Item 1.02. Termination of a Material Definitive Agreement
On September 9, 2017, Achillion Pharmaceuticals, Inc. (the
Company
) received notice from Janssen Pharmaceuticals, Inc.
(
Janssen
) of Janssens termination, effective as of November 8, 2017, of the Collaboration and License Agreement between the Company and Janssen dated May 19, 2015, as amended (the
Collaboration
Agreement
).
Under the terms of the Collaboration Agreement, the Company granted Janssen exclusive worldwide rights to develop
and commercialize products that contained one or more of the Companys drug candidates for the treatment of chronic hepatitis C virus, (
HCV
), namely odalasvir, a second-generation NS5A inhibitor,
ACH-3422,
a NS5B HCV polymerase inhibitor, and sovaprevir, a NS3/4A HCV protease inhibitor. In May 2015, the Company also entered into a parallel transaction with Janssens affiliate, JJDC, Inc.
(
JJDC
) pursuant to which JJDC purchased 18,367,346 shares (the
Shares
) of the Companys common stock at a price of $12.25 per share, for an aggregate purchase price of $225.0 million. In connection
with the purchase of the Shares, the Company and JJDC also entered into an investor agreement (the
Investor Agreement
) on July 1, 2015 governing specified rights and obligations of JJDC with respect to its ownership of the
Shares.
Under the terms of the Collaboration Agreement, the Company earned a $15.0 million clinical milestone payment in December
2016 and would have been eligible to receive (1) up to an additional $100.0 million of clinical milestone payments based upon the achievement of clinical enrollment and dosing in a phase III study, (2) up to an additional
$290.0 million of milestone payments based upon regulatory approvals and first commercial sale in specified territories, the majority of which related to regulatory approval and the first commercial sale in the United States, and (3) up to
an additional $500.0 million of milestone payments based upon achieving worldwide sales targets. The Company would also have been eligible to receive royalties on worldwide annual net sales of licensed products, if any, at tiered royalty rate
percentages beginning in the
mid-teens
and rising to the
low-twenties,
subject to customary reductions. The royalty term was determined on a
licensed-product-by-licensed-product
and
country-by-country
basis and was to begin on the first
commercial sale of a licensed product in a country and end on the expiration of the last to expire of specified patents or regulatory exclusivity covering such licensed product in such country or, with a customary royalty reduction, ten years after
such first commercial sale if there was no such exclusivity. Janssen was to bear the future costs of worldwide development and commercialization of licensed products.
Pursuant to the terms of the Investor Agreement, which remains in effect following the termination of the Collaboration Agreement, the Shares
were subject to a
lock-up
restriction, voting covenants and a standstill agreement, each of which expired on July 1, 2016. In February 2017, the Company entered into an agreement with JJDC (the
Lock-Up
Agreement
) pursuant to which the Shares became subject to a new
lock-up
restriction, which expires on the earlier of January 31, 2018, or the date that
is sixty days after the first public announcement of
top-line
clinical results from Janssens phase IIb
OMEGA-1
clinical trial of
JNJ-4178,
a three drug combination for the treatment of HCV which contained odalasvir, one of the HCV drug candidates the Company had licensed to Janssen under the Collaboration Agreement. In addition, until
July 1, 2023, JJDC has the right to require, under specified conditions, that the Company file a registration statement in order to register all or a portion of the Shares. The Company will not be required to effect more than two such demand
registrations for JJDC in the aggregate and is not required to effect more than one such demand registration in any
12-month
period. The Company has also agreed to provide JJDC with certain
piggyback registration rights such that at any time prior to July 1, 2023, subject to specified conditions, whenever the Company proposes to register shares of its common stock for its account, JJDC will have the right to include
some or all of its Shares in such registration. The Investor Agreement also contains other customary terms and conditions of the parties with respect to the registration of the Shares.
Janssen terminated the Collaboration Agreement under section 14.6 of the Collaboration Agreement, which allows for unilateral termination at
Janssens discretion upon 60 days written notice to the Company at any time prior to the submission of the first application for marketing approval for a licensed product in any of the major market countries specified in the Collaboration
Agreement. Pursuant to its notice of termination, Janssen informed the Company that with an increasing number of effective therapies addressing medical need in hepatitis C, Janssen had made a strategic decision to discontinue the development of
JNJ-4178..
Following the termination, all licenses
granted by either party to the other under the Collaboration Agreement terminate, except to the extent necessary to allow either party to perform any obligations or exercise rights that survive
the termination. In addition, the Collaboration Agreement provides that the Company and Janssen will coordinate in good faith to wind down development and manufacturing activities under the Collaboration Agreement.
The foregoing description of the material terms of the Collaboration Agreement is qualified in its entirety by the terms of the Collaboration
Agreement, which the Company filed as an exhibit to its Quarterly Report on Form
10-Q
for the fiscal period ended June 30, 2015, filed with the Securities and Exchange Commission on August 10, 2015.
The foregoing description of the material terms of the Investor Agreement is qualified in its entirety by the terms of the Investor Agreement, which the Company filed as an exhibit to its Quarterly Report on Form
10-Q
for the fiscal period ended June 30, 2015, filed with the Securities and Exchange Commission on August 10, 2015. The foregoing description of the material terms of the
Lock-Up
Agreement is qualified in its entirety by the terms of the
Lock-Up
Agreement, which the Company filed as an exhibit to its Quarterly Report on Form
10-Q
for the fiscal period ended March 31, 2017, filed with the Securities and Exchange Commission on May 4, 2017.