by its Board of Directors (the ‘‘Board”). If the Board approves payment of bonuses for any given year, the bonus amounts generally will be determined and paid within the first calendar quarter of the year based on the prior year’s performance. If your employment terminates for any reason prior to the payment of a bonus, then you will not have earned the bonus and will not receive any portion of it.
Equity
Stock Options: Subject to Board approval, and as a material inducement for you to enter into employment with the Company, you will be granted an option grant to purchase 87,500 shares of the Company’s common stock, subject to the terms and conditions of a Portola equity incentive plan, pursuant to a stock option grant notice and stock option agreement that will be provided to you following the date of grant. The exercise price of the option will be the closing price of Portola's Common Stock on the date of grant. The option will be subject to a four (4) year vesting schedule, such that 25% of the shares will vest on the first anniversary of the commencement of your employment, with the balance vesting in equal monthly installments over the subsequent thirty-six (36) months, until either your option shares are fully vested or your employment ends, whichever occurs first, in each case subject to your continued employment with the Company through the applicable vesting dates.
178285579 v1
Restricted Stock Units (RSUs): Subject to Board approval, and as a material inducement for you to enter into employment with the Company, you will be granted 30,000 Restricted Stock Units that will vest and become non-forfeitable, assuming your continued employment with the Company upon each vesting date, annually over three years subject to Board determination.
You will also be eligible for a grant of perf ormance-based RSUs (PRSUs) in Q1 2019, at the Board’s discretion, subject to terms and conditions to be determined by the Board.
Additional Benefits
In addition to the compensation package outlined above, you will receive the following:
Benefits: You will be eligible to receive Portola's complete package of benefits subject to the terms of the benefit plans and generally applicable Company policies.
Sign-On Bonus: Payable upon your first paycheck, you will receive a one-time sign-on bonus payment of $75,000.00, less required taxes and withholdings. You are required to repay this bonus to the Company in full if your employment terminates for any reason in the first year and if your employment terminates prior to the completion of your second year of employment, you will be required to pay half of the bonus amount, whether you resign or the Company terminates your employment with or without cause. You are required to make any such repayment to the Company within sixty (60) days following your employment termination date.
Relocation Program: You are eligible to participate in the Portola Relocation Program administered by MoveTrek Mobility. To determine the relocation elements that are applicable to you, please contact our MoveTrek Account Manager, Patty MacKinnon at 781-616-6345.
Executive Severance Benefits Agreement: You will be eligible for severance benefits under the terms of the Company's standard form of Executive Severance Benefits Agreement, which provides you certain severance benefits in the event that you are subject to certain qualifying terminations of employment, including a change in control and an involuntary termination without cause.
Enhanced Severance Benefits: The Company is currently in the process of retaining a new Chief Executive Officer (CEO). Following the Company's hiring of a new CEO, you will be eligible for the following additional enhanced severance bene fits:
|
• |
If, during the one (1) year period following the Company's hiring of a new CEO (as measured from the first day of employment for the new CEO), your employment is terminated without Cause (as defined in the Executive Severance Benefits Agreement), or you resign for Good Reason (as defined in the Executive Severance Benefits Agreement), then in addition to the severance benefits set forth in your Executive Severance Benefits Agreement, the Company will also (subject to the terms and conditions set forth in the Executive Severance Benefits Agreement) accelerate the vesting of your equity awards such that you will be deemed vested in such shares that would have vested had you remained employed for one (1) additional year following your last day of employment with the Company. |
|
• |
If, during the one (1) year period following the Company's hiring of a new CEO (as measured from the first day of employment for the new CEO), you decide to resign your employment for any reason, then the Company will accelerate the vesting on any earned PRSUs such that all earned but unvested shares will be deemed vested as of your last day of employment with the Company. |
178285579 v1
Please note that Portola may modify compensation and benefits from time to time as it deems necessary in accordance with applicable law.
Confidentiality
As a Portola employee, and as a condition of your employment, you will be expected to abide by Company rules and regulations and sign and comply with the Company’s Proprietary Information and Inventions Agreement which prohibits unauthorized use or disclosure of Portola proprietary information.
In your work for the Company, you will be expected not to make any unauthorized use or disclosure of any confidential information or materials, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.
