Nuvation Bio Inc 8-K/A, filed Jun 20, 2024
Nuvation Bio Inc. (NUVB)
About this 8-K/A
Nuvation Bio Inc filed this 8-K/A on June 20, 2024, reporting on events of April 9, 2024.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under Exchange Act (17 CFR 240.13e-4(c)) |
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Trading Symbol(s) |
Name of each exchange on which registered | ||
Item 8.01. |
Other Events. |
| • | The pursuit of validated targets FDA-approved drugs, and we then attempt to design or acquire novel or potential best-in-class |
| • | Innovative medicinal chemistry expertise: |
| • | Human capital management |
| • | Safusidenib, a novel, oral, potent, brain penetrant, targeted inhibitor of mutant isocitrate dehydrogenase 1 (“mIDH1”), which we also acquired as part of the AnHeart acquisition. Safusidenib is being evaluated in a global Phase 2 study for the treatment of patients with diffuse mIDH1 glioma. |
| • | NUV-868, a binding domain 2 (“BD2”)-selective, oral, small molecule bromodomain and extra-terminal (“BET”) inhibitor that inhibits bromodomain-containing protein 4 (“BRD4”). NUV-868 is being evaluated in a Phase 1b dose escalation study in combination with olaparib for the treatment of patients with ovarian cancer, pancreatic cancer, metastatic castration-resistant prostate cancer (“mCRPC”), triple negative breast cancer, and other solid tumors, and in combination with enzalutamide for the treatment of patients with mCRPC. |
| • | NUV-1511, our first clinical-stage DDC fuses a targeting agent to a widely used chemotherapy agent that suppresses the growth of various advanced solid tumors. NUV-1511 is being evaluated in a Phase 1/2 study for the treatment of patients with advanced solid tumors who previously received and progressed on or after treatment with Enhertu® and/or Trodelvy® per approved U.S. FDA labeling, human epidermal growth factor receptor 2-negative (“HER2-”) metastatic breast cancer, mCRPC, advanced pancreatic cancer, and platinum-resistant ovarian cancer (“PROC”). |
| • | Rapidly developing taletrectinib for the treatment of advanced ROS1-positive NSCLC and seeking global regulatory approvals. |
| • | Advancing the ongoing clinical development of our other clinical-stage product candidates: safusidenib, NUV-868 and NUV-1511. |
| • | Building a fully integrated biotechnology company that includes research, development, manufacturing, and commercial capabilities. |
| • | Leveraging our deep insights in medicinal chemistry to pursue innovative clinical candidates and our business development expertise to identify and in-license or acquire additional promising drug candidates |
| • | Identifying strategic opportunities to accelerate development timelines and maximize the value of our pipeline. |
| • | 90.6% of patients’ tumors shrank following treatment with taletrectinib (cORR). |
| • | Brain tumors shrank in 87.5% of taletrectinib-treated patients who had measurable central nervous system tumors (n=8; intracranial cORR). |
| • | After median follow-up of 23.5 months, median duration of response and median progression-free survival have not yet been reached. |
| • | At two years, 78.6% of patients who responded following treatment with taletrectinib were still responding, and 70.5% of patients were still progression-free. |
| • | 51.5% of patients’ tumors shrank following treatment with taletrectinib (cORR). |
| • | Brain tumors shrank in 73.3% of taletrectinib-treated patients who had measurable central nervous system tumors (n=15; intracranial cORR). |
| • | Tumors shrank in 66.7% of taletrectinib-treated patients with G2032R mutations (n=12). |
| • | After median follow-up of 9.7 months, median duration of response was 10.6 months and median progression-free survival was 7.6 months. Median duration of response and progression free survival data are still maturing and may change as results from future data cut-off dates are disclosed. |
| • | At nine months, 69.8% of patients who responded following treatment with taletrectinib were still responding, and 47.4% were still progression-free. |
| • | 92.0% of patients’ tumors shrank following treatment with taletrectinib (cORR). |
| • | Brain tumors shrank in 80.0% of taletrectinib-treated patients who had measurable central nervous system tumors (n=5; intracranial cORR). |
| • | After median follow-up of 8.1 months, median duration of response and median progression-free survival were not reached. |
| • | At 12 months, 89.5% of patients who responded following treatment with taletrectinib were still responding, and 82.3% were still progression-free. |
| • | 57.1% of patients’ tumors shrank following treatment with taletrectinib (cORR). |
| • | Brain tumors shrank in 62.5% of taletrectinib-treated patients who had measurable central nervous system tumors (n=8; intracranial cORR). |
| • | After median follow-up of 11.7 months, median duration of response was not reached and median progression-free survival was 11.7 months. Median progression free survival data are still maturing and may change as results from future data cut-off dates are disclosed. |
