Quarterly report pursuant to Section 13 or 15(d)

Collaboration and Stock Purchase Agreements

v3.19.3
Collaboration and Stock Purchase Agreements
9 Months Ended
Sep. 30, 2019
Collaboration And Stock Purchase Agreements  
Collaboration and Stock Purchase Agreements

4. Collaboration and Stock Purchase Agreements

Caelum

Agreement with Alexion

In January 2019, Caelum, a subsidiary of the Company, entered into a Development, Option and Stock Purchase Agreement (the “DOSPA”) and related documents by and among Caelum, Alexion Therapeutics, Inc. (“Alexion”), the Company and Caelum security holders parties thereto (including Fortress, the “Sellers”). Under the terms of the agreement, Alexion purchased a 19.9% minority equity interest in Caelum for $30 million. Additionally, Alexion has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which Alexion obtained a contingent exclusive option to acquire the remaining equity in Caelum for pre-negotiated economics.

The Company deconsolidated its holdings in Caelum immediately prior to the execution of the DOSPA. Following the DOSPA execution, the Company owns approximately 40% of the issued and outstanding capital stock of Caelum. The following table provides a summary of the assets and liabilities of Caelum impacted by the deconsolidation:

 

 

 

 

 

 

 

January

($ in thousands)

    

2019

ASSETS

 

 

  

Current assets

 

 

  

Cash and cash equivalents

 

$

1,201

Prepaid expenses and other current assets

 

 

 6

Total current assets

 

$

1,207

 

 

 

 

LIABILITIES

 

 

  

Current liabilities

 

 

  

Accounts payable and accrued expenses

 

$

2,246

Interest payable

 

 

198

Interest payable - related party

 

 

106

Note payable - related party

 

 

929

Note payable

 

 

9,914

Warrant liability

 

 

991

Total current liabilities

 

 

14,384

Net liability impacted by deconsolidation

 

$

13,177

 

In connection with this transaction the Company recorded a gain resulting from the deconsolidation of Caelum on its condensed consolidated financial statements for the nine months ended September 30, 2019:

 

 

 

 

 

 

 

Gain on

 

 

deconsolidation of

($ in thousands)

    

Caelum

Fair value of Caelum

 

$

11,193

Net liabilities deconsolidated

 

 

13,177

Non-controlling interest share

 

 

(4,849)

Write off of MSA fees due Fortress

 

 

(1,000)

Gain on deconsolidation of Caelum

 

$

18,521

 

Avenue

Agreement with InvaGen

On November 12, 2018, the Company’s partner company Avenue entered into a Stock Purchase and Merger Agreement (“SPMA”) with InvaGen Pharmaceuticals Inc. (“InvaGen”) and Madison Pharmaceuticals Inc., a newly-formed, wholly-owned subsidiary of InvaGen. Pursuant to the SPMA, and following approval by Avenue’s stockholders on February 8, 2019, InvaGen purchased a number of shares of Avenue common stock representing 33.3% of Avenue’s fully-diluted capital stock for net proceeds to Avenue of $31.5 million (after deducting fees and other offering-related costs).

Upon the achievement of certain closing conditions (including most notably U.S. Food and Drug Administration approval for IV Tramadol, Avenue’s product candidate), InvaGen will be obligated to acquire Avenue via reverse subsidiary merger (the “Merger Transaction”). Under the Merger Transaction, InvaGen will pay $180 million (subject to certain potential reductions) to the holders of Avenue’s capital stock (other than InvaGen itself).

Subject to the terms and conditions described in the SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $7.0 million during the time period between February 8, 2019 and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

Prior to the closing of the Merger Transaction, Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights, pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones. If, during the period commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates at least $325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled to receive their pro rata share of (i) if the product generated less than $400 million in Net Sales during such calendar year, 10% of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $400 million and $500 million in Net Sales during such calendar year, 12.5% of Gross Profit, or (iii) if the product generated more than $500 million in Net Sales during such calendar year, 15% of Gross Profit. Additionally, at any time beginning on January 1, 2029 that IV Tramadol has generated at least $1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates $100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20% of the Gross Profit generated by IV Tramadol. These additional payments will terminate on the earlier of December 31, 2036 and the date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.