Item 1.01. Entry into a Material Definitive Agreement.
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Collaboration with Alnylam Pharmaceuticals, Inc.
On April 8, 2019,
Regeneron Pharmaceuticals, Inc. (“
Regeneron
” or the “
Company
”) and Alnylam
Pharmaceuticals, Inc. (“
Alnylam
”) entered into a global, strategic collaboration to discover, develop, and
commercialize RNA interference (RNAi) therapeutics for a broad range of diseases by addressing therapeutic disease targets
expressed in the eye and central nervous system (“
CNS
”), in addition to a select number of targets
expressed in the liver (collectively, the “
Collaboration
”). The Collaboration is governed by a Master
Collaboration Agreement (the “
Master Agreement
”), dated April 8, 2019, by and between Regeneron and
Alnylam (including the form of License Agreement (a “
License Agreement
”) and Co-Co (Co-Commercialization) Collaboration Agreement (a “
Co-Co Collaboration Agreement
”) appended thereto), which
will become effective upon closing of the Equity Transaction (as defined below) (the “
Effective Date
”);
and is subject to customary closing conditions and clearances, including clearance under the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended (the “
HSR Act
”).
Under the Master Agreement, Regeneron will make
an upfront payment of $400 million to Alnylam within 10 business days of the Effective Date. As discussed further below, pursuant
to the terms of the Equity Transaction, Regeneron will also purchase $400 million of Alnylam equity on the Effective Date. In addition,
Alnylam is eligible to receive up to $200 million in clinical proof-of-principle milestones for eye or CNS programs. For each program,
Regeneron will provide Alnylam with a specified amount of funding at program initiation and at
lead
candidate designation
.
Under the Collaboration, the parties plan to
perform discovery research until designation of lead candidates, with Regeneron having certain final decision-making rights over
the discovery plan. Following designation of a lead candidate, the parties may further advance such lead candidate under either
a License Agreement or a Co-Co Collaboration Agreement structure. The initial target nomination and discovery period is five
years (which may under certain situations automatically be extended for up to seven years in the aggregate) (the “
Research
Term
”). In addition, Regeneron has an option to extend the Research Term for an additional five-year period for a research
extension fee ranging from $200 million to $400 million. The actual amount of the research extension fee will be determined based
on the acceptance of one or more Investigational New Drug applications (or their equivalent in certain other countries) for programs
in the eye and CNS. The terms of the Master Agreement generally contemplate six targets selected per year. During the Research
Term, Alnylam is required to work exclusively with Regeneron in the field of oligonucleotide therapeutics for use in the eye and
CNS, subject to certain exceptions.
At the stage of designation of a lead candidate
for CNS programs and liver programs, the parties have alternating rights to be a lead party for collaboration products. At the
stage of designation of a lead candidate for eye programs, Regeneron has the sole right to take the product forward as a licensee.
The lead party is required to take the program forward under the License Agreement structure unless the other party exercises its
rights to opt-in to a Co-Co Collaboration Agreement, in which case the lead party is required to take the program forward under
the Co-Co Collaboration Agreement structure. Alnylam does not have rights to opt-in to a Co-Co Collaboration Agreement for eye
programs.
Under a License Agreement, the lead party is
designated as the licensee and has the right to develop and commercialize the collaboration product under such program. The licensee
will be responsible for its own costs and expenses incurred in connection with the development and commercialization of the collaboration
products under the License Agreement. The licensee will pay to the licensor certain development and/or commercialization milestone
payments totaling up to $150 million for each collaboration product. In addition, following the first commercial sale of the applicable
collaboration product under a License Agreement, the licensee is required to make certain tiered royalty payments, ranging from
low double-digits up to 20%, to the licensor based on the aggregate annual net sales of the collaboration product, subject to customary
reductions.
For CNS programs and liver programs, as soon
as a party is designated as a lead party, the other company has rights to opt-in to a Co-Co Collaboration Agreement as a participating
party. Under a Co-Co Collaboration Agreement, the party designated as the lead party has operational responsibility and final decision-making
authority on development and commercialization of the program and the parties will split profits and share costs equally, subject
to certain co-funding opt-outs at specified clinical trial phases or under other conditions. If a party exercises its co-funding
opt-out right, following the first commercial sale of the applicable collaboration product under a Co-Co Collaboration Agreement,
the lead party will be required to make certain tiered royalty payments, ranging from low double-digits up to 20%, to the other
party based on the aggregate annual net sales of the collaboration product and the timing of the exercise of the co-funding opt-out
right, subject to customary reductions. If the non-lead party does not initially opt-in to a Co-Co Collaboration Agreement, the
lead party has the right to take the program forward under a License Agreement structure.
Under the Collaboration, when Regeneron is the
licensee under a License Agreement or the lead party under a Co-Co Collaboration Agreement, Alnylam will be responsible for the
manufacture and supply of the product to Regeneron for Phase 1 and Phase 2 clinical trials. Additionally, Regeneron will have the
opportunity to combine its proprietary antibodies with the silencing RNA (“
siRNA
”) therapeutics developed under
the Collaboration.
Within three months of the Effective Date, the
parties plan to negotiate and enter into a Co-Co Collaboration Agreement for an siRNA therapeutic targeting the C5 component of
the human complement pathway being developed by Alnylam, with Alnylam as the lead party, and a License Agreement for a combination
product consisting of such siRNA therapeutic and a fully human monoclonal antibody targeting C5 being developed by Regeneron, with
Regeneron as the licensee. The C5 siRNA Co-Co Collaboration Agreement would generally match the financial terms set forth in the
form of the Co-Co Collaboration Agreement attached to the Master Agreement. The C5 siRNA License Agreement would contain a flat
low double-digit royalty on net sales of the combination product only subject to customary reductions, and there could be up to
$325 million in commercial milestones.
Regeneron has the
right to terminate the Master Agreement for convenience upon 90 days’ notice to Alnylam. Either party may also terminate
the Master Agreement for a material breach by the other party. The termination of the Master Agreement does not affect the term
of any License Agreement or Co-Co Collaboration Agreement
then in effect
.
The foregoing description of the Collaboration
is qualified in its entirety by reference to the full text of the Master Agreement, a copy of which will be filed with the United
States Securities and Exchange Commission (the “
SEC
”) as an exhibit to the Quarterly Report on Form 10-Q to
be filed by the Company for the quarterly period ending June 30, 2019 (the “
2Q19 Form 10-Q
”).
Purchase of Equity of Alnylam Pharmaceuticals, Inc.; Investor
Agreement
In connection with the Collaboration described
above, Regeneron and Alnylam have entered into a Stock Purchase Agreement (the “
Stock Purchase Agreement
”) and
an Investor Agreement (the “
Investor Agreement
”), each dated April 8, 2019. Pursuant to the terms of the Stock
Purchase Agreement, Regeneron has agreed to purchase from Alnylam 4,444,445 shares of Alnylam common stock, par value $0.01 per
share (“
Common Stock
”), or, if Stockholder Approval (as defined below) is not obtained at Alnylam’s 2019
Annual Meeting of Stockholders (currently scheduled to be held on April 25, 2019), 1,481,482 shares of Alnylam Series A Redeemable
Convertible Preferred Stock, par value $0.01 per share (“
Preferred Stock
”), in each case, for aggregate cash
consideration of approximately $400 million (the “
Equity Transaction
”).
If issued, each share of Preferred Stock will
automatically convert, following receipt of approval by Alnylam’s stockholders to increase the number of shares of authorized
Common Stock issuable under Alnylam’s certificate of incorporation by at least the number of shares of Common Stock issuable
under the Stock Purchase Agreement (“
Stockholder Approval
”), into three shares of Common Stock. If any shares
of Preferred Stock are outstanding at the expiration of the Lock-Up Period (as defined below), Regeneron will have a right to request
Alnylam to redeem such shares at a price per share equal to three times the volume-weighted average price of a share of Common
Stock for the 15 trading days prior to the date of Regeneron’s request for such redemption.
Pursuant to the Stock Purchase Agreement, as
a condition to closing, Alnylam must file (i) if Stockholder Approval is not timely obtained, a certificate of designations in
respect of the Preferred Stock; or (ii) if Stockholder Approval is timely obtained, a certificate of amendment to its certificate
of incorporation to increase the number of authorized shares of Common Stock thereunder by at least the number of shares of Common
Stock issuable under the Stock Purchase Agreement. The Stock Purchase Agreement also contains customary representations, warranties, and other customary covenants of each of the parties. Subject to the satisfaction or waiver of the closing conditions, including
the expiration or early termination of the applicable pre-merger waiting period under the HSR Act, the Equity Transaction is expected
to close during the second quarter of 2019.
Under the Investor Agreement, Regeneron has
agreed to certain standstill provisions whereby Regeneron is obligated, during the research term of the Collaboration and under
certain circumstances for up to two years thereafter, to refrain from seeking to directly or indirectly exert control of Alnylam
or acquiring more than 30% of outstanding shares of Common Stock (including any shares of Common Stock issuable upon conversion
of outstanding Preferred Stock), subject to certain exceptions. In addition, Regeneron has agreed, subject to limited exceptions,
not to sell or otherwise transfer any of the shares purchased by it under the Stock Purchase Agreement (the “
Shares
”)
or any other shares of Common Stock held by it or its subsidiaries at the closing of the Collaboration for a period ending on the
earlier of four years after the Effective Date or the termination of the Master Agreement (the “
Lock-Up Period
”).
After the expiration of the Lock-Up Period, if Regeneron exceeds a specified beneficial ownership threshold, Regeneron will be
subject to certain volume restrictions with respect to its sale of shares of Common Stock, unless Alnylam consents otherwise or
such sale is made pursuant to a registered underwritten public offering. Regeneron has further agreed to vote all of the voting
securities of Alnylam it holds in accordance with the recommendation of Alnylam’s board of directors, other than with respect
to certain extraordinary matters (including a change in control of Alnylam). The voting agreement expires, among other events,
on the date on which Regeneron (together with its affiliated permitted transferees) no longer holds at least 1% of the outstanding
shares of Common Stock. The Investor Agreement also provides that, following the Lock-Up Period, Regeneron will have certain demand
and piggyback registration rights with respect to the Shares, subject to customary conditions (including underwriter cutbacks).
The foregoing rights and restrictions under the Investor Agreement are subject to termination upon the occurrence of certain events,
as described therein.
The Stock Purchase Agreement may be terminated
at any time prior to closing by mutual consent; by Regeneron if closing has not occurred by September 30, 2019; or by either party
if any specified closing condition becomes incapable of fulfillment for a reason other than that party’s failure to fulfill
its obligations under the Stock Purchase Agreement, or upon the breach by the other party of any covenant or agreement or upon
a representation or warranty given by the other party becoming untrue, in each case, so that certain closing conditions cannot
be met.
The foregoing description of the Equity Transaction
and the Investor Agreement is qualified in its entirety by reference to the full text of the Stock Purchase Agreement and the Investor
Agreement, respectively, a copy of each of which will be filed with the SEC as an exhibit to the 2Q19 Form 10-Q.