| • | At 12 months, 81.5% of patients who responded following treatment with taletrectinib were still responding, and 42.6% were still progression-free. |
| • | Tissue-selective targeting improves therapeutic index vs. untargeted warhead; |
| • | Oral or IV delivery; |
| • | Binds intracellular and cell membrane targets; |
| • | Highly cell permeable; and |
| • | Simpler and less expensive to manufacture than antibody-drug conjugates |
| • | completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with Good Laboratory Practice (“GLP”); |
| • | submission to the FDA of an IND, which must become effective before human clinical trials may begin; |
| • | approval by an independent institutional review board (“IRB”) or ethics committee at each clinical trial site before each trial may be initiated; |
| • | performance of adequate and well controlled human clinical trials in accordance with applicable IND regulations, current Good Clinical Practice (“GCP”) requirements and other clinical trial-related protocols and regulations to establish substantial evidence of the safety and efficacy of the investigational product for each proposed indication; |
| • | submission to the FDA of an NDA after completion of all pivotal trials; |
| • | determination by the FDA within 60 days of its receipt of an NDA to accept the filing for substantive review; |
| • | satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug will be produced to assess compliance with current Good Manufacturing Practices (“cGMP”) requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; |
| • | potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA filing to assess compliance with GCP; |
| • | FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the U.S.; and |
| • | compliance with any post-approval requirements, including the potential requirement to implement a risk evaluation and mitigation strategy (“REMS”) and the potential requirement to conduct post-approval studies. |
| • | Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, tolerability and safety of the drug. |
| • | Phase 2 clinical trials involve studies in disease-affected patients to determine the dose and dosing schedule required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted. |
| • | Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. These trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. |
| • | restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls; |
| • | fines, warning letters, or holds on post-approval clinical studies; |
| • | refusal of the FDA to approve pending applications or supplements to approved applications; |
| • | suspension or revocation of product approvals; |
| • | product seizure or detention; |
| • | refusal to permit the import or export of products; and |
| • | injunctions or the imposition of civil or criminal penalties. |
| • | The federal Anti-Kickback Statute, which makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Moreover, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (collectively, the “Affordable Care Act”) provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. |
| • | The federal false claims laws, including the civil False Claims Act that can be enforced by private citizens through civil whistleblower or qui tam |
| • | The federal Health Insurance Portability and Accountability Act (“HIPAA”) prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. |
| • | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their implementing regulations also impose obligations on covered entities such as health insurance plans, healthcare clearinghouses, and certain healthcare providers and their respective business associates and their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. |
| • | The federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to the Centers for Medicare & Medicaid Services (“CMS”) information regarding certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals as well as information regarding ownership and investment interests held by physicians and their immediate family members. |
| • | Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, state laws that require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and require the registration of their sales representatives, state laws that require biotechnology companies to report information on the pricing of certain drug products, and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
Item 9.01. |
Financial Statements and Exhibits. |
| Nuvation Bio Inc. | ||||||
| Date: June 20, 2024 | By: | /s/ David Hung, M.D. | ||||
| Name: | David Hung, M.D. | |||||
| Title: | Chief Executive Officer | |||||
Exhibit 10.1
In accordance with Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted because the information (i) is not material and (ii) would likely cause competitive harm to Nuvation Bio if publicly disclosed. The omissions have been indicated by “[**Redacted**]”.
COLLABORATION AND LICENSE AGREEMENT
BETWEEN
ANHEART THERAPEUTICS (HANGZHOU) CO., LTD.
