Item 1.01. Entry into a Material Definitive Agreement.
Asset Purchase Agreement
On May 21, 2022, Kala Pharmaceuticals, Inc., a Delaware corporation (the “Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Alcon Pharmaceuticals Ltd., a Swiss limited company, and Alcon Vision, LLC, a Delaware limited liability company (together, the “Buyers”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Buyers agreed to (1) purchase (a) the Company’s rights to (i) manufacture, sell, distribute, market and commercialize EYSUVIS® (loteprednol etabonate ophthalmic suspension) 0.25% and INVELTYS® (loteprednol etabonate ophthalmic suspension) 1% and (ii) develop, manufacture, market and otherwise exploit its proprietary AMPPLIFY® Drug Delivery Technology, which, among other applications, is incorporated into EYSUVIS and INVELTYS and (b) certain assets used by the Company in connection with the foregoing (collectively, the “Commercial Business”) and (2) assume certain liabilities with respect to the Commercial Business (the “Transaction”).
Under the terms of the Asset Purchase Agreement, the Buyers have agreed to pay to the Company an upfront cash payment of $60.0 million upon the closing of the Transaction. In addition, pursuant to the Asset Purchase Agreement, the Company is eligible to receive from the Buyers up to four commercial-based sales milestone payments as follows: (1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029. Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year. In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year.
The closing of the Transaction is subject to (1) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (2) the release of specified liens on the assets of the Commercial Business, (3) the receipt of specified third-party consents and (4) other customary conditions.
The Asset Purchase Agreement further provides that the Company and the Buyers will indemnify each other for losses arising from certain breaches of the Asset Purchase Agreement, including breaches of certain representations and warranties, and for certain other matters and subject to certain limitations as more fully described in the Asset Purchase Agreement.
The Asset Purchase Agreement also contains customary representations and warranties. 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. 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 the Buyers 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 Company has agreed not to encourage, solicit, initiate or facilitate, enter into any discussions or negotiations, or provide any information, or enter into any agreement, in each case, with respect to any alternative proposal relating to the disposition of the Commercial Business.
Pursuant to the Asset Purchase Agreement, the Company has agreed to enter into supply and commercial agreements at the closing of the Transaction under which the Company will agree to supply EYSUVIS and INVELTYS to the Buyers and their affiliates and distribute EYSUVIS and INVELTYS to third party customers of the Commercial Business on behalf of the Buyers and their affiliates for a period of six months following the closing of the Transaction, subject to early termination. In addition, the Company has agreed to enter into a transition services agreement under which the Company has agreed to provide agreed upon transition services to the Buyers on a cost-plus pricing arrangement for up to six months following the closing of the Transaction.
The description of the Asset Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and incorporated herein by reference.