Item 1.01. Entry
into a Material Definitive Agreement.
On April 22, 2016, we entered into a license
and supply agreement to acquire the exclusive U.S. rights to Natesto™ (testosterone) nasal gel from Acerus Pharmaceuticals
Corporation, or Acerus, which rights we will acquire effective upon the expiration of the current licensee’s rights, expected
to occur on June 30, 2016.
The license’s term runs for the greater
of eight years or until the expiry of the latest to expire patent including claims covering Natesto and until the entry on the
market of at least one AB-rated generic product.
We paid Acerus an upfront fee of $2,000,000
upon execution of the agreement. On September 5, 2016 we will pay an additional $2,000,000 (referred to as the Second Upfront).
On January 1, 2017, we will pay an additional $4,000,000 (referred to as the Third Upfront).
In addition to the upfront payments, we
must make the following one-time, non-refundable payments to Acerus within 45 days of the occurrence of the following events (provided
that, the maximum aggregate amount payable under such milestone payments will be $37,500,000):
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$2,500,000 if net sales during any four consecutive calendar quarter period equal or exceed $25,000,000 (referred to as the
First Milestone);
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$5,000,000 if net sales during any four consecutive calendar quarter period equal or exceed $50,000,000;
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$7,500,000 if net sales during any four consecutive calendar quarter period equal or exceed $75,000,000;
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$10,000,000 if net sales during any four consecutive calendar quarter period equal or exceed $100,000,000; and
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$12,500,000 if net sales during any four consecutive calendar quarter period equal or exceed $125,000,000.
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We also will purchase on April 28,
2016, an aggregate of 12,245,411 shares of Acerus common stock for Cdn. $2,534,800 (approximately US $2,000,000), with
a purchase price per share of Cdn. $0.207; provided that,
in
the event that the TSX, as a condition of providing its approval of the listing of the shares on the TSX, requires an
upward adjustment to the subscription price per share to an amount greater than Cdn.$0.207, the subscription agreement will
be automatically amended to provide that the subscription will be comprised of that number of shares equal to
Cdn.$2,534,800 divided by the greater of (i) Cdn.$0.207 per share, and (ii) the lowest subscription price per share required
by the TSX. We cannot dispose of these shares until August 29, 2016.
During the term of the agreement, we
will purchase all of our Natesto product needs from Acerus. Each month we will provide Acerus with a two-year forecast of our
product needs, the first three months of which will be noncancelable. Pursuant to the agreement, we will pay Acerus a supply
price per unit of the greater of (i) 115% of Acerus’ cost of goods sold for Natesto, not to exceed a fixed ceiling
price and (ii) 10% of the net selling price for the first year of the agreement that increases to 16% in the second year and
25% in the third year of the agreement and remains constant after that. Upon the expiration or invalidation of the
last-to-expire (or be invalidated) Acerus patent covered by the agreement, the supply price will be reduced to an amount
equal to the sum of (A) 115% of Acerus’ cost of goods sold (but not to exceed the fixed ceiling price) and (B) 50% of
the difference between the supply price and 115% of Acerus’ cost of goods sold (but not to exceed the fixed ceiling
price); provided that the supply price will not be reduced to an amount lower than 115% of Acerus’ cost of goods sold
(but not to exceed the fixed ceiling price).
In the event of any termination of the
agreement prior to the date on which the Second Upfront, Third Upfront and/or First Milestone is otherwise payable, all of those
amounts will, unless otherwise paid prior to the effective date of termination, be payable on the effective termination date. Following
the termination date, any further milestone amounts will be payable to Acerus in accordance with the agreement, even if the milestone
is met after the termination date.
Pursuant to the agreement, we and Acerus
are forming a cross-functional transition team to ensure a fully-integrated and timely transition to us from Endo. In addition,
during the term of the agreement, we have committed to the following promotional and operational elements:
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We and Acerus will form a joint marketing committee to oversee brand marketing and overall planning related to Natesto;
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We will be responsible for all aspects of managing the NDA and complying with any regulatory or other legal obligations
arising in connection therewith – excluding any additional safety or (except as set out below with respect to a twice
a day study) efficacy studies. Notwithstanding the foregoing, we will, in our capacity as the holder of the NDA for
Natesto,
provide all assistance and cooperation as may reasonably be required by Acerus in connection with the conduct of such safety
or efficacy studies.
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We may, at our discretion, elect to initiate a clinical trial to seek approval for twice a day dosing for Natesto and administer
such trial at our costs, provided, however, that Acerus will manage and oversee such trial in accordance with the existing protocol
for such a trial, subject to such changes as we may agree).
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Acerus will be responsible for directly
or indirectly manufacturing Natesto, and we will be obligated to purchase Natesto from Acerus, as set forth above.
We agreed to undertake the
cardiovascular postmarketing requirement, or PMR, for Natesto; however, Acerus must reimburse us for all costs of such
obligation, including any PMR trial.
In the event that Acerus
decides to dispose of any intellectual property licensed to us under the agreement in any territory in the world (other than Brazil
or the countries of the European Union), Acerus must notify us and negotiate exclusively with us for a period of 60 days for an
agreement to assign, transfer or license such intellectual property to us.
We may terminate the agreement
at any time upon six months’ notice, provided that we must make any milestone payment to Acerus that would otherwise become
due during such six month period, and may be responsible for the Second Upfront, Third Upfront and First Milestone payments as
referenced above. Either Party may terminate the agreement for material default or breach that remains uncured or the bankruptcy
or insolvency of the other party. Acerus may terminate the agreement upon six months’ notice if it determines that the reimbursable
amounts in connection with the cardiovascular PMR obligations would no longer make the agreement economically viable for Acerus,
provided that it must pay us all reimbursable amounts outstanding prior to such termination, and also fulfill any valid purchase
orders submitted by us prior to the effective date of termination.
The description of the license and
supply agreement and the subscription agreement provided above is qualified in their entirety by reference to the full and
complete terms contained in the license and supply agreement and subscription agreement, which are filed as exhibits 10.1 and
10.2 hereto, respectively.
A copy of the press release announcing
the entry into the license and supply agreement is attached hereto as Exhibit 99.1 and is incorporated herein by reference.