Item 1.01.
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Entry into a Material Definitive Agreement
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License Agreements
Effective August 24, 2017, XOMA (US) LLC (XOMA US), a wholly owned subsidiary of XOMA Corporation (XOMA) and
Novartis Pharma AG (Novartis) entered into a license agreement (the License Agreement) pursuant to which XOMA US has granted to Novartis an exclusive, world-wide, royalty-bearing license to XOMAs program relating to
gevokizumab, a novel anti-IL-1 beta allosteric monoclonal antibody (the Program).
Under the License Agreement, Novartis will
have worldwide rights to the Program and will be solely responsible for the development and commercialization of antibodies and products containing antibodies arising from the Program. XOMA will transfer certain proprietary know-how, materials and
inventory relating to the Program to Novartis. XOMA will receive an approximately $16 million upfront payment and Novartis will repay in its entirety the approximately 12 million of debt will be owed by XOMA to Les Laboratoires Servier,
and upon receipt of such repayment the loan documents relating to the same will be terminated (Servier Loan Repayment). Based on the achievement of pre-specified criteria, XOMA also is eligible to receive up to $438 million in
development, regulatory and commercial milestones. XOMA is also eligible to receive royalties on sales of licensed products from the Program, which are tiered based on sales levels and range from a high-single digit percentage rate to up to a
mid-double-digit percentage rate.
Novartis obligation to pay such development and commercialization milestones will continue for so
long as Novartis is developing or selling products under the License Agreement, subject to the maximum milestone payment amounts set forth above. Novartis obligation to pay royalties with respect to a particular product and country will
continue for the longer of the date of expiration of the last valid patent claim covering the product in that country, or ten years from the date of the first commercial sale of the product in that country.
The License Agreement contains customary termination rights relating to material breach by either party. Novartis also has a unilateral right
to terminate the License Agreement on a product-by-product and country-by-country basis or in its entirety on six months notice.
In
addition, in connection with the execution of the License Agreement, XOMA US and Novartis Institutes for BioMedical Research, Inc. are expected to execute an amendment to their Secured Note Agreement, dated May 26, 2005, as amended, to extend
the maturity date to September 30, 2022.
On August 24, 2017, pursuant to a separate agreement (the IL-1 Beta Target
Agreement), XOMA US granted to Novartis a non-exclusive license to its intellectual property covering the use of IL-1 beta targeting antibodies in the treatment of cardiovascular disease and other diseases and conditions, and an exclusive
option to obtain an exclusive license to such intellectual property for the treatment of cardiovascular disease. Under the IL-1 Beta Target Agreement, XOMA will receive a $10 million upfront payment and is eligible to receive low-single-digit
royalties on canakinumab sales in cardiovascular indications. XOMA also granted to Novartis an exclusive option to convert its non-exclusive license with respect to cardiovascular indications into an exclusive license. Should Novartis exercise this
option, the royalties will increase to the mid-single digits, and Novartis will have the right of first negotiation with respect to certain transactions relating to the licensed intellectual property.
Purchase Agreement
On August 24, 2017, XOMA entered into a common stock purchase agreement (the Purchase Agreement) with Novartis, pursuant to
which XOMA agreed to issue and sell to Novartis 539,131 shares of its common stock, par value $0.0075 per share (the Common Stock), at a price per share of approximately $9.2742, representing a 25% premium of the 30-day average of the
closing prices of XOMAs Common Stock preceding the execution of the Purchase Agreement (the Shares), for the aggregate purchase price of $5.0 million.
The Shares will be issued in reliance upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933,
as amended (the Securities Act). The Purchase Agreement contains representations to support XOMAs reasonable belief that Novartis has had access to information concerning XOMAs operations and financial condition, that it
is acquiring the Shares for its own account and not with a view to the distribution thereof, and that it is an accredited investor as defined by Rule 501 promulgated under the Securities Act.
The descriptions of the License Agreement, the IL-1b Target Agreement, and the Purchase Agreement contained herein do not purport to be
complete and are qualified in their entirety by reference to such agreements, together with the exhibits thereto, copies of which will be filed as exhibits to XOMAs Quarterly Report on Form 10-Q for the period ending September 30, 2017.