葆元生物医药科技（杭州）有限公司
AND
INNOVENT BIOLOGICS (SUZHOU) CO. LTD.,
(信达生物制药（苏州）有限公司)
May 31, 2021
Execution Version
COLLABORATION AND LICENSE AGREEMENT
This Collaboration and License Agreement (this “Agreement”), dated May 31, 2021 (the “Effective Date”), is entered into by and between: AnHeart Therapeutics (Hangzhou) Co., Ltd.(葆元生物医药科技（杭州）有限公司), a Chinese corporation having an office and place of business at Room 423, Building No. 1, Heda Pharma Town, No. 291 Fucheng Road, Xiasha, Qiantangxin District, Hangzhou, Zhejiang 310018 China (“AnHeart”); and Innovent Biologics (Suzhou) Co. Ltd., (信达生物制药（苏州）有限公司) a Chinese corporation having an office and place of business at 168 Dongping Street, Suzhou Industrial Park, Suzhou Jiangsu 215123, China (“Innovent”). AnHeart and Innovent are each referred to herein by name, individually as a “Party”, or collectively as the “Parties”.
RECITALS:
1. AnHeart controls Patents (hereinafter defined) and Know-how (hereinafter defined) in existence as of the Effective Date relating to the Licensed Compound (hereinafter defined), to which AnHeart exclusively in-licensed the rights in the Territory from AnHeart Therapeutics Inc. (“AnHeart US”), which is a wholly-owned subsidiary of AnHeart, pursuant to the Technology Sublicense Agreement between AnHeart US and AnBio Biopharmaceuticals (Hangzhou) Co. Ltd. (then English name of AnHeart Therapeutics (Hangzhou) Co., Ltd., both refer to 葆元生物医药科技（杭州）有限公司) dated January 14, 2019 (“Technology License Agreement”)AnHeart US exclusively in-licensed the global rights from Daiichi Sankyo Company Ltd. (“DS” or “Daiichi Sankyo”) pursuant to a license agreement between AnHeart Inc. and DS dated December 7, 2018, as amended (the “DS License Agreement”);
2. Innovent desires to commercialize products containing the Licensed Compound for therapeutic uses in humans for cancer treatment in the Territory; and
3. AnHeart desires to grant to Innovent, and Innovent desires to obtain from AnHeart, an exclusive sublicense to commercialize the Licensed Compound in the Territory on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements and covenants set forth herein, the Parties agree as follows:
1. Definitions.
As used in this Agreement, each capitalized term used herein shall have the meaning set forth below unless context clearly and unambiguously dictates otherwise.
1.1. “Affiliate” means, with respect to a legal person or entity, any other legal person or entity that controls, is controlled by or is under common control with such legal person or entity, for so long as such control exists. For purposes of this definition only, “control” shall mean: (a) beneficial ownership (direct or indirect) of more than fifty percent (50%) of the shares of the person entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, in the election of the corresponding managing authority); or (b) the de facto ability to control or direct the management of such person or entity.
1.2. “Applicable Law” means any law, statute, ordinance, code, rule or regulation that has been enacted by a government authority (including, without limitation, any Regulatory Authority) and is in force as of the Effective Date or comes into force during the Agreement Term, in each case to the extent that the same is applicable to the performance by the Parties of their respective obligations under this Agreement.
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1.3. “AnHeart Technology” means the AnHeart Patents and AnHeart Know-how.
1.3.1. “AnHeart Know-how” means Know-how related to the Licensed Compound that is owned or Controlled by AnHeart as of the Effective Date or later developed solely by AnHeart during the Term.
1.3.2. “AnHeart Patents” means Patents owned or Controlled by AnHeart as of the Effective Date or later developed solely by AnHeart during the Term with a Valid Claim Covering the Licensed Compound or a Product, or that are otherwise reasonably necessary or useful for researching, developing, manufacturing, using, selling, offering for sale, or importing the Licensed Compound or a Product, or that would otherwise Cover manufacturing, using, selling, offering for sale, or importing a Product. The AnHeart Patent as of the Effective Date in the Territory is set forth in Exhibit A.
1.4. “Anti-bribery Requirement” means any applicable: 1) the People’s Republic of China (“PRC”), and 2) foreign anti-bribery and anti-corruption laws, regulations, rules and/or punishment.
1.5. “Business Day” means any day other than a Saturday, a Sunday, or a day on which commercial banks located in the United States, China or Japan are authorized or required by law to remain closed.
1.6. “Calendar Quarter” means each period of three (3) consecutive calendar months, ending March 31, June 30, September 30, and December 31.