By signing this letter, you represent that you are able to perform your job duties within these guidelines, and you are not in unauthorized possession of any confidential documents, information, or other property of any former employer or other third party. In addition, you represent that you have disclosed to the Company in writing any agreement you may have with any third party (e.g., a former employer) which may limit your ability to perform your duties to the Company.
Acknowledgements
By signing below, you agree that your employment with Portola is ‘‘ at will,” which means you may terminate your employment with Portola at any time and for any reason whatsoever simply by notifying Portola, and likewise, Portola may terminate your employment at any time and with or without cause or advance notice. This at-will employment relationship cannot be changed except in a writing signed by a Company officer. Portola reserves the right, in its sole discretion, to adjust salaries, incentive compensation, stock plans, employee benefits, job titles, locations, duties, responsibilities and reporting relationships in accordance with applicable laws.
This letter, together with the Proprietary Information and Inventions Agreement and Executive Severance Benefits Agreement, forms the complete and exclusive statement of agreement with Portola concerning the subject matter hereof. The employment terms in this letter supersede any other agreements or promises made to you by anyone, whether oral or written. Changes in your employment terms, other than those changes expressly reserved to the Company’s discretion in this letter, require a written modification signed by an officer of Portola. As required by law, this offer is subject to satisfactory proof of your right to work in the United States of America.
The Company reserves the right to conduct background investigations and/or reference checks on all of its potential employees. Your employment offer, therefore, is contingent upon a clearance of such a background investigation and/or reference check, to the Company's satisfaction.
178285579 v1
Please sign and date this letter and return it to the Company if you wish to accept employment at Portola under the terms described above.
We welcome you to the Portola team and look forward to your contribution to the Company's success.
Yours truly,
/s/ John Curnutte |
|
John Curnutte |
|
Co-President and Executive Vice President, R&D |
Accepted:
/s/ Ernie Meyer |
|
6/27/18 |
|
Ernie Meyer |
|
Date |
|
178285579 v1
Exhibit 10.49
|
|
|
|
info@portola.com |
T: 650.246.7000 |
270 East Grand Avenue |
|
|
www.portola.com |
T: 650.246.7376 |
South San Francisco, CA 94080 |
Innovative Science. Patient Focused.
January 17, 2019
Sheldon Koenig
VIA EMAIL
Dear Sheldon,
On behalf of Portola Pharmaceuticals, Inc. (‘‘Portola” or the ‘‘Company”), I am pleased to offer you an exempt position of Executive Vice President, Chief Commercial Officer, reporting to Scott Garland, President and Chief Executive Officer. Your start date for this position is Monday, January 28, 2019.
Annual Salary
Your salary will be paid at the rate of $37,500.00 per month ($450,000.00 annualized) less payroll deductions and all required withholdings.
Target Bonus
You will be eligible to receive an annual bonus target of 45% of your base salary. Whether Portola awards bonuses for any given year, the allocation of the bonuses, if awarded, will be in the sole discretion of the Company as determined by its Board of Directors (the ‘‘Board”). If the Board approves payment of bonuses for any given year, the bonus amounts generally will be determined and paid within the first calendar quarter of the year based on the prior year's performance. If your employment terminates for any reason prior to the payment of a bonus, then you will not have earned the bonus and will not receive any portion of it.
Equity
Stock Options: Subject to Board approval, and as a material inducement for you to enter into employment with the Company, you will be granted an option grant to purchase 125,000 shares of the Company’s common stock, subject to the terms and conditions of a Portola equity incentive plan, pursuant to a stock option grant notice and stock option agreement that will be provided to you following the date of grant. The exercise price of the option will be the closing price of Portola’s Common Stock on the date of grant. The option will be subject to a four (4) year vesting schedule, such that 25% of the shares will vest on the first anniversary of the commencement of your employment, with the balance vesting in equal monthly installments over the subsequent thirty-six (36) months, until either your option shares are fully vested or your employment ends, whichever occurs first, in each case subject to your continued employment with the Company through the applicable vesting dates.
Restricted Stock Units (RSUs): Subject to Board approval, and as a material inducement for you to enter into employment with the Company, you will be granted 25,000 Restricted Stock Units that will vest and become non-forfeitable, assuming your continued employment with the Company upon each vesting date, annually over three years subject to Board determination.
