Item 1.01 Entry into a Material Definitive Agreement
On February 13, 2017, AMAG Pharmaceuticals, Inc. (“
AMAG
”) and Endoceutics, Inc. (“
Endoceutics
”) entered into a license agreement (the “
License Agreement
”) pursuant to which Endoceutics has agreed to grant to AMAG rights to Intrarosa
TM
(prasterone), an FDA-approved product for the treatment of moderate-to-severe dyspareunia (pain during sexual intercourse). The License Agreement grants AMAG the right to develop and commercialize pharmaceutical products containing dehydroepiandrosterone (“
DHEA
”), including Intrarosa, at dosage strengths of 13 mg or less per dose and formulated for intravaginal delivery (the “
Product
”), excluding any dosage strengths over 13 mg per dose and combinations with other active pharmaceutical ingredients, in the United States for the treatment and prevention of vulvar and vaginal atrophy (“
VVA
”) and female sexual dysfunction (“
FSD
”) (the “
Field
”). The closing of the transactions contemplated by the License Agreement (the “
Effective Date
”) is subject to clearance under the Hart-Scott-Rodino Act and other customary closing conditions.
Subject to the terms of the License Agreement, Endoceutics has agreed to conduct clinical studies for use of the Product in FSD to support an application for regulatory approval for the Product for use in FSD in the United States. AMAG and Endoceutics have agreed to share the direct costs related to such studies based upon a negotiated allocation with AMAG funding up to $20.0 million. AMAG may, with Endoceutics’ consent (not to be unreasonably withheld, conditioned or delayed), conduct any other studies of the Product in the Field anywhere in the world for the purpose of obtaining or maintaining regulatory approval of or commercializing the Product in the Field in the United States. All data generated in connection with the above described studies would be owned by Endoceutics and licensed to AMAG pursuant to the License Agreement.
AMAG will be granted the exclusive right to commercialize the Product in the Field in the United States, subject to the terms of the License Agreement, including having final decision making authority with respect to commercial strategy, pricing and reimbursement and other commercialization matters. AMAG has agreed to use commercially reasonable efforts to market, promote and otherwise commercialize the Product in the Field in the United States. Endoceutics has the right to directly conduct, itself or through its affiliates or subcontractors, additional commercialization activities for the Product in the Field in the United States, which scope of activities will be agreed to by the parties acting reasonably and in good faith, and has the right to conduct activities related generally to the field of intracinology, in each case, subject to AMAG’s right to withhold approval in certain instances.
Pursuant to the terms of the License Agreement, promptly following the Effective Date, AMAG has agreed to make an upfront cash payment of $50.0 million, and (subject to certain conditions) has agreed to issue 600,000 shares of unregistered common stock, to Endoceutics, 300,000 of which will be subject to a 180-day lock-up provision, and the other 300,000 of which will be subject to a one-year lock-up provision. AMAG has also agreed to make a payment of $10.0 million to Endoceutics on the first anniversary of the Effective Date and up to $10.0 million upon the delivery of launch quantities of the Product. AMAG has also agreed to pay tiered royalties to Endoceutics equal to a percentage of net sales of the Product in the United States ranging from mid-teens (for calendar year net sales up to $150 million) to mid twenty percent (for any calendar year net sales that exceed $1 billion) (such royalty rate to be dependent on the aggregate net sales of the Products) for the commercial life of the Product, with deductions after the later of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) ten years after the first commercial sale of the Product in the Field in the United States, generic competition and third party payments. Endoceutics is also eligible to receive certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales exceed $300.0 million. If annual net U.S. sales exceed $500.0 million, there are additional sales milestone payments totaling up to $850 million, which would be triggered at various sales thresholds.
In connection with the License Agreement, AMAG and Endoceutics have agreed to enter into a commercial supply agreement on or about the Effective Date, pursuant to which Endoceutics, itself or through affiliates or contract manufacturers, would agree to manufacture and supply the Product to AMAG (the “
Supply Agreement
”) and would be AMAG’s exclusive supplier of the Product in the United States, subject to certain rights for AMAG to manufacture and supply the Product in the event of a cessation notice or supply failure (as such terms are defined in the Supply Agreement). Under the Supply Agreement, Endoceutics would maintain at all times a second source supplier for the manufacture of DHEA and the drug product and identify and validate and transfer manufacturing intellectual property to the second source supplier within two years of the Effective Date. The Supply Agreement remains in effect until the termination of the License Agreement, unless terminated earlier by either party for an uncured material breach or insolvency of the other party, or by AMAG if it exercises its rights to manufacture and supply the Product following a cessa
tion notice or supply failure.
