Item 1.01
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Entry into a Material Definitive Agreement
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On May 11, 2020, Adamis Pharmaceuticals
Corporation (the “Company”) announced in a press release that it had entered into an agreement (the
“Termination Agreement”) with Sandoz Inc. to terminate the Distribution and Commercialization Agreement dated as
of July 1, 2018 (the “Sandoz Agreement”) previously entered into between the Company and Sandoz relating to the
Company’s SYMJEPI ® (epinephrine) Injection 0.3mg, SYMJEPI® (epinephrine) Injection
0.15mg products for the emergency treatment of allergic reactions (Type I) including anaphylaxis, which are currently
marketed by Sandoz and available in the United States pursuant to the Sandoz Agreement, and reacquire the rights to the
SYMJEPI products. The Company also announced that it had entered into an exclusive distribution and commercialization
agreement (the “USWM Agreement”) with USWM, LLC (“USWM” or “US WorldMeds”) for
the United States commercial rights for the SYMJEPI products, as well as for the Company’s ZIMHI™
(naloxone HCI Injection, USP) 5mg/0.5mL product candidate intended for the emergency treatment of opioid overdose.
The Termination Agreement provides for the mutually
agreed return to Adamis of the marketing, promotion, and distribution rights, and certain marketing and promotional materials,
relating to the SYMJEPI products, and the termination of the Sandoz Agreement, following a transition period, supported by a transition
services agreement that Sandoz and the Company or its designee agree to use commercially reasonable efforts to enter into, concerning
certain transition services, activities and arrangements relating to the SYMJEPI products. As part of the Termination Agreement,
Sandoz will continue to support the products in the U.S. under the Sandoz Agreement through the end of the transition period to
help reduce or minimize any potential impact to patients and customers. The Termination Agreement also provides for a future
resolution following the end of the transition period and termination of the Sandoz Agreement of any amounts that may be payable
or owed with respect to the net sales and profit sharing provisions of the Sandoz Agreement, and for survival of certain provisions
of the Sandoz Agreement.
Under the terms of the USWM Agreement, the Company
appointed USWM as the exclusive (including as to the Company) distributor of the SYMJEPI products in the United States and related
territories (“Territory”) effective upon the termination of the Sandoz Agreement, and of the ZIMHI product, following
receipt of regulatory approval, and granted USWM an exclusive license under the Company’s patent and other intellectual property
rights and know-how to market, sell, and otherwise commercialize and distribute the products in the Territory, subject to the provisions
of the USWM Agreement, in partial consideration of an initial payment by USWM and potential regulatory and commercial based milestone
payments totaling up to $26 million, if the milestones are achieved. There can be no assurances that any of these milestones
will be met or that any milestone payments will be paid to the Company. The Company retains rights to the intellectual property
subject to the USWM Agreement and to commercialize both products outside of the Territory. In addition, the Company may continue
to use the licensed intellectual property (excluding certain of the licensed trademarks) to develop and commercialize other products
(with certain exceptions), including products that utilize the Company’s injection device platform.
The USWM Agreement provides that, subject
to certain adjustments, USWM will pay to the Company 50% of the net profit from net sales, as each such term is defined in
the USWM Agreement, of the products in the Territory to third parties, determined on a quarterly basis. The Company will be
the supplier of the products to USWM, and USWM will order and pay the Company a supply price for quantities of products
ordered. Under the USWM Agreement, net profit is determined based on the amount of net sales less the supply price that USWM
pays the Company for quantities of the products sold in the applicable period, less certain additional amounts relating to
sales, distribution and other allocations and expenses and amounts allocable to the products and less certain other
adjustments and amounts, and net sales is determined based on the net sales recorded by USWM for sales of the products and
reflecting a number of customary deductions allocable to the products including, without limitation, product recalls or
returns, discounts and credits, rebates, and certain other items.
The Company will be responsible for all manufacturing,
component and supply costs related to manufacturing and supplying the products to USWM at a supply price based on Adamis’
direct product costs. The Company is responsible for component sourcing and regulatory compliance in the supply chain and for testing
of lots of products. The USWM Agreement includes customary provisions relating to ordering, delivering and payment for products
ordered by USWM. The Company will also be responsible for all regulatory and registration activities related to the products in
the Territory, including all costs of protecting and maintaining the Company’s intellectual property and costs related to
obtaining and maintaining regulatory approvals for the products.