Additional Benefits
In addition to the compensation package outlined above, you will receive the following:
Benefits: You will be eligible to receive Portola’s complete package of benefits subject to the terms of the benefit plans and generally applicable Company policies.
Relocation Program: You are eligible to participate in the Portola Relocation Program administered by MoveTrek Mobility. To determine the relocation elements that are applicable to you, please contact our MoveTrek Account Manager, Patty MacKinnon at 781-616-6345.
Executive Severance Benefits Agreement: Provides compensation and benefits in the event that you are subject to certain qualifying terminations of employment, including a change in control and an involuntary termination without cause. The compensation and benefits are subject to the terms of the Company’s form of severance benefits agreement for similarly situated employees.
Please note that Portola may modify compensation and benefits from time to time as it deems necessary in accordance with applicable law.
Confidentiality
As a Portola employee, and as a condition of your employment, you will be expected to abide by Company rules and regulations and sign and comply with the Company’s Proprietary Information and Inventions Agreement which prohibits unauthorized use or disclosure of Portola proprietary information.
In your work for the Company, you will be expected not to make any unauthorized use or disclosure of any confidential information or materials, including trade secrets, of any former employer or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information which is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.
By signing this letter, you represent that you are able to perform your job duties within these guidelines, and you are not in unauthorized possession of any confidential documents, information, or other property of any former employer or other third party. In addition, you represent that you have disclosed to the Company in writing any agreement you may have with any third party (e.g., a former employer) which may limit your ability to perform your duties to the Company.
By signing below, you agree that your employment with Portola is ‘‘ at will,” which means you may terminate your employment with Portola at any time and for any reason whatsoever simply by notifying Portola, and likewise, Portola may terminate your employment at any time and with or without cause or advance notice. This at-will employment relationship cannot be changed except in a writing signed by a Company officer. Portola reserves the right, in its sole discretion, to adjust salaries, incentive compensation, stock plans, employee benefits, job titles, locations, duties, responsibilities and reporting relationships in accordance with applicable laws.
This letter, together with the Proprietary Information and Inventions Agreement, forms the complete and exclusive statement of agreement with Portola concerning the subject matter hereof. The employment terms in this letter supersede any other agreements or promises made to you by anyone, whether oral or written. Changes in your employment terms, other than those changes expressly reserved to the Company's discretion in this letter, require a written modification signed by an officer of Portola. As required by law, this offer is subject to satisfactory proof of your right to work in the United States of America.
The Company reserves the right to conduct background investigations and/or reference checks on all of its potential employees. Your employment offer, therefore, is contingent upon a clearance of such a background investigation and/or reference check, to the Company’s satisfaction.
We welcome you to the Portola team and look forward to your contribution to the Company's success.
Yours truly,
/s/ Errie Meyer |
|
Errie Meyer |
|
Executive Vice President, Chief Human Resources Officer |
Accepted:
/s/ Sheldon Koenig |
|
1/19/2019 |
Sheldon Koenig |
|
Date |
Exhibit 10.50
CONSULTING AGREEMENT
Effective Date: March 28 , 2019
This Consulting Agreement (the ‘‘ Agreement’’ ) is made as of the Effective Date set forth above by and between Portola Pharmaceuticals, Inc. ( ‘‘ Client’’ ) and Charles Homey, M.D. ( ‘‘ Consultant’’ ) .
1. Engagement of Services. Subject to the terms of this Agreement, Consultant will render the services (the ‘‘ Services’’ ) set forth in the Project Assignment attached to this Agreement as Exhibit A ( ‘‘ Project Assignment’’ ) . Except as otherwise provided in the Project Assignment, Consultant will be free of control and direction from the Client (other than general oversight and control over the results of the Services), and will have exclusive control over the manner and means of performing the Services, including the choice of place and time. Consultant will provide, at Consultant's own expense, a place of work and all equipment, tools and other materials necessary to complete the Services; however, to the extent necessary to facilitate performance of the Services, Client may, in its discretion, make certain of its equipment or facilities available to Consultant at Consultant's request. While on the Client's premises, Consultant agrees to comply with Client's then-current access rules and procedures, including those related to safety, security and confidentiality. Consultant agrees and acknowledges that Consultant has no expectation of privacy with respect to Client's telecommunications, networking or information processing systems (including stored computer files, email messages and voice messages) and that Consultant's activities, including the sending or receiving of any files or messages, on or using those systems may be monitored, and the contents of such files and messages may be reviewed and disclosed, at any time, without notice.
