Asset Purchase Agreement
On December 7, 2019, XBiotech Inc. (the “Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Janssen Biotech, Inc. (“Janssen”), under which Janssen will acquire the Company’s True Human Antibody bermekimab to target interleukin-1 alpha (IL-1⍺). The Company will retain its True Human Antibody discovery program targeting IL-1⍺ to treat all non-dermatological diseases. Upon closing of the transactions contemplated by the Purchase Agreement (the “Closing”), Janssen will pay $750 million in cash to the Company, $75 million of which will be held in an escrow account for 18 months to satisfy any indemnity claims. In addition, Janssen will be obligated to pay the Company up to four milestone payments of $150 million each, or a maximum of $600 million if it receives specified commercial authorizations within a specified timeframe for a pharmaceutical product that contains bermekimab and is for a non-dermatological indication.
The Purchase Agreement includes customary representations and warranties from each party to the other party, along with customary mutual indemnification obligations. Closing is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. The Company and Janssen have agreed to certain non-competition and exclusivity covenants and rights of first negotiation following the closing.
The Company plans to use the proceeds from the closing cash payment under the Purchase Agreement to fund discovery and development of its next generation True Human anti-IL-1⍺ antibody program and to advance other antibody therapeutics in the Company’s pipeline. The Company will also have sufficient cash to support a significant capital transaction, such as a stock repurchase, subject to board review and approval.
IP Non-Assertion and License Agreement
At the Closing, the Company and Janssen will enter into an IP Non-Assertion and License Agreement (the “License Agreement”), pursuant to which the Company will grant Janssen a non-exclusive license to certain patents and intellectual property of the Company. Janssen has agreed not to assert certain claims from the patents to be acquired from the Company in the transaction against the Company in connection with the Company’s new antibodies targeting IL-1⍺ as described in the Purchase Agreement, to treat non-dermatological diseases.
Clinical Manufacturing Agreement
In addition, at the Closing, XBiotech USA, Inc., a subsidiary of the Company (“XBiotech USA), and Janssen Research & Development, LLC (“JRD”) will enter into a Clinical Manufacturing Agreement (the “Manufacturing Agreement”). Pursuant to the Manufacturing Agreement, XBiotech USA will agree to manufacture bermekimab for use by Janssen in clinical trials, in exchange for payments, paid in quarterly installments.
Transition Services Agreement
Finally, at the Closing, XBiotech USA and JRD will enter into a Transition Services Agreement (the “Services Agreement” and, together with the Purchase Agreement, the License Agreement and the Manufacturing Agreement, the “Agreements”). Pursuant to the Services Agreement, XBiotech USA will agree to continue operational management, on a fee-for-service basis, of certain ongoing clinical trials related to bermekimab.
The foregoing description of the Agreements does not purport to be complete and is qualified in its entirety by reference to the terms of the Purchase Agreement, the form of License Agreement, the form of Manufacturing Agreement and the form of Services Agreement.