1.7. “Calendar Year” means the period of time beginning on January 1 and ending December 31, except for the first year which shall begin on the Effective Date and end on December 31 of the Calendar Year in which the Effective Date is encompassed and the last year of the shall begin on January 1 of the last Calendar Year of the Agreement Term and end on the effective date of the expiration or termination of this Agreement.
1.8. “Change of Control” means, with respect to a Party: (a) the acquisition by one or more Third Party(ies) of beneficial ownership of more than fifty percent (50%) of the then outstanding common shares or voting power of such Party, other than acquisitions by employees under benefit plan(s) sponsored or maintained by such Party; (b) the consummation of a business combination involving such Party, unless, following such business combination, the stockholders of such Party immediately prior to such business combination beneficially own directly or indirectly more than fifty percent (50%) of the then outstanding common shares or voting power of the entity resulting from such business combination; or (c) the sale of all or substantially all of such Party’s assets or business relating to the subject matter of this Agreement.
1.9. “Clinical POC” means the clinical proof of concept of a compound through a clinical trial which is reasonably designed to provide at least some initial evidence of efficacy of the relevant compound in a small number of patients and results in some clinical data, according to which a sponsor would reasonably decide to continue the Development of the compound in an enlarged or a separate clinical trial.
1.10. “COGS” means the aggregate direct and indirect costs attributable to the production of the Product(s) by AnHeart and/or its Affiliates under this Agreement, including without limitation transportation costs and transportation insurance regarding the delivery of the Product(s) from contract development and manufacture organizations (CDMO) to AnHeart (if applicable), cost for quality management, service fees paid to CDMO and cost of the raw materials. COGS will be updated by [**Redacted**] following the [**Redacted**]. For the avoidance of doubt, the [**Redacted**].
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1.11. “Combination Product(s)” means any pharmaceutical product which (a) as a single formulation, comprises the Product and one or more additional active pharmaceutical or biologic ingredients approved by a Regulatory Authority for and suitable for sale as a distinct product, or (b) in a single package or container and intended for coordinated use and sold for a single price, comprises the Product and one or more additional active pharmaceutical or biologic ingredients approved by a Regulatory Authority.
1.12. “Commercially Reasonable Efforts” means, with respect to particular objectives or tasks of a Party under this Agreement, that level of efforts and resources required to carry out such particular objectives or tasks in an active and sustained manner, consistent with the general practice followed by such Party (which in any event shall not be less than the efforts used by a reasonable international biopharmaceutical company or a pharmaceutical company, in each case, that is of comparable size and has comparable resources to such Party) in the exercise of its reasonable business discretion relating to other pharmaceutical products owned by it, or to which it has exclusive rights, which are of similar market potential and at a similar stage in their development or product life, [**Redacted**]. For clarity, Commercially Reasonable Efforts requires, at a minimum in relation to a task or objective of a Party under this Agreement, that such Party: [**Redacted**].
1.13. “Commercialization” or “Commercialize” means any activities associated with using, marketing, promotion, distributing, offering for sale or selling and importing products following or in expectation of receipt of Marketing Approval of Product(s) and shall include activities required to fulfill ongoing regulatory obligations.
1.14. “Competing Molecules” means drug candidates other than Licensed Compound which: [**Redacted**].
1.15. “Confidential Information” has the meaning provided in Section 7.1.
1.16. “Control”, when used in reference to intellectual property, means possession of the ability (whether by license or ownership, or an Affiliate having possession by license or ownership) to grant a license or sublicense, of or within the scope set forth in this Agreement, without violating the terms of any written agreement with any Third Party.
1.17. “Cover”, “Covering” or “Covered” means, with respect to a Patent, that, but for ownership by or a license granted to a Party under a Valid Claim included in such Patent, the practice by such Party of an invention claimed in such Patent would infringe such Valid Claim (or in the case of a Patent that is a patent application, would infringe a Valid Claim in such patent application if it were to issue as a patent).
1.18. “CRO” means a contract research organization, which is a company that provides support to the pharmaceutical, biotechnology, and medical device industries in the form of research services outsourced on a contract basis.
1.19. “Development” or “Develop” means non-clinical, clinical and regulatory activities with respect to the Licensed Compound or the Product(s) (including investigator-initiated trial (“IIT”)) and the submission of filings with applicable Regulatory Authorities to seek Marketing Approval), including undertaking any clinical studies necessary to establish reimbursement and including clinical trials conducted after Marketing Approval in order to (a) maintain the existing Marketing Approvals; or (b) convert conditional approvals into unconditional or full approvals where necessary.