2. Compensation. Client will compensate Consultant as set forth in the Project Assignment for Services rendered pursuant to this Agreement. Consultant will be reimbursed only for expenses that are expressly provided for in the Project Assignment or have been approved in advance in writing by Client, provided Consultant has furnished such documentation for authorized expenses as Client may reasonably request.
3. Ownership of Work Product. Consultant agrees that any and all Work Product (as defined below) will be the sole and exclusive property of Client. Consultant hereby irrevocably assigns to Client all right, title and interest worldwide in and to any deliverables specified in the Project Assignment ( ‘‘ Deliverables’’), and to any ideas, concepts, processes, discoveries, developments, formulae, information, materials, improvements, designs, artwork, content, software programs, other copyrightable works, and any other work product created, conceived or developed by Consultant (whether alone or jointly with others) for Client during or before the term of this Agreement, including all copyrights, patents, trademarks, trade secrets, and other intellectual property rights therein (the ‘‘ Work Product’’ ) . Consultant retains no rights to use the Work Product and agrees not to challenge the validity of Client's ownership of the Work Product. Consultant agrees to execute, at Client's request and expense, all documents and other instruments necessary or desirable to confirm such assignment. Consultant hereby irrevocably appoints Client as Consultant's attorney-in-fact for the purpose of executing such documents on Consultant's behalf, which appointment is coupled with an interest. Consultant will deliver any Deliverables in accordance with the applicable Project Assignment and disclose promptly in writing to Client all other Work Product.
4. Other Rights. If Consultant has any rights, including without limitation ‘‘ artist's rights’’ or ‘‘ moral rights,’’ in the Work Product that cannot be assigned, Consultant hereby unconditionally and irrevocably grants to Client an exclusive (even as to Consultant), worldwide, fully paid and royalty-free, irrevocable, perpetual license, with rights to sublicense through multiple tiers of sublicensees, to use, reproduce, distribute, create derivative works of, publicly perform and publicly display the Work Product in any medium or format, whether now known or later developed. In the event that Consultant has any rights in the Work Product that cannot be assigned or licensed, Consultant unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Client or Client's customers.
1 .
200559169 v3
5. License to Preexisting IP. Consultant agrees not to use or incorporate into Work Product any intellectual property developed by any third party or by Consultant other than in the course of performing services for Client ( ‘‘ Preexisting IP ’’ ). In the event Consultant uses or incorporates Preexisting IP into Work Product, Consultant hereby grants to Client a non-exclusive, perpetual, fully-paid and royalty free, irrevocable and worldwide right, with the right to sublicense through multiple levels of sublicensees, to use, reproduce, distribute, create derivative works of, publicly perform and publicly display in any medium or format, whether now known or later developed, such Preexisting IP incorporated or used in Work Product.
6. Representations and Warranties & Consultant's Business. Consultant represents and warrants that: (a) the Services will be performed in a professional manner and in accordance with the industry standards and the Work Product will comply with the requirements set forth in the Project Assignment, (b) Work Product will be an original work of Consultant, (c) Consultant has the right and unrestricted ability to assign the ownership of Work Product to Client as set forth in Section 3 (including without limitation the right to assign the ownership of any Work Product created by Consultant's employees or contractors), (d) neither the Work Product nor any element thereof will infringe upon or misappropriate any copyright, patent, trademark, trade secret, right of publicity or privacy, or any other proprietary right of any person, whether contractual, statutory or common law, (e) Consultant has an unqualified right to grant to Client the license to Preexisting IP set forth in Section 5, and (f) Consultant will comply with all applicable federal, state, local and foreign laws governing self-employed individuals, including laws requiring the payment of taxes, such as income and employment taxes, and social security, disability, and other contributions. Consultant further represents and warrants that Consultant is self-employed in an independently established trade, occupation, or business, maintains and operates a business that is separate and independent from Client's business, holds himself or herself out to the public as independently competent and available to provide applicable services similar to the Services, has obtained and/or expects to obtain clients or customers other than Client for whom Consultant performs services, and will perform work for Client that Consultant understands is outside the usual course of Client's business. Consultant agrees to indemnify and hold Client harmless from any and all damages, costs, claims, expenses or other liability (including reasonable attorneys' fees) arising from or relating to the breach or alleged breach by Consultant of the representations and warranties set forth in this Section 6.
