Item
1.01. Entry into a Material Definitive Agreement.
On
May 2, 2021, Sonnet BioTherapeutics, Inc. (the “Company”) entered into a License Agreement (the “Agreement”)
with New Life Therapeutics PTE, LTD., a company organized under the laws of Singapore (“New Life”). Pursuant
to the Agreement, Sonnet granted New Life an exclusive license (with the right to sublicense) to develop and commercialize pharmaceutical
preparations containing a specific recombinant human interleukin-6 (or any derivatives, fragments or conjugates thereof) (the
“Compound”) (such preparations, the “Products”) for the prevention, treatment or palliation
of diabetic peripheral neuropathy in humans (the “DPN Field”) in Malaysia, Singapore, Indonesia, Thailand,
Philippines, Vietnam, and Brunei (the “Exclusive Territory”). New Life may exercise the option to expand (1)
the field of the exclusive license to include the prevention, treatment or palliation of chemotherapy-induced peripheral neuropathy
in humans (the “CIPN Field”), which option is non-exclusive and will expire on December 31, 2021; and/or (2)
the territorial scope of the license to include the People’s Republic of China, Hong Kong and/or India, which option is
exclusive and will also expire on December 31, 2021. Sonnet is excluded from developing, using, selling or otherwise commercializing
any Compounds or Products for use in the DPN Field in the Exclusive Territory during the term of the Agreement.
The
Company retains all rights to manufacture Compounds and Products anywhere in the world. The Company and New Life shall enter into
a follow-on supply agreement pursuant to which the Company shall supply to New Life Productsfor development and commercialization
thereof in the DPN Field (and the CIPN Field, if applicable) in the Exclusive Territory on terms to be negotiated by the parties..
Pursuant
to the terms of the Agreement, New Life will bear the cost of, and be responsible for, among other things, conducting clinical
studies and additional non-clinical studies (if any, subject to both parties’ approval), preparing and filing applications
for regulatory approval and undertaking other developmental and regulatory activities for and commercializing Products in the
DPN Field (and the CIPN Field, if applicable) in the Exclusive Territory. New Life will own and maintain all regulatory filings
and approvals for Products in the Exclusive Territory.
In
consideration of the license and other rights granted by the Company, New Life will pay the Company, within 30 days of the date
of the Agreement, a $500,000 upfront cash payment and is obligated to pay a deferred license fee of an additional $1,000,000 at
the time of the satisfaction of certain milestones as well as potential additional milestone payments to the Company totaling
up to $19,000,000 subject to the achievement of certain development and commercialization milestones. In addition, during the
Royalty Term (as defined below), New Life is obligated to pay the Company tiered double digit royalties ranging from 12% to 30%
based on annual net sales of Products in the Territory. The “Royalty Term” means, on a Product-by-Product and
a country-by-country basis in the Exclusive Territory, the period commencing on the date of the first commercial sale (subject
to certain conditions) of such Product in such country in the Exclusive Territory and continuing until New Life ceases commercialization
of such Product in the DIPN Field (or CIPN Field, if applicable). In the event New Life (i) files for an initial public offering
or (ii) is subject to a Change of Control, the royalty obligations may be converted to equity subject to mutual agreement of the
parties.
In
addition, New Life shall pay to the Company a percentage, in the double digits, of all revenue received through sub-licensing
of each Product, subject to certain exclusions.
Sonnet
retains the sole responsibility to pay its third party licensors to the extent such obligations are applicable to the rights granted
to New Life with respect to the Products and shall remain liable for all obligations under the license related to the Compounds
and Products between Sonnet and ARES Trading SA.
The
Agreement will remain in effect on a Product-by-Product, country-by-country basis and will expire upon the expiration of the Royalty
Term for the last-to-expire Product in the last-to-expire country, subject to (i) each party’s early termination rights
including for material breach or insolvency or bankruptcy of the other party and (ii) the Company’s Buy Back Right and New
Life’s Give Back Right (as defined below).
In
addition, New Life granted to the Company an exclusive option to buy back the rights granted by the Company to New Life and the
Company granted New Life the right to give back the rights with respect to Products in the DPN Field and/or the CIPN Field (if
applicable) in one or more countries in the Exclusive Territory on terms to be agreed upon, which options will expire upon the
initiation of a Phase III Trial for the applicable Product.
Pursuant
to the Agreement, the parties agreed to develop a joint development committee to provide strategic oversight of the parties’
collaboration activities under the Agreement, including to coordinate the development of Licensed Products in the Territory.
The
Agreement also contains customary representations, warranties and covenants by both parties, as well as customary provisions relating
to indemnification, confidentiality and other matters.
The
foregoing description of the terms of the Agreement is qualified in its entirety by reference to the full text of the Agreement,
which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ending March 31,
2021.
Forward-Looking
Statements
This
Current Report on Form 8-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934 and Private Securities Litigation Reform Act, as amended, including
those relating to the Company’s product development, clinical trials, clinical and regulatory timelines, market opportunity,
competitive position, possible or assumed future results of operations, business strategies, potential growth opportunities and
other statement that are predictive in nature. These forward-looking statements are based on current expectations, estimates,
forecasts and projections about the industry and markets in which we operate and management’s current beliefs and assumptions.
These
statements may be identified by the use of forward-looking expressions, including, but not limited to, “expect,” “anticipate,”
“intend,” “plan,” “believe,” “estimate,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions and the negatives of those terms. These
statements relate to future events or our financial performance and involve known and unknown risks, uncertainties, and other
factors which may cause actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. Such factors include those set forth in the Company’s
filings with the Securities and Exchange Commission. Prospective investors are cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date of this press release. The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information, future events or otherwise.