Item 1.02
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Termination of a Material Definitive Agreement.
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On July 25, 2019, Lexicon Pharmaceuticals, Inc. received written notice (the
Letter
) from Sanofi-Aventis Deutschland
GmbH (
Sanofi
), informing the Company of Sanofis intention to terminate the Collaboration and License Agreement, dated November 5, 2015 (the
CLA
, and as amended by Amendment No. 1 to the
Agreement, dated as of July 1, 2017 (the
Amendment
), the
Agreement
), entered into between the Company and Sanofi for the worldwide development and commercialization of the Companys diabetes drug
candidate sotagliflozin. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement.
The Letter purports to provide notice of Sanofis decision to terminate the Agreement for a Positive Results Failure pursuant to
Section 12.3.2(i)(b) thereof, relating to Study EFC14837 (the
CKD-3
Study
) and Study EFC 15166 (the
CKD-4
Study
). We disagree
that Sanofi has the right to so terminate the Agreement and consider Sanofis notice to such effect to be invalid and such purported termination to constitute a breach of the Agreement and a breach of Sanofis implied duty and covenant of
good faith and fair dealing under New York law.
Section 12.3.2(i)(b) of the Agreement provides that Sanofi may terminate the
Agreement upon thirty (30) days written notice if, with respect to any Decision Point, Positive Results are not achieved in all material respects, as determined in accordance with Section 3.1.3 of the Agreement. Section 3.1.3 of
the Agreement provides that the JSC determines whether or not Positive Results have been achieved. The timing of that determination is to be within thirty (30) days after the earlier of (i) completion of the final study report for
the applicable clinical study and, if applicable, delivery of such report to Sanofi and (ii) one hundred twenty (120) days after the first database lock for the applicable clinical study. In the event that the JSC is unable to agree,
the determination of Positive Results is subject to the dispute resolution procedures of the Agreement. In no case is Sanofi entitled to unilaterally make a Positive Results determination.
Sanofi first provided Lexicon with a summary of topline results from the
CKD-3
Study and the
CKD-4
Study on July 23, 2019. Sanofi did not provide at that time, and still has not provided, the clinical data underlying Sanofis summary topline results. Having not received that data, the Lexicon
members of the JSC have not had a reasonable opportunity to evaluate the clinical data and the statistical analysis thereof. The earliest date under the Agreement for a JSC determination of Positive Results is in October 2019. Contrary to these
terms of the Agreement, Sanofi claims to have taken upon itself, bypassing the JSC, without providing access to the underlying data, ignoring contractually-specified timelines, and disregarding the dispute resolution provisions of the Agreement, the
right to unilaterally determine Positive Results so that it declare them not to have been achieved (which we dispute and/or are not yet in a position to assess) and report at its previously scheduled earnings call on July 29, 2019 that it had
terminated the Agreement.
In addition, we believe that Sanofi has breached Section 3.1.1 of the Agreement, which
provides that Sanofis Development activities for T2DM shall be conducted in accordance with and pursuant to the Development Plan, by defining the primary endpoint of the
CKD-3
Study as six successively statistically tested endpoints, including several subgroups, rather than a single primary endpoint as required in the Development Plan. As a result, we disagree with Sanofis assertion that the primary endpoint of the
CKD-3
Study was not met.
In the event of a termination of the Agreement, Sanofi has certain obligations
including, at Lexicons request, transferring to Lexicon control of all clinical studies involving sotagliflozin being conducted by Sanofi as of the effective date of termination; provided that Sanofi shall remain obligated to continue to fund,
to the extent of Sanofis funding obligations under the Agreement, the costs of such clinical studies then being conducted by Sanofi for Development Costs incurred twelve (12) months after the effective date of termination.
We issued a press release regarding the topline results and the disputed termination notice on July 26, 2019, a copy of which is attached
to this current report on Form
8-K
as Exhibit 99.1.
A summary of the material terms of the
Agreement is included in our annual report on Form
10-K
for the year ending December 31, 2018. The foregoing description of the CLA and the Amendment does not purport to be complete and is qualified in
its entirety by reference to the CLA, which is filed as Exhibit 10.14 to our annual report on Form
10-K/A
for the year ending December 31, 2015, and the Amendment, which is filed as Exhibit 10.1 to our
quarterly report on Form
10-Q
for the period ended September 30, 2017.