7. Independent Contractor Relationship. Consultant's relationship with Client is that of an independent contractor, and nothing in this Agreement is intended to, or should be construed to, create a partnership, agency, joint venture or employment relationship between Client and any of Consultant's employees or agents. Consultant is not authorized to make any representation, contract or commitment on behalf of Client. Consultant (if Consultant is an individual) and Consultant's employees will not be entitled to any of the benefits that Client may make available to its employees, including, but not limited to, group health or life insurance, profit-sharing or retirement benefits. Because Consultant is an independent contractor, Client will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions, or obtain workers' compensation insurance on behalf of Consultant. Consultant is solely responsible for, and will file, on a timely basis, all tax returns and payments required to be filed with, or made to, any federal, state or local tax authority with respect to the performance of Services and receipt of fees under this Agreement. Consultant is solely responsible for, and must maintain adequate records of, expenses incurred in the course of performing Services under this Agreement. No part of Consultant's compensation will be subject to withholding by Client for the payment of any social security, federal, state or any other employee payroll taxes. Client will regularly report amounts paid to Consultant by filing Form 1099-MISC with the Internal Revenue Service as required by law. If, notwithstanding the foregoing, Consultant is reclassified as an employee of Client, or any affiliate of Client, by the U.S. Internal Revenue Service, the U.S. Department of Labor, or any other federal or state or foreign agency as the result of any administrative or judicial proceeding, Consultant agrees that Consultant will not, as the result of such reclassification, be entitled to or eligible for, on either a prospective or retrospective basis, any employee benefits under any plans or programs established or maintained by Client.
2 .
200559169 v3
8. Confidential Information. Consultant agrees that during the term of this Agreement and thereafter it will not use or permit the use of Client's Confidential Information in any manner or for any purpose not expressly set forth in this Agreement, will hold such Confidential Information in confidence and protect it from unauthorized use and disclosure, and will not disclose such Confidential Information to any third parties except as set forth herein. ‘‘ Confidential Information ’’ as used in this Agreement means all information disclosed by Client to Consultant, whether during or before the term of this Agreement, that is not generally known in the Client's trade or industry and will include, without limitation: (a) concepts and ideas relating to the development and distribution of content in any medium or to the current, future and proposed products or services of Client or its subsidiaries or affiliates; (b) trade secrets, drawings, inventions, know-how, software programs, and software source documents; (c) information regarding plans for research, development, new service offerings or products, marketing and selling, business plans, business forecasts, budgets and unpublished financial statements, licenses and distribution arrangements, prices and costs, suppliers and customers; (d) existence of any business discussions, negotiations or agreements between the parties; and (e) any information regarding the skills and compensation of employees, contractors or other agents of Client or its subsidiaries or affiliates. Confidential Information also includes proprietary or confidential information of any third party who may disclose such information to Client or Consultant in the course of Client's business. Confidential Information does not include information that (x) is or becomes a part of the public domain through no act or omission of Consultant, (y) is disclosed to Consultant by a third party without restrictions on disclosure, or (z) was in Consultant's lawful possession prior to the disclosure and was not obtained by Consultant either directly or indirectly from Client. In addition, this section will not be construed to prohibit disclosure of Confidential Information to the extent that such disclosure is required by law or valid order of a court or other governmental authority; provided, however, that Consultant will first have given notice to Client and will have made a reasonable effort to obtain a protective order requiring that the Confidential Information so disclosed be used only for the purposes for which the order was issued. All Confidential Information furnished to Consultant by Client is the sole and exclusive property of Client or its suppliers or customers. Upon request by Client, Consultant agrees to promptly deliver to Client the original and any copies of the Confidential Information. Notwithstanding the foregoing nondisclosure obligations, pursuant to I 8 U.S.C. Section 1833(b), Consultant will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
9. No Conflict of Interest. During the term of this Agreement, Consultant will not accept work, enter into a contract, or accept an obligation from any third party, inconsistent or incompatible with Consultant's obligations, or the scope of Services rendered for Client, under this Agreement. Consultant warrants that there is no other contract or duty on its part inconsistent with this Agreement. Consultant agrees to indemnify Client from any and all loss or liability incurred by reason of the alleged breach by Consultant of any services agreement with any third party.