Under the License Agreement, except as permitted under the License Agreement or the Supply Agreement, and except for any compounds or products affecting the melanocortin receptor pathway, including without limitation, bremelanotide (collectively, “
Excluded Product
”), AMAG will not be permitted to research, develop, manufacture, or commercialize (i) DHEA for delivery by any route of administration anywhere in world, (ii) any compound (including DHEA) or product for use in VVA anywhere in the world, or (iii) commencing on the date of an approval of the Product for the treatment of FSD in the United States and continuing for the remainder of the term of the License Agreement, any compound (including DHEA) for use in FSD (each, a “
Competing Product
”). Any compound or product for use in FSD that would be a Competing Product in the United States but that (i) does not contain DHEA and (ii) was acquired or licensed or for which the research, development, manufacture or commercialization of such compound or product is initiated by AMAG or its affiliates, in each case, prior to the date of an approval of the Product for the treatment of FSD in the United States, will be an Excluded Product and will not be subject to the exclusivity obligations under the License Agreement in the treatment of FSD, subject to certain restrictions in the License Agreement. These noncompete restrictions are subject to certain exclusions relating to the acquisition of competing programs.
AMAG and Endoceutics have made customary representations and warranties and have agreed to certain customary covenants. The License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance with the License Agreement. The License Agreement may be terminated by either Party if the Effective Date has not occurred within 180 days following the execution date or such date as the parties may mutually agree. The License Agreement may be terminated by either Party for material breach that is either uncured after a 90-day notice period, or if such breach cannot be cured within such 90-day period, if the breaching party does not commence appropriate and material actions to cure such breach within the notice period and continue to diligently cure such breach for a period not to exceed 90 days, in either case, subject to tolling or determination of the arbitrators, if dispute resolution procedures are initiated within 30 days’ of the termination notice. AMAG has the ability to elect not to terminate the License Agreement in the case of a material breach, in which case future milestone and royalty payments owed to Endoceutics would be reduced by a negotiated percentage or by an amount determined by arbitration. Either party may terminate under certain situations relating to the bankruptcy or insolvency of the other party. AMAG may terminate the License Agreement for a valid business reason upon 365 days’ prior written notice to Endoceutics; or upon 60 days’ written notice in the event AMAG reasonably determines in good faith, after due inquiry and after discussions with Endoceutics, that AMAG cannot reasonably continue to develop or commercialize any Product as a result of a safety issue regarding the use of the Product. AMAG may also terminate the License Agreement upon 180 days’ notice if there is a change of control of AMAG and the acquiring entity (alone or with its affiliates) is engaged in a competing program (as defined in the Licensed Agreement) in the United States or in at least three countries within the European Union.
Endoceutics has represented that the historical research and development costs incurred to date by Endoceutics and its affiliates (including any third party costs and expenses) in connection with the Product are approximately CAD $19.6 million (approximately USD $15.0 million) since January 1, 2014, including (i) CAD $10,127,220 (approximately USD $7.7 million) during the twelve months ended December 31, 2014, (ii) CAD $4,896,520 (approximately USD $3.8 million) during the twelve months ended December 31, 2015, and (iii) CAD $4,559,816 (approximately USD $3.5 million) during the twelve months ended December 31, 2016. AMAG is not assuming any liabilities (including contingent liabilities), acquiring any physical assets, or hiring or acquiring any employees from Endoceutics in connection with the License Agreement.
The foregoing summary is qualified in its entirety by reference to the License Agreement and Supply Agreement, each of which AMAG expects to file as an exhibit to its Quarterly Report on Form 10-Q for the quarter in which such agreement is entered, if not earlier on a Current Report on Form 8-K. AMAG intends to seek confidential treatment for certain portions of the License Agreement and the Supply Agreement.