USWM will purchase all the products from the
Company at a supply price and will be responsible for the marketing, sales, and distribution of the products in the Territory,
subject to the provisions of the USWM Agreement. USWM will also be responsible for regulatory compliance with federal, state, and
local government purchasing, pricing, and reimbursement programs. USWM will record revenues from sales of the products and will
be responsible for marketing and sales costs, and is also responsible for developing, and regulatory compliance regarding, promotional
materials.
The Company and USWM will appoint an equal number
of representatives to a joint project team that will meet periodically to discuss and make certain decisions regarding launch and
commercialization strategies of the products. The joint project team will, among other things, determine the allocation of USWM’s
direct marketing and sales expenses that will be included in the quarterly net profit calculation. The USWM Agreement also provides
that USWM will enter into a quality agreement relating to the products, and that USWM and the Company will enter into a pharmacovigilance
agreement relating to exchange of safety information and regulatory reporting requirements.
The USWM Agreement contains customary representations,
warranties and covenants of the Company, including without limitation relating to matters such as rights to grant the licenses
under the USWM Agreement, compliance with applicable laws, absence of infringement or violation of third party rights, conformity
of the products and components with applicable laws and specifications, and other matters. The USWM Agreement includes a number
of other provisions dealing with product recalls, delivery requirements, safety reporting, intellectual property, quality control,
audits, recordkeeping, consequences of sustained continued delays or inability to deliver products, and other matters and agreements
by the Company and USWM.
The USWM Agreement includes customary indemnification
provisions between the parties. The Company has agreed to indemnify USWM against losses and expenses paid or payable by USWM to
third parties as a result of any third party claim related to certain matters, including (a) breach by the Company of any representations,
warranties, covenants, or agreements made by the Company in the USWM Agreement or certain related agreements, (b) negligence or
willful misconduct by the Company or certain related persons relating to the USWM Agreement, (c) the development, processing or
manufacturing of the products, (d) certain product liability actions arising from the sale or use of the products, (e) certain
amounts relating to failure to supply required quantities of the products, (f) third party intellectual property infringement claims,
with certain exceptions, or (g) certain matters relating to the products in respect of periods before the date of the USWM Agreement.
USWM has agreed to indemnify the Company against losses and expenses paid or payable by the Company to third parties as a result
of any third party claim related to any breach by USWM of any representations, warranties, covenants, or agreements made by USWM
in the USWM Agreement or certain related agreements, negligence or willful misconduct by USWM or certain related persons relating
to the USWM Agreement, or the commercialization of products by USWM, except where the Company is obligated to indemnify USWM for
such matter.
The initial term of the USWM Agreement will,
unless otherwise terminated as permitted by the agreement, continue for ten years from the launch of the first product in the Territory
pursuant to the agreement, and will thereafter be automatically renewed for consecutive five year renewal terms unless the agreement
is otherwise terminated by mutual agreement of the parties with respect to either or both of the SYMJEPI and ZIMHI products, or
unless otherwise terminated by a party as permitted by the agreement.
Either party may terminate the USWM Agreement,
with respect to either the SYMJEPI products or the ZIMHI product or both (as applicable), by reason of an uncured breach of a material
provision of the USWM Agreement, or following bankruptcy-related events affecting the other party. In addition, USWM may terminate
the USWM Agreement for other reasons, such as withdrawal of the product from the Territory due to certain regulatory actions of
the FDA including FDA requirements, issuance of a voluntary recall or mutually agreed safety considerations, certain uncured quality
deficiencies relating to the supply or manufacture of the products, if the Company is unable to supply products to USWM for certain
periods of time, the occurrence of certain intellectual property related matters within certain periods of time, certain uncured
quality deficiencies, or with respect to ZIMHI failure to achieve regulatory approval within certain periods of time. The Company
has the right to terminate the USWM Agreement following the occurrence of certain events relating to progress in launching or commercializing
the products.
The foregoing description of certain terms of
the USWM Agreement does not purport to be complete and is qualified in its entirety by reference to the USWM Agreement that the
Company intends to file as an exhibit to its Quarterly Report on Form 10-Q for the period ended June 30, 2020, or other report
that the Company may file with the Securities and Exchange Commission (the “SEC”). The Company intends to seek confidential
treatment for certain portions of the USWM Agreement pursuant to a confidential treatment request submitted to the SEC pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.