10. Term and Termination.
10.1 Term. The initial term of this Agreement shall be from the date hereof until March 31, 2020. Thereafter, this Agreement will remain in effect unless terminated by either Party pursuant to Section 10.2 below.
10.2 Termination. Following its initial term, either party may terminate this Agreement with or without cause, at any time upon 30 days' prior written notice to the other party. Either party may terminate this Agreement immediately in the event the other party has materially breached the Agreement and failed to cure such breach within 15 days after notice by the non-breaching party is given.
11. Noninterference with Business. Consultant agrees that during the Term of this Agreement, Consultant will not, without Client's express written consent, either directly or indirectly engage in any employment or business activity that is competitive with, or would otherwise conflict with the Services rendered to, or that would otherwise interfere with the business of, the Client. Consultant agrees that during the Term of this Agreement, and for one year thereafter, Consultant will not either directly or indirectly, solicit or attempt to solicit any employee, independent contractor, or consultant of Client to terminate his, her or its relationship with Client in order to become an employee, consultant, or independent contractor to or for any other person or entity.
3 .
200559169 v3
12. Successors and Assigns. Consultant may not subcontract or otherwise delegate or assign this Agreement or any of its obligations under this Agreement without Client's prior written consent. Any attempted assignment in violation of the foregoing will be null and void. Subject to the foregoing, this Agreement will be for the benefit of Client's successors and assigns, and will be binding on Consultant's assignees.
13. Notices. Any notice required or permitted by this Agreement will be in writing and will be delivered as follows with notice deemed given as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt. Notice will be sent to the addresses set forth below or such other address as either party may specify in writing.
14. Governing Law. This Agreement will be governed in all respects by the laws of the United States of America and by the laws of the State of California, without giving effect to any conflicts of laws principles that require the application of the law of a different jurisdiction.
15. Severability. Should any provisions of this Agreement be held by a court of law to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement will not be affected or impaired thereby.
16. Waiver. The waiver by Client of a breach of any provision of this Agreement by Consultant will not operate or be construed as a waiver of any other or subsequent breach by Consultant.
17. Injunctive Relief for Breach. Consultant's obligations under this Agreement are of a unique character that gives them particular value; breach of any of such obligations will result in irreparable and continuing damage to Client for which there will be no adequate remedy at law; and, in the event of such breach, Client will be entitled to injunctive relief and/or a decree for specific performance, and such other and further relief as may be proper (including monetary damages if appropriate).
18. Entire Agreement. This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or contemporaneous oral or written agreements concerning such subject matter. The terms of this Agreement will govern all services undertaken by Consultant for Client; provided, however, that in the event of any conflict between the terms of this Agreement and the Project Assignment, the terms of the Project Assignment will control. This Agreement may only be changed or amended by mutual agreement of authorized representatives of the parties in writing. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.
[Remainder of page intentionally left blank]
4 .
200559169 v3
The parties have executed this Agreement as of the Effective Date.
CLIENT: |
||
|
|
|
|
|
|
By: |
|
|
|
|
|
|
Name: |
J. Scott Garland |
|
Title: |
President and Chief Executive Officer |
|
|
|
Email: |
sgarland@portola.com |
|
|
|
|
Address : |
|
Portola Pharmaceuticals Inc. |
|
|
270 East Grand Avenue |
|
|
South San Francisco, CA 94080 |
CONSULTANT: |
||
|
||
Charles Homcy, M.D. |
||
Name of Consultant (Please Print) |
||
|
||
Signature |
||
|
||
|
||
|
||
|
||
|
||
|
||
Address : |
|
|
|
|
|
|
|
|
5 .
