Item 1.01. Entry into a Material Definitive Agreement.
Amended and Restated License Agreement
On October 9, 2019, Reata Pharmaceuticals, Inc. (the “Company”) and an affiliate of AbbVie, Inc., AbbVie Ltd., a successor in interest to Abbott Pharmaceuticals PR Ltd. (“AbbVie”), entered into an Amended and Restated License Agreement (the “Agreement”) pursuant to which the Company reacquired the development, manufacturing, and commercialization rights concerning its proprietary Nrf2 activator product platform originally licensed to AbbVie with respect to the territories set forth below. Pursuant to the Agreement, the License Agreement dated as of September 21, 2010, entered into between the Company and AbbVie (the “License Agreement”), and the Collaboration Agreement dated as of December 9, 2011, entered into between the Company and AbbVie (the “Collaboration Agreement”), have been amended. Except as otherwise set forth in the Agreement, the other provisions of the License Agreement and the Collaboration Agreement have been terminated. Certain licenses granted to AbbVie will continue. Under the Agreement, AbbVie has granted exclusive sublicenses to the Company under AbbVie’s continuing licenses, resulting in the Company re-acquiring worldwide rights to bardoxolone methyl (“Bardoxolone”), excluding certain Asian countries that the Company previously licensed to Kyowa Kirin Co., Ltd., and worldwide rights to omaveloxolone (“Omaveloxolone”) and the other second-generation Nrf2 activators (the “Second-Generation Activators”), in each case that the Company had licensed to AbbVie under the License Agreement and the Collaboration Agreement.
In exchange for such rights, the Company will pay AbbVie $330 million, of which $75 million will be payable on December 8, 2019, $150 million will be payable on June 30, 2020, and $105 million will be payable on November 30, 2021. If the Company raises cash proceeds of $200 million or more in one or more equity offerings, the Company will prepay AbbVie $25 million, which prepayment will reduce the amount payable to AbbVie on November 30, 2021, from $105 million to $80 million. The Company also will pay AbbVie an escalating, low single-digit royalty on worldwide net sales, on a product-by-product basis, of Omaveloxolone and an identified list of existing Second-Generation Activators (the “Existing AIMs”).
As part of the Agreement, AbbVie has agreed not to clinically develop or acquire certain Nrf1 or Nrf2 activators for a period of time after entering into the Agreement; thereafter, for another period of time, AbbVie has agreed not to clinically develop or acquire certain Nrf1 or Nrf2 activators for certain restricted indications. The Company has agreed not to license or otherwise transfer its rights to develop or commercialize Bardoxolone, Omaveloxolone, or the Existing AIMS for a period of 18 months after entering into the Agreement; thereafter through month 36, the Company has the right to so transfer or license such rights, in one or more transactions, but only if the Company receives, in the aggregate, prior to the earlier of one year after the transaction was entered into or the end of the 36-month period, less than a certain amount of cash payments.
After the $330 million has been paid to AbbVie, the licenses granted to AbbVie, and the sublicenses granted to the Company with respect to Omaveloxolone and the Second-Generation Activators, will be terminated, with all rights reverting to the Company, and, if (or when) 18 months has elapsed since the execution of the Agreement, the licenses granted to AbbVie, and the sublicenses granted to the Company with respect to Bardoxolone, also will be terminated, with all rights reverting to the Company.
The foregoing is only a summary of the material terms of the Agreement, does not purport to be complete, and is qualified in its entirety by reference to the redacted text of the Agreement, which is attached as Exhibit 10.1 hereto and incorporated herein it its entirety.
First Amendment to Amended and Restated Loan and Security Agreement
On October 9, 2019, Oxford Finance LLC, as the collateral agent and lender (“Oxford”), Silicon Valley Bank, as a lender (together with Oxford, the “Lenders”), and the Company entered into the First Amendment to Amended and Restated Loan and Security Agreement (the “Amendment”), which amended the Amended and Restated Loan and Security Agreement, dated June 14, 2018, entered into among the Company and the Lenders (the “Loan Agreement”). Under the terms of the Loan Agreement, the Company borrowed $80 million (the “Term A Loan”) from the Lenders and had the right to borrow an additional $45 million (the “Term B Loan”, and together with the Term A Loan, the “Term Loans”) within 30 days after the achievement of the first Trial Milestone Date, but no later than December 31, 2019. The “Trial Milestone Date” means the earlier of the date that the Company achieves (i) positive topline registrational data of Bardoxolone in chronic kidney disease caused by Alport syndrome (the ongoing CARDINAL trial) or (ii) positive topline registrational data of Omaveloxolone in Friedreich’s ataxia (the ongoing MOXIe trial).
Under the Amendment, the Term B Loan availability was increased from $45 million to $75 million, and the availability period was increased to within 60 days after the first Trial Milestone Date but no later than December 31, 2019. The Company will be required to make a final payment of 2.00% (previously 4.00%) of the Term B Loan, payable on the earliest of June 1, 2023 (the “Maturity Date”), the acceleration of the Term B Loan, or the prepayment of the Term B Loan. The Company may prepay all, but not less than all, of the borrowed amounts under the Term B Loan upon 10 days advance written notice to the Lenders, provided that the Company will be obligated to pay a prepayment fee. The prepayment fees payable by the Company for the Term B Loan were reduced to (i) 4.00% (previously the aggregate amount of interest that the Company would have paid through the Maturity Date) at the interest in effect on the date of prepayment of the Term B Loan if prepaid on or before the first anniversary of the funding date, (ii) 3.00% (previously 4.00%) of the Term B Loan if prepaid after the first anniversary of the funding date and on or before the second anniversary of the funding date, (iii) 1.50% (previously 3.00%) of the Term B Loan if prepaid after the second anniversary of the funding date and on or before the third anniversary of the funding date, and (iv) 0.00% (previously 1.50%) of the Term B Loan if prepaid after the third anniversary of the funding date and prior to the Maturity Date. The Amendment also permits the incurrence of convertible debt under certain circumstances.
The foregoing is only a summary of the material terms of the Agreement, does not purport to be complete, and is qualified in its entirety by reference to the redacted text of the Agreement, which is attached as Exhibit 10.2 hereto and incorporated herein it its entirety.