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Item 1.01.
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Entry into A Material Definitive Agreement.
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Introduction
On January 12, 2021, Pacific Biosciences of California, Inc. (“we”, “us”, or the “Company”) entered into a Development and Commercialization Agreement (the “Development Agreement”) with Invitae Corporation (“Invitae”) pursuant to which we will develop a whole genome sequencing platform with high-throughput and ultra-high-throughput capabilities, and related consumables with medical, clinical and other applications (collectively, the “Program Platform”). In connection with the development of the Program Platform, Invitae will reimburse the Company for certain development costs incurred by the Company.
Development Program
Under the Development Agreement, we will be primarily responsible for conducting a development program to develop the Program Platform pursuant to a schedule and budget. We will make decisions regarding the development program jointly with Invitae. The development program is expected to last approximately sixty months, but may be shorter or longer. There can be no assurances that the development program will be successful or that the Program Platform will become ready for commercial sale.
Development Costs
Invitae is obligated to reimburse us for labor and other costs we incur in performing the development program, as agreed between the parties under approved budgets. It is expected that Invitae will reimburse us for substantially all of our development costs for the Program Platform, subject to certain limitations and exceptions detailed in the Development Agreement.
Preferential Pricing
As a benefit of its contribution, Invitae will be entitled to preferred pricing on the Program Platform products if and when they are available for commercial sale. Each model of Program Platform instrument and its related consumables will have a preferred pricing period. During the initial period of preferred pricing for each Program Platform instrument, which will not exceed four years from the date of the first delivery of that Program Platform instrument, Invitae may purchase the Program Platform products at a fixed margin until it has recouped a mutually agreed multiple of its contribution; and for up to three years after the initial period of preferred pricing Invitae has the right to buy the Program Platform products for a higher margin. We refer to these preferred pricing periods collectively as the “Preferred Pricing Period”.
During the Preferred Pricing Period, Invitae will be entitled to most favored pricing in respect of the Program Platform products.
Termination
We and Invitae may terminate the Development Agreement if the other party remains in material breach of the Development Agreement following a cure period to remedy the material breach. In addition, the Development Agreement includes other circumstances for termination by each party, including circumstances when Invitae may terminate for delays, IP concerns, if we or our assets are acquired without Invitae’s consent, and without cause.
In certain termination circumstances, (i) we will be obligated to refund all or a portion of the development costs advanced by Invitae and/or (ii) we will owe Invitae a share of the revenue generated from the sale of the Program Platform or similar products if and when they are commercialized until such time as Invitae has recouped the amounts reimbursed to us, and in certain circumstances, a mutually agreed return.
The foregoing summary is not complete and is qualified in its entirety by reference to the Agreement, which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.