200559169 v3
Project Assignment
Project:
Consultant will provide advisory services on scientific and business matters as directed by Client's Chief Executive Officer.
Fees And Reimbursement:
A. |
Cash Fee: $3,000.00 per month. |
Equity: Any outstanding equity awards granted to Consultant by Client prior to the Effective Date shall continue to vest pursuant to the applicable terms of the underlying grant notice during the Term of this Agreement. In addition, subject to approval by the Compensation Committee of the Board of Directors, Client will grant Consultant an option to purchase I0,000 shares of the Company's common stock, with all such shares to vest on the one-year anniversary of the date of grant. This option shall be governed in all respects by the terms of the applicable option agreement and option plan. In the event either party terminates this Agreement prior to the end of the Term, all outstanding and unvested equity awards will vest in full on such termination date.
B. |
Reimbursement for expenses at cost, as approved in advance by Client. |
Client will pay the cash fee on a monthly basis without separate invoice by Consultant.
If Consultant requests reimbursement of expenses, Consultant shall invoice Client within 30 days after incurring such expenses and will provide such reasonable receipts or other documentation of expenses as Client might request.
The parties have executed this Project Assignment as of the Effective Date.
CLIENT: |
||
|
|
|
By: |
/s/ J. Scott Garland |
|
|
|
|
|
Name: |
J. Scott Garland |
|
Title: |
President and Chief Executive Officer Portola Pharmaceuticals, Inc. |
CONSULTANT: |
|
Charles Homcy, M.D. |
Name of Consultant (Please Print) |
|
Signature |
|
200559169 v3 |
A-1 |
Project Assignment
Project:
Consultant will provide advisory services on scientific and business matters as directed by Client 's Chief Executive Officer.
Fees And Reimbursement:
A. |
Cash Fee: $3,000.00 per month. |
Equity: Any outstanding equity awards granted to Consultant by Client prior to the Effective Date shall continue to vest pursuant to the applicable terms of the underlying grant notice during the Term of this Agreement. In addition, subject to approval by the Compensation Committee of the Board of Directors, Client will grant Consultant an option to purchase 10,000 shares of the Company's common stock, with all such shares to vest on the one-year anniversary of the date of grant. This option shall be governed in all respects by the terms of the applicable option agreement and option plan. In the event either party terminates this Agreement prior to the end of the Term, all outstanding and unvested equity awards will vest in full on such termination date.
B. |
Reimbursement for expenses at cost, as approved in advance by Client. |
Client will pay the cash fee on a monthly basis without separate invoice by Consultant.
If Consultant requests reimbursement of expenses, Consultant shall invoice Client within 30 days after incurring such expenses and will provide such reasonable receipts or other documentation of expenses as Client might request.
The parties have executed this Project Assignment as of the Effective Date.
CLIENT: |
||
|
|
|
|
|
|
By: |
|
|
|
|
|
|
Name: |
J. Scott Garland |
|
Title: |
President and Chief Executive Officer Portola Pharmaceuticals, Inc. |
CONSULTANT: |
|
Charles Homcy, M.D. |
Name of Consultant (Please Print) |
/s/ Charles Homcy |
Signature |
|
200559169 v3 |
A-1 |
Exhibit 31.1
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mardi Dier, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Portola Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2019
|
|
/s/ Mardi Dier |
|
|
Mardi Dier |
|
|
Chief Financial Officer (Principal Financial Officer) |
Exhibit 31.2
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Scott Garland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Portola Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2019
|
|
/s/ Scott Garland |
|
|
Scott Garland |
|
|
President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.1
CERTIFICATION
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Mardi Dier, Chief Financial Officer of Portola Pharmaceuticals, Inc. (the “Company”), and Scott Garland, President and Chief Executive Officer of the Company, each hereby certifies that, to the best of his or her knowledge:
|
1. |
The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2019, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and |
|
2. |
The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
In Witness Whereof , the undersigned have set their hands hereto as of the 8th day of May, 2019.
/s/ Mardi C. Dier |
|
/s/ Scott Garland |
Mardi C. Dier |
|
Scott Garland |
Chief Financial Officer |
|
President and Chief Executive Officer |
(Principal Financial Officer) |
|
(Principal Executive Officer) |
|
|
|
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Portola Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.