Item
1.01 Entry into a Material Definitive Agreement.
On
December 4, 2018, VBI Vaccines Inc. (the “Company”) entered into a license and collaboration agreement (the “License
Agreement”) with Brii Biosciences Limited (“Brii Bio”), pursuant to which, among other things, subject to terms
and conditions set forth in the License Agreement:
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(i)
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the
Company and Brii Bio agreed to collaborate on the development of a hepatitis B recombinant protein-based immunotherapeutic
in the licensed territory, which consists of China, Hong Kong, Taiwan and Macau (collectively, the “Licensed Territory”),
and to conduct a Phase II collaboration clinical trial for the purpose of comparing VBI-2601, which is a recombinant protein-based
immunotherapeutic developed by the Company for use in treating hepatitis B, and a novel composition (the “Novel Composition”),
which is a new recombinant protein-based immunotherapeutic formulation that includes a Brii Bio adjuvant and a licensed compound
of the Company;
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(ii)
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the
Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as
may be required to obtain and maintain marketing approval for the licensed product, which is either VBI-2601 or the Novel
Composition (the “Licensed Product”), for the treatment of hepatitis B in the Licensed Territory and to commercialize
and promote the Licensed Product for the diagnosis and treatment of hepatitis B in the Licensed Territory; and
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(iii)
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Brii
Bio granted the Company an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest
in any joint technology developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis
and treatment of hepatitis B in the countries of the world other than the Licensed Territory.
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Pursuant
to the License Agreement and the initial development plan, Brii Bio shall fund all clinical trials for the Licensed Territory.
The Company and Brii Bio will jointly own all rights, title and interest in the joint know-how developed and the patents claiming
joint inventions made pursuant to the License Agreement. Outside of the field of the diagnosis and treatment of hepatitis B, the
Company will not have any right to practice the joint technology in the countries outside of the Licensed Territory unless and
until the parties have negotiated a separate license agreement.
As part of the consideration
for the collaboration, the Company received from Brii Bio a total upfront payment of $11 million, consisting of a $4 million upfront
payment and a $7 million equity investment. The Company is also eligible to receive an additional $117.5 million in potential
milestone payments, along with potential low double-digit royalties on commercial sales in the Licensed Territory. In connection
with the equity investment, the Company and Brii Bio entered into a stock purchase agreement, dated as of December 4, 2018, pursuant
to which the Company issued to Brii Bio an aggregate of 2,295,082 common shares (the “Brii Bio Shares”) in
exchange for $7 million, or $3.05 per share.
The
License Agreement will be in effect until the last-to-expire of the latest of the following terms in each region of the Licensed
Territory: (i) expiration, invalidation or lapse of the last Company patent claiming a Licensed Product, (ii) 10 years from the
date of first commercial sale of a Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s
obligation to pay third party royalties with respect to sales of a Licensed Product. Upon expiration (but not an earlier termination)
of the License Agreement in each region of the Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive,
fully paid-up, royalty free license under the Company’s technology related to the licensed compounds or Licensed Products
pursuant to the License Agreement in such region to make and sell Licensed Products for the diagnosis and treatment of hepatitis
B in such region. Each party may terminate the License Agreement upon a material breach of the License Agreement which has not
been cured within 60 days (or 30 days for a breach payment obligations) after notice from the terminating party requesting cure
of the breach, or upon bankruptcy or insolvency, either voluntary or involuntary, dissolution or liquidation of a party. In addition,
Brii Bio may terminate the License Agreement without cause upon 180 days’ notice or, if a Data and Safety Monitoring Board
or any regulatory authority in the Licensed Territory imposes a clinical hold on any clinical trial for a Licensed Product for
six consecutive months, immediately upon notice. The Company may terminate the License Agreement immediately upon notice, if Brii
Bio or its affiliates, directly, or indirectly through any third party, commences any interference or opposition proceeding with
respect to, challenges the validity or enforceability of, or opposes any extension of or the grant of a supplementary protection
certificate with respect to, any patents owned or controlled by the Company related to the composition or the method of making
or using licensed compounds or Licensed Products, or are otherwise necessary or useful to research, develop, make, or otherwise
commercialize the licensed compounds or Licensed Products.
The
License Agreement also contains mutual confidentiality and indemnification obligations for the Company and Brii Bio.
Prior
to the Company’s entering into the License Agreement, the Company paid $6 million to terminate a distribution agreement
with a third party who previously held certain distribution rights to certain Asian markets.