Item 2.01. Completion of Acquisition or Disposition of Assets.
On April 20, 2017, PTC Therapeutics, Inc. (the “Company”), completed the previously announced acquisition of all rights to Emflaza™ (deflazacort) (the “Transaction”). The Transaction was completed pursuant to an asset purchase agreement, dated March 15, 2017, as amended on April 20, 2017 to amend certain post-closing obligations (as amended, the “Asset Purchase Agreement”) by and between the Company and Marathon Pharmaceuticals, LLC (“Marathon”).
The assets (the “Assets”) acquired by the Company in the Transaction include intellectual property rights related to Emflaza, inventories of Emflaza, certain contractual rights related to Emflaza, including the contractual rights described herein, among others, and certain other assets related to Emflaza.
The Company assumed certain liabilities and obligations in the Transaction, including the contractual obligations described herein and various other liabilities and obligations arising out of, or relating to, the Assets.
Upon the closing of the Transaction, the Company paid to Marathon total upfront consideration of approximately $140 million. The total upfront consideration was comprised of $75 million in cash, funded through cash on hand, and 6,683,598 shares of the Company’s common stock. The number of shares of common stock issued at closing was determined by dividing $65 million by 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. As previously disclosed, 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 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. A copy of the Asset Purchase Agreement was previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 16, 2017. A copy of the amendment to the Asset Purchase Agreement is attached hereto as Exhibit 2.1.
Faes Agreement.
Upon the closing of the Transaction, Marathon assigned to the Company all rights, and the Company assumed all obligations, under the Exclusive License and Supply Agreement, dated as of May 12, 2015 and amended as of November 1, 2015, between Marathon and Faes Farma, S.A. (“Faes”) (the “Faes Agreement”).
Pursuant to the assignment and assumption of the Faes Agreement, Faes grants the Company a license in, to and under certain intellectual property, know-how and technology of Faes (as per the definition of “Licensed Assets” in the Faes Agreement) related to the deflazacort oral suspension pharmaceutical product as owned and currently supplied by Faes in certain markets in the world (the “Faes Product”, together with the Licensed Assets, the “Faes Assets”) to research, develop, obtain regulatory approval for, market, promote, distribute, sell, use, commercialize and, solely as expressly permitted under the Faes Agreement, manufacture the deflazacort oral suspension pharmaceutical products developed by the Company (or developed by Marathon prior to the closing of the Transaction) based upon and utilizing the Faes Assets and approved by the FDA for the treatment in humans of Duchenne muscular dystrophy or other indications in and for the territory of the United States (the “Deflazacort Suspension Product”) as set forth in the Faes Agreement. The license is exclusive during the Manufacturing Term and non-exclusive thereafter. The Manufacturing Term is defined as (a) the Initial Manufacturing Term, commencing on the date of the Faes Agreement and ending on the 20th anniversary thereof, together with (b) any Renewed Manufacturing Terms, which are automatic renewals of the Manufacturing Term for 10-year periods, subject to earlier termination by the parties in accordance with the terms of the Faes Agreement.
Subject to the terms and conditions of the Faes Agreement, Faes reserves all rights under the Licensed Assets to research, develop and manufacture the Faes Product for any and all purposes both inside the United States (with the Company’s prior written consent, not to be unreasonably withheld) or outside the United States. Faes also retains the right under the Faes Agreement to research, develop, make and have made, use, market, distribute, offer for sale, sell and import the Faes Product for any and all purposes outside of the United States.
Pursuant to the Faes Agreement, the parties agree to work collaboratively to conduct manufacturing research and development work relating to Deflazacort Suspension Products in accordance with the terms of the Faes Agreement.
Pursuant to the terms of the Faes Agreement, during the initial period commencing on the FDA approval date of Emflaza and continuing until the seventh anniversary of such date, Faes shall be the exclusive supplier to the Company of any finished Deflazacort Suspension Product for use in the United States. During the Manufacturing Term, Faes and its affiliates may only supply deflazacort oral suspension products for use in the United States to the Company. The Faes Agreement provides that Faes shall supply finished Deflazacort Suspension Products to the Company at a specified per unit supply price.
Pursuant to the terms of the Faes Agreement, during the initial period commencing on the FDA approval date of Emflaza and continuing until the seventh anniversary of such date, the Company is obligated to pay to Faes royalty payments, on a quarterly basis, based on a percentage (ranging from low to middle-low double digits) of, or a fixed payment with respect to, the Company’s annual net sales of Deflazacort Suspension Product in the United States as specified in the Faes Agreement, subject to reduction in accordance with the terms of the agreement. The royalty payments during such initial period are subject to a minimum aggregate annual payment ranging from €0.5 million to €1.5 million per year.
The Faes Agreement may be terminated at any time upon the mutual agreement of the parties or upon a party’s material breach of its material obligations under the Faes Agreement, subject to notice and cure periods and other procedures set forth in the Faes Agreement. The Faes Agreement also contains provisions relating to, among other things, representations and warranties of the parties, purchase orders, pricing, payment terms, costs and expenses, regulatory matters, audit and reporting rights, intellectual property matters, limitations on assignment, confidentiality, indemnification and dispute resolution.
Alcami Agreement
. Upon the closing of the Transaction, Marathon assigned to the Company all rights, and the Company assumed all obligations, under the Commercial Manufacturing Agreement, dated as of September 18, 2015 and amended as of September 18, 2016 and January 6, 2017, between Marathon and Alcami Corporation, f/k/a AAIPharma Services Corp. (“Alcami”) (the “Manufacturing Agreement”).
Pursuant to the assignment and assumption of the Manufacturing Agreement, the Company agrees to exclusively purchase from Alcami, and Alcami agrees to exclusively manufacture and supply, all of the Company’s requirements for deflazacort tablets as well as secondary packaging of pre-filled deflazacort oral suspension bottles (the “Manufacturing Products”) for the commercialization of such Manufacturing Products in the United States, and any other jurisdiction in which the Company may commercialize the Manufacturing Products, pursuant to the terms of the Manufacturing Agreement. The initial term of the Manufacturing Agreement continues for a period of five years commencing on the first date of shipment of commercial product from Alcami’s site with respect to each Manufacturing Product, subject to automatic two-year renewal periods with respect to each Manufacturing Product unless terminated by the parties pursuant to the terms of the Manufacturing Agreement. Pursuant to the terms of the Manufacturing Agreement, the Company is required to supply to Alcami the active pharmaceutical ingredient for Manufacturing Products, which shall remain the sole property of the Company.
The Manufacturing Agreement may be terminated as described above or upon a party’s material breach of its obligations under the Manufacturing Agreement in addition to other specified events, including with respect to governmental actions, certain circumstances relating to individual products, force majeure or bankruptcy proceedings, in each case subject to notice, cure periods and other conditions set forth in the Manufacturing Agreement. The Manufacturing Agreement also contains provisions relating to, among other things, representations and warranties of the parties, purchase orders, pricing (including price changes), payment terms, costs and expenses, regulatory matters, non-conforming products, recalls, intellectual property matters, limitations on assignment, confidentiality, indemnification and dispute resolution provisions.
Item 3.02. Unregistered Sales of Equity Securities.
The description of the common stock consideration set forth in Item 2.01 above is incorporated herein by reference. In connection with the closing of the Transaction, the Company issued to Marathon the common stock consideration pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder, based in part on Marathon’s representations to the Company that it is an “accredited investor” as that term is defined under Rule 501(a) under the Securities Act.