Item 1.01. Entry into a Material Definitive Agreement.
On September 6, 2016, Aralez Pharmaceuticals Inc., a company formed under the laws of the Province of British Columbia, Canada (the
Company
), and Aralez Pharmaceuticals Trading DAC, an Irish designated activity company and a wholly-owned, indirect subsidiary of the Company (
Buyer
), entered into an Asset Purchase Agreement (the
Asset Purchase Agreement
) with Schering-Plough (Ireland) Company, an Irish private unlimited company and an affiliate of Merck & Co., Inc. (
Seller
). Pursuant to and subject to the terms and conditions of the Asset Purchase Agreement, on September 6, 2016, Buyer acquired from Seller the pharmaceutical product containing vorapaxar sulphate as the active pharmaceutical ingredient and distributed under the brand name ZONTIVITY
®
(the
Product
) in the United States and Canada and their respective territories (the
Territory
). The purchase price of the Product and related assets consists of (i) a payment of $25 million by Buyer to Seller, which was made on the closing date, (ii) certain milestone payments payable by Buyer subsequent to the closing upon the occurrence of certain milestone events based on the annual aggregate net sales of the Product, any combination product containing vorapaxar sulphate and one or more other active pharmaceutical ingredients or any line extension thereof, which in no event will exceed $80 million in the aggregate, and (iii) certain royalty payments based on the annual aggregate net sales of the Product, any combination product containing vorapaxar sulphate and one or more other active pharmaceutical ingredients or any line extension thereof (collectively, the
Aggregate Payments
). Buyer has also agreed to bear the cost, if any, of all transfer taxes due in connection with the purchase of the purchased assets pursuant to the Asset Purchase Agreement. The Company guaranteed the obligations of Buyer under the Asset Purchase Agreement and the Ancillary Agreements (as defined below), including the Aggregate Payments and any payments due to Seller under the Ancillary Agreements.
Pursuant to the Asset Purchase Agreement, Buyer assumed, among other things, liabilities arising out of or related to any Product that is manufactured or sold on or after the closing date, and Seller retained certain liabilities relating to pre-closing activities.
The Asset Purchase Agreement contains certain representations and warranties made by Seller with respect to Seller and the purchased assets. The Asset Purchase Agreement includes an indemnity from Seller for breaches of representations, warranties and covenants and in respect of the excluded liabilities and excluded assets. Sellers indemnity obligations for breaches of Sellers representations and warranties are subject to specified limitations, including a deductible and cap.
Pursuant to the terms of the Asset Purchase Agreement and certain ancillary agreements entered into by Buyer and Seller (the
Ancillary Agreements
), Seller has agreed to supply Product to Buyer for a period of up to three years following the Closing. Seller will also provide certain transition services to Buyer following the closing to facilitate the transition of the supply, sale and distribution of the Product, including distributing the Product on behalf of Buyer in exchange for compensation specified in the transition services agreement. In addition, in connection with the foregoing transactions, Seller granted Buyer, among other things, (i) an exclusive and royalty-free license to certain trademarks solely to exploit the Product in the Territory, and (ii) an exclusive and royalty-free license to certain know-how solely in connection with the manufacture of the Product for exploitation in the Territory.
In connection with the Asset Purchase Agreement, the lenders party to the Second Amended and Restated Facility Agreement, dated as of December 7, 2015 (the
Credit Agreement
), by and among such lenders, the Company, POZEN Inc., a Delaware corporation (
Pozen
), Tribute Pharmaceuticals Canada Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (
Tribute
and, collectively with the Company and Pozen, the
Credit Parties
) consented to Buyer entering into the Asset Purchase Agreement and consummation of the transactions contemplated thereby. Pursuant to the terms of such consent, until December 31, 2016, subject to the satisfaction of certain conditions set forth in the Credit Agreement, the Credit Parties may borrow under the credit facility to finance the $25 million payment made by Buyer to Seller on the closing date.
The foregoing description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to a copy of the Asset Purchase Agreement, which is filed as
Exhibit 2.1
to this Current Report on Form 8-K, and is incorporated by reference herein. The Company is seeking confidential treatment for certain
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