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1.20. “DMF” means a Drug Master File as more fully defined in 21 C.F.R. §314.420 in the United States or similar documents filed with a Regulatory Authority in another jurisdiction.
1.21. “Field” means all human therapeutic uses of the Licensed Compound that derives therapeutic effect from ROS proto-oncogene 1 (ROS1), the neurotrophic receptor tyrosine kinase (NTRK), and/or [**Redacted**] pathways for the diagnosis, prevention, or treatment of any indication.
1.22. “First Commercial Sale” means the date on which the Product is first shipped by Innovent, or its Affiliate to Third Parties for commercial sale in the Territory after all required Marketing Approvals have been granted, or such sale is otherwise permitted, by the Regulatory Authority in the Territory, excluding (a) any sale to an Affiliate or sublicensee of Innovent, unless such Affiliate or sublicensee is the last Person in the distribution chain of the Product; or (b) any use of such Product in clinical trials or non-clinical development activities with respect to such Product by or on behalf of a Party, or disposal or transfer of such Product for a bona fide charitable purpose, compassionate use, or samples if no monetary consideration is received for such use or transfer.
1.23. “Governmental Authority” means any agency, department, authority, body, institution or other instrumentality of any national, state, country, city or other political subdivision.
1.24. “IND” means, in the United States, an effective Notice of a Claimed Investigational New Drug Application filed with the FDA as more fully defined in 21 C.F.R. §312.3, and, with respect to every other region in the Territory, the equivalent application (i.e., a filing that must be made prior to commencing clinical testing of Product in humans) for such country, filed with the applicable Regulatory Authority in such region.
1.25. “Invention” means any new or useful process, machine, manufacture, or composition of matter relating to or comprising the Licensed Compound or a Product, and any improvement, enhancement, modification, or derivative work to any AnHeart Technology, that is conceived or first reduced to practice or first demonstrated to have utility during the Term in connection with the Parties’ activities to develop, manufacture and commercialize the Licensed Compound and Product(s) worldwide.
1.26. “Joint Technology” means the Joint Patents and Joint Know-how.
1.26.1. “Joint Know-how” means Know-how, including any Invention, that is related to the Licensed Compound and conceived of discovered, developed, made and/or reduced to practice jointly by or on behalf of employees, agents, or consultants of Innovent or its Affiliates, on the one hand, and employees, agents, or consultants of AnHeart, its Affiliates, or its Sublicensees, on the other hand.
1.26.2. “Joint Patents” means Patents with a Valid Claim Covering an Invention that is related to the Licensed Compound or a Product, or that is otherwise reasonably necessary or useful for researching, developing, manufacturing, using, selling, offering for sale, or importing the Licensed Compound or a Product, or that would otherwise Cover manufacturing, using, selling, offering for sale, or importing a Product, that is conceived of discovered, developed, made and/or reduced to practice jointly by or on behalf of employees, agents, or consultants of Innovent or its Affiliates, on the one hand, and employees, agents, or consultants of AnHeart, its Affiliates, or its Sublicensees, on the other hand.
1.27. “Know-how” means a Party’s confidential and/or proprietary technical or business information, including without limitations (a) any proprietary scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including databases, safety information, practices, methods, techniques, specifications, instructions, processes, formulations, formulae, methods, protocols, expertise, knowledge, know-how, inventions, discoveries, improvements, trade secrets, skill, experience, test data including pharmacological, pharmaceutical, physical, medicinal
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chemistry, biological, chemical, biochemical, toxicological and clinical test data (including patient report forms, preliminary and final investigators’ reports, statistical analyses, expert opinions and reports, safety and other electronic databases, Regulatory Filings and communications, and the like), analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information and descriptions, results and data and (b) any proprietary biological, chemical or physical materials, regardless that exists as of the Effective Date or is discovered, developed or acquired during the Term, and whether patentable or unpatentable. Know-How does not include any Patents.
1.28. “Licensed Compound” means the compound claimed in the AnHeart Patent set forth in Exhibit A, which is identified by the internal AnHeart compound code AB-106 or INN name taletrectinib with the molecular structure set forth in Exhibit A, and any salts, hydrates, solvates, esters, and stereoisomers of such Licensed Compound.
