Item 1.01. Entry into a Material Definitive Agreement
On January 10, 2017, KP EU C.V. (Kite), a wholly owned indirect subsidiary of Kite Pharma, Inc., entered into a Sino-foreign Co-operative
Joint Venture Contract (the JV Agreement) with Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd. (Fosun) pursuant to which the parties will establish a joint venture (the JV Company) for the purpose
of developing, manufacturing and commercializing axicabtagene ciloleucel, also known as KTE-C19, in the mainland of the Peoples Republic of China, the Hong Kong Special Administration Region and the Macau Special Administration Region
(together, the China Market). Axicabtagene ciloleucel, Kites lead product candidate, is an investigational therapy in which a patients T cells are engineered to express a chimeric antigen receptor to target the antigen CD19,
a protein expressed on the cell surface of B-cell lymphomas and leukemias, and redirect the T cells to kill cancer cells.
Pursuant to the JV Agreement,
Kite and Fosun will each own 50% of the JV Company, with 40% of the profits allocated to Kite and the remaining 60% allocated to Fosun. Fosun will contribute the RMB equivalent of $20 million in cash to the JV Company and Kite will contribute
certain exclusive commercial rights to be set forth in the Product and Know-How License Agreement with the JV Company in kind to the JV Company.
Pursuant
to the JV Agreement, Kite and Fosun have agreed that within 20 business days following the establishment of the JV Company, which is subject to government approval, the JV Company and Kite will enter into a Technology License Agreement and a Product
and Know-How License Agreement (together with the Technology License Agreement, the License Agreements). Under the License Agreements, Kite will grant the JV Company an exclusive license to manufacture, develop and commercialize KTE-C19
in the China Market.
In addition, under the JV Agreement, the JV Company has a certain period of time to exclusively license in the China Market, at its
option, certain additional CAR and T cell receptor (TCR) product candidates, including KITE-439, Kites TCR product candidate targeting the human papillomavirus type 16 E7 oncoprotein and KITE-718, Kites TCR product candidate targeting
MAGE-A3/A6.
Pursuant to the Technology License Agreement, Kite will receive a $40 million upfront payment from the JV Company, funded by Fosun, and for
KTE-C19 will be entitled to (a) regulatory and commercial milestone payments of up to $35 million and (b) subject to certain conditions, mid-single digit sales royalties. In addition, if Fosun exercises its option to acquire an exclusive
license to KITE-439 or KITE-718, Kite will be entitled to option exercise and milestone payments of up to $70 million, plus mid-single digit sales royalties.
Fosun and Kite have also agreed that the JV Company and Kite will enter into a Technical Service Agreement within 20 business days following the establishment
of the JV Company, pursuant to which Kite will provide the JV Company with certain technical transfer services.
The term of the JV Agreement is 20 years
from the date that the JV Company is established, subject to extension by mutual agreement of the parties. Either party may terminate the JV Agreement with written notice and subject to a good faith discussion and negotiation period upon the failure
of a condition related to capital contributions, cooperation of the parties, the JV Companys business license, the JV
Companys cash flow and certain adverse revisions to the JV Agreement required by governmental authorities. Either party may also terminate the JV Agreement with written notice and subject
to a negotiation period upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice, in the event of the other partys bankruptcy, or upon the occurrence of certain force majeure
events or governmental actions. The License Agreements terminate concurrent with any termination of the JV Agreement. For as long as Kite owns 40% of the equity of the JV Company, any other termination right under the License Agreements is
conditioned upon the termination of the JV Agreement.
Contemporaneously with execution of the JV Agreement, Kite Pharma, Inc. and Fosun executed a
guarantee agreement pursuant to which Kite Pharma, Inc. guarantees Kites performance under the JV Agreement. Kite Pharma, Inc. will also guarantee Kites performance under the License Agreements and the Technical Service Agreement.
The foregoing description of the JV Agreement and License Agreements is only a summary and is qualified in its entirety by reference to the JV Agreement and
License Agreements. Kite intends to file copies of the JV Agreement and License Agreements as exhibits to its Quarterly Report on Form 10-Q for its fiscal quarter ending March 31, 2017, portions of which will be subject to a FOIA Confidential
Treatment Request to the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, for certain portions of the JV Agreement and License Agreements. The omitted material will be included in the
request for confidential treatment.