Item 1.01. Entry into a Material Definitive Agreement.
On March 15, 2017, PTC Therapeutics, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Marathon Pharmaceuticals, LLC (“Marathon”) pursuant to which the Company agreed to acquire all rights to Emflaza™ (deflazacort) (the “Transaction”). Emflaza is the first treatment approved in the
United States for all Duchenne muscular dystrophy patients five years and older, regardless of their genetic mutation. Under the terms of the Asset Purchase Agreement, the Company has agreed to pay Marathon total upfront consideration of $140 million upon the closing of the Transaction, comprised of approximately $75 million in cash and approximately $65 million of the Company’s common stock. The number of shares of the Company’s common stock issuable at closing will be based on the volume weighted average price per share of the Company’s common stock on the Nasdaq Stock Market for the 15 trading day period ending on the third trading day immediately preceding the closing of the Transaction and will be subject to reduction such that the number of shares issuable will not exceed 19.9% of the issued and outstanding shares of the Company’s common stock immediately prior to the closing date, which is expected to be a maximum of approximately 6.9 million shares, with any shortfall to be made whole with additional cash consideration. The Company will also assume certain liabilities with respect to the assets to be acquired. In addition, Marathon will be entitled to receive contingent payments from the Company based on annual net sales of Emflaza beginning in 2018, up to a specified aggregate maximum amount for such payments, and a single $50 million sales-based milestone, in each case subject to the terms and conditions of the Asset Purchase Agreement. The Company expects that the contingent payments will, on a blended average basis, range in percentages of net sales between the low to mid-twenties.
The Asset Purchase Agreement includes customary pre-closing covenants, including with respect to Marathon’s conduct of business, capital expenditures and studies and trials relating to the assets to be acquired as well as provisions with respect to the parties’ rights and responsibilities in the event Marathon elects to commercialize the assets to be acquired prior to closing of the Transaction.
Additionally, prior to the closing of the Transaction, Marathon is prohibited from initiating, soliciting, encouraging or otherwise facilitating any inquiry, proposal, offer or discussion or engaging in discussions or negotiating with any party other than the Company with respect to a sale or similar transaction of the assets to be acquired, subject to the terms and conditions of the Asset Purchase Agreement. The Asset Purchase Agreement also prohibits Marathon from engaging in the business of developing, selling, manufacturing, distributing or marketing any product that is a steroid or anti-inflammatory for the treatment of Duchenne Muscular Dystrophy and from soliciting or hiring specified persons and employees of the Company, subject to certain exceptions as set forth in the Asset Purchase Agreement, for a period of five years following the closing of the Transaction. Under the Asset Purchase Agreement, Marathon has also agreed to a standstill with respect to the Company’s securities, not to dispose of any Company common stock and to vote any of its Company common stock in accordance with the Company’s governing body for a period of six months following closing of the Transaction, subject to certain exceptions as set forth in the Asset Purchase Agreement.
The Asset Purchase Agreement includes customary closing conditions, including regulatory approval, and termination provisions as well as indemnification provisions pursuant to which the parties agree to indemnify each other, subject to certain thresholds and caps on liability as set forth in the Asset Purchase Agreement. The Asset Purchase Agreement may be terminated by either party if the Transaction has not closed by July 15, 2017, subject to the terms and conditions of the Asset Purchase Agreement.
The Asset Purchase Agreement also contains customary representations and warranties that the Company and Marathon made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the Asset Purchase Agreement and may be subject to important qualifications and limitations agreed to by the Company and Marathon in connection with negotiating its terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders or may have been used for the purpose of allocating risk between the Company and Marathon rather than establishing matters as facts. For the foregoing reasons, no person should rely on such representations and warranties as statements of factual information at the time they were made or otherwise.
The above description of the Asset Purchase Agreement is a summary only and is qualified in its entirety by reference to the terms of the Asset Purchase Agreement, filed as Exhibit 2.1 hereto and incorporated herein by reference.