Item 1.01 Entry into a Material Definitive Agreement.
License and Research Collaboration Agreements and Common Stock Purchase Agreement
On October 4, 2018, Arrowhead Pharmaceuticals, Inc., a Delaware corporation (the Company), entered into a License Agreement
(the License Agreement) and a Research Collaboration and Option Agreement (the Collaboration Agreement) with Janssen Pharmaceuticals, Inc., a Pennsylvania corporation (Janssen), part of the Janssen Pharmaceutical
Companies of Johnson & Johnson. Also on October 4, 2018, the Company entered into a Common Stock Purchase Agreement (the Stock Purchase Agreement) and Registration Rights Agreement (the Registration Rights Agreement)
with Johnson & Johnson Innovation-JJDC, Inc. (JJDC), a New Jersey corporation.
Under the License Agreement, Janssen
will receive a worldwide, exclusive license to the Companys
ARO-HBV
program, the Companys third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potentially
curative therapy for patients with chronic hepatitis B virus infection. Beyond the Companys ongoing Phase 1 / 2 study of
ARO-HBV
(which will remain the responsibility of the Company), Janssen will be
wholly responsible for clinical development and commercialization.
Under the Collaboration Agreement, Janssen will be able to select up
to three new targets against which Arrowhead will develop clinical candidates. These candidates are subject to certain restrictions and will not include candidates in the Companys current pipeline. The Company will perform discovery,
optimization and preclinical development on selected targets, entirely funded by Janssen, sufficient to allow the filing of a U.S. Investigational New Drug application or equivalent, at which time Janssen will have the option to take an exclusive
license to the Companys intellectual property rights covering that compound. If the option is exercised, Janssen will be wholly responsible for clinical development and commercialization of each optioned compound.
Under the Stock Purchase Agreement, the Company will sell 3,260,869 shares of common stock (the Shares) to JJDC at a price of
$23.00 per share. The Shares are being sold in a private placement that is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the Act). Pursuant to the Registration Rights Agreement, the
Company will be obligated to register the Shares under the Act for resale by JJDC.
Under the terms of the agreements taken together, the
Company will receive (i) $175 million as an upfront payment, (ii) $75 million in the form of an equity investment by JJDC in Arrowhead common stock pursuant to the Stock Purchase Agreement, (iii) up to $1.6 billion in
development, regulatory and sales milestones payments for the License Agreement, and (iv) up to $1.9 billion in development, regulatory and sales milestone payments for the three additional targets covered under the Collaboration
Agreement. The Company is further eligible to receive tiered royalties up to the
mid-teens
on product sales for products commercialized under the License Agreement and the Collaboration Agreement.
The transactions contemplated under the License Agreement, Collaboration Agreement and Stock Purchase Agreement are subject to customary
closing conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Closing is expected to occur in the fourth calendar quarter of 2018.