1.29. “MAH” means the holder of a Marketing Approval.
1.30. “Marketing Approval” means, with respect to a Product, all approvals, licenses, registrations, or authorizations of any Regulatory Authority, necessary for the manufacturing, use, storage, import, transport, and sale of such Product in the Territory, but excluding pricing or reimbursement approval where governmental approval is required for pricing, or for the Product to be reimbursed by national health insurance.
1.31. “NDA” means a New Drug Application with the regulatory authority, filed with the Regulatory Authority in the Territory.
1.32. “Net Sales” means the gross amounts invoiced for Product sold by Innovent or its Affiliates (each a “Selling Party”) in finished product form, packaged and labeled for sale in arm’s length transactions to Third Parties, less the following deductions from such gross amounts: (a) normal and customary trade, cash and other discounts and allowances actually allowed by the Selling Party and taken by the customer; (b) credits, price adjustments or allowances actually granted to the customer for damaged goods, returns or rejections of a Product; (c) sales taxes or similar taxes, including duties or other governmental charges imposed on the sale of a Product (including value added taxes or other governmental charges, but excluding any income taxes), to the extent the Selling Party is not otherwise entitled to a credit or a refund for such taxes, duties or payments made; (d) chargeback payments, rebates, fees, and other adjustments, including those granted on price adjustments, billing errors, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups, health insurance carriers or other institutions, including those paid in connection with such sales to any governmental entity; and (e) any invoiced freight, shipping, insurance and other transportation charges. Net Sales does not include samples or Product for compassionate use; for the avoidance of doubt, the Product for compassionate use shall include Products donated under any PAP. Net Sales, as set forth in this definition, will be calculated by applying the Selling Party’s standard accounting practices, in accordance with PRC Generally Accepted Accounting Principles or International Financial Reporting Standards, or other standards duly adopted and used by the Selling Party, as consistently applied in its respective audited financial statements. In the event that the Product is sold as part of a Combination Product, the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product by the fraction, A / (A+B) where A is the weighted average sale price of the Product when sold separately in finished form, and B is the weighted average sale price of the other active pharmaceutical or biologic ingredient(s) sold separately in finished form. In the event that the weighted average sale price of either the Product or the other active pharmaceutical or biologic ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by the Parties through negotiation in good faith.
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1.32.1. Sales between Innovent and its Affiliates shall be excluded from the computation of Net Sales if such sales are not intended for end use, but Net Sales will include the subsequent final sales to Third Parties by Innovent or its Affiliates.
1.32.2. If Innovent, or its Affiliate sells or transfers units of a Product in conjunction with any other product, and in so doing sells or transfers such units for an amount less than the sum of the weighted average selling price for such units of such Product sold separately, for the purposes of determining Net Sales from such sales or transfers, Net Sales shall be based upon the price of such Product sold to a similar size customer ordering a similar volume of units of the Product under similar terms and conditions, but sold separately.
1.33. “Innovent Technology” means the Innovent Patents and Innovent Know-how.
1.33.1. “Innovent Know-how” means Know-how, including any Invention, that is related solely to the Licensed Compounds and conceived of discovered, developed, made and/or reduced to practice by or on behalf of employees, agents, or consultants of Innovent or its Affiliates during the Term. For the avoidance of any doubt, Innovent Know-how does not include any Know-how, including any Innovent Patents (defined below) as of the Effective Date.
1.33.2. “Innovent Patents” means Patents with a Valid Claim Covering an Invention that is related to the Licensed Compounds or a Product, or that is otherwise reasonably necessary or useful for researching, developing, manufacturing, using, selling, offering for sale, or importing the Licensed Compounds or a Product, or that would otherwise Cover manufacturing, using, selling, offering for sale, or importing a Product, that is conceived of discovered, developed, made and/or reduced to practice by or on behalf of employees, agents, or consultants of Innovent or its Affiliates during the Term. For the avoidance of any doubt, there are no Innovent Patents as of the Effective Date.
1.34. “Patents” means any of the following: (a) any issued and unexpired patent, including without limitation, any inventor’s certificate, substitution, extension, re-registration, confirmation, reissue, re-examination, re-validation, renewal or any similar governmental grant