Item 1.01 Entry into a Material Definitive Agreement.
Settlement and License Agreement
On January 5, 2018,
Alder BioPharmaceuticals, Inc. (Alder) entered into a Settlement and License Agreement (the Settlement and License Agreement) with Teva Pharmaceuticals International GmbH (Teva). The Agreement resolves
Alders appeal following opposition proceedings before the European Patent Office related to Tevas European Patent No. 1957106 B1, with respect to calcitonin gene-related peptide (CGRP) antagonist antibodies, and provides
clarity regarding Alders freedom to develop, manufacture and commercialize eptinezumab, its lead product candidate for migraine prevention targeting CGRP.
Under the terms of the Settlement and License Agreement, Alder has received a
non-exclusive
license to Tevas
CGRP patent portfolio to develop, manufacture and commercialize eptinezumab in the United States and worldwide, excluding Japan and Korea. In exchange, Alder has agreed to:
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Withdraw its appeal before the European Patent Office;
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Make an immediate
one-time
payment of $25 million to Teva;
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Make a second
one-time
payment of $25 million upon the approval of a Biologics License Application (BLA) for eptinezumab with the U.S. Food and Drug
Administration (FDA) or of an earlier equivalent filing with a regulatory authority elsewhere in the license territory in which any Teva licensed patents exist; and
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Following commercial launch of eptinezumab, pay $75 million at each of two sales-related milestones (at the first $1 billion and $2 billion in net sales in a calendar year) and provide certain royalty
payments on net sales at rates from 5% to 7%.
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The foregoing summary of the Settlement and License Agreement is not intended to be complete
and is qualified in its entirety by reference to the full text of the Settlement and License Agreement to be filed as an exhibit to Alders Quarterly Report on
Form 10-Q for
the quarterly period
ending March 31, 2018.
Preferred Stock Purchase Agreement for $250 Million Committed Equity Financing
On January 7, 2018, Alder entered into a Preferred Stock Purchase Agreement (the Purchase Agreement) with certain institutional and other
accredited investors affiliated with or managed by Redmile Group, LLC (collectively, the Buyers), pursuant to which Alder has the right to sell to the Buyers from time to time up to $250,000,000 in shares of Alders
non-voting
Class A Preferred Stock (Preferred Stock) over the next three years (the Facility Term), subject to certain limitations and conditions set forth in the Purchase Agreement. The
Preferred Stock is initially convertible into shares of Alders common stock on a one for ten basis.
Upon execution of the Purchase Agreement, and
subject to certain conditions, Alder agreed to sell to the Buyers 725,268 shares of Preferred Stock (the Initial Purchase Shares) at $137.88 per share (the Initial Purchase Price) for gross proceeds of approximately
$100,000,000 (the Initial Purchase). The proceeds to Alder will be reduced by an initial commitment fee of $2,000,000 and certain applicable expense amounts. The aggregate of all applicable expense amounts under the Purchase Agreement to
be reimbursed by Alder shall not exceed $250,000. The closing of the Initial Purchase is expected to occur on January 12, 2018, subject to the satisfaction of customary closing conditions. The Initial Purchase Price was calculated on the basis
of the average of the volume-weighted average price (the VWAP) for Alders common stock traded on the Nasdaq Global Market for each of January 4, 2018 ($13.2319), January 5, 2018 ($13.2353) and January 8, 2018
($14.8966), multiplied by ten.
Under the Purchase Agreement, in addition to the Initial Purchase Shares, on any trading day selected by Alder beginning
after the
90-day
period following the date of the Initial Purchase, Alder has the right, in its sole discretion, to present the Buyers with a purchase notice (each, a VWAP Purchase Notice),
directing the Buyers or their designees or assignees to purchase up to $150,000,000 of Alders Preferred Stock in the aggregate (each such purchase, a VWAP Purchase). The purchase price per share for each VWAP Purchase (the
VWAP Purchase Price) shall equal the product of (1) ten times the lower of (2) ninety percent (90%) of (a) the VWAP for the thirty trading days immediately preceding the date of the Buyers receipt of the VWAP
Purchase Notice or (b) the closing sales price of Alders common stock, on the last trading day immediately preceding the date of the Buyers receipt of the VWAP Purchase Notice, less applicable expense amounts. On the date of the
first VWAP Purchase, the VWAP Purchase Price will be reduced by an access fee of $7,500,000.
Alder may deliver multiple VWAP Purchase Notices to the
Buyers from time to time during the term of the Purchase Agreement, so long as (1) the most recent purchase has been completed, (2) a registration statement registering for sale by the Buyers the shares of Alders common stock
issuable upon conversion of the Preferred Stock issued pursuant to the Purchase Agreement or upon exercise of a warrant that may be issued pursuant to the Purchase Agreement (as described below) is continuously effective, and (3) certain other
conditions set forth in the Purchase Agreement are met. No VWAP Purchase Amount (as defined below) may exceed, together with all other VWAP Purchase Amounts set forth in any VWAP Purchase Notice within the same calendar month, without the written
consent of the Buyers that will purchase at least a majority of the Purchase Shares pursuant to such VWAP Purchase Notice, the lesser of (1) $13,500,000 and (2) an amount equal to 2% of Alders market capitalization, determined by taking
the product of (a) the number of shares of the Alders common stock outstanding as of the last day of the preceding calendar month multiplied by (b) the closing sales price of the Common Stock on the last trading day of the preceding
calendar month. The VWAP Purchase Amount means, with respect to any particular VWAP Purchase Notice, the amount set forth in such VWAP Purchase Notice.
Pursuant to the Purchase Agreement, the total number of shares of Preferred Stock that may be issued to the
Buyers shall not exceed such number of shares of Preferred Stock that are convertible into an aggregate of 13,561,804 shares of Alders common stock (the Exchange Cap), representing 19.99% of Alders outstanding shares of
common stock as of the date of execution of the Purchase Agreement, unless stockholder approval is obtained to issue more shares, in which case the Exchange Cap will not apply. In addition, the Exchange Cap will not apply if at any time, the
Exchange Cap is reached and at all times thereafter the price paid for all shares issued under the Purchase Agreement is equal to or greater than $129.50 (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction) per share. Additionally, at no time will Alder issue any Preferred Stock to the Buyers under the Purchase Agreement if the Buyers and their affiliates would own more than 19.99% of the
outstanding shares of Alders common stock or voting power, unless Alder has received approval from the listing market or obtained any required stockholder approval. The Buyers have no right to require Alder to sell any shares of Preferred
Stock to the Buyers, but are obligated to make purchases from Alder as directed by Alder in accordance with the Purchase Agreement, subject to the satisfaction of customary closing conditions, including that no event of default has occurred.
During the Facility Term, the Buyers shall have the right to submit to the managing underwriter(s) in any public offering of securities by Alder a
non-binding
indication of interest to participate in such offering by purchasing that number of securities equal to such Buyers pro rata ownership of Alder.
In addition, pursuant to the Purchase Agreement, in the event a deemed liquidation occurs within 24 months of the date of the Purchase Agreement, Alder
will issue the Buyers or their designees or assignees a warrant to purchase an aggregate of 75,000 shares of Preferred Stock at a purchase price per share equal to the Initial Purchase Price (share number and exercise price each subject to
adjustment for any reorganization, recapitalization,
non-cash
dividend, stock split, reverse stock split or other similar transaction).
The Purchase Agreement may be terminated (1) by the Buyers in the event of an event of default under the Purchase Agreement or (2) by Alder at any
time, at its discretion, without any cost to Alder. In addition, the Purchase Agreement will automatically terminate (1) on the date that Alder sells the Buyers the full $250,000,000 of Preferred Stock, (2) on the date Alder raises in one
or more financing transactions for aggregate proceeds to Alder of at least $100,000,000 during the Facility Term (excluding amounts raised under the Purchase Agreement) or (3) upon a deemed liquidation.
Each holder of Preferred Stock is entitled to receive in a liquidation (including any deemed liquidation) an amount equal to the greater of the original
purchase price plus all accrued but unpaid dividends thereon or the amount to which such holder would be entitled to receive if such shares had been converted to Alders common stock immediately prior to such liquidation or deemed liquidation
as set forth in the applicable Certificate of Designation. The Preferred Stock shall be entitled to receive dividends, at a rate of 5% per annum, accrued, accumulated and payable semi-annually in arrears. Dividends may be payable in cash or in
shares of Preferred Stock, at the option of Alder.
No holder of Preferred Stock may convert shares of Preferred Stock into Alders common stock if,
after giving effect to an attempted conversion, such conversion would result in the holder, together with its affiliates, beneficially owning more than 9.99% of the shares of Alders common stock then issued and outstanding, which percentage
may be changed at a holders election upon 61 days notice to Alder.
The offer and sale of the foregoing securities are being made in a
transaction not involving a public offering and have not been registered under the Securities Act of 1933, as amended (the Securities Act), or applicable state securities laws. Accordingly, the securities may not be reoffered or resold
in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws. As part of the transaction, Alder will enter
into a registration rights agreement pursuant to which it will agree to file one or more registration statements with the Securities and Exchange Commission for the purpose of registering the resale of shares of common stock issued or issuable to
the Buyers upon conversion of the Preferred Stock.
The foregoing summary of the Purchase Agreement is not intended to be complete and is qualified in its
entirety by reference to the full text of the Purchase Agreement filed as Exhibit 10.1 to this Current Report on
Form 8-K,
and is incorporated herein by reference. The press release announcing the
execution of the Purchase Agreement, dated January 8, 2018, is filed as Exhibit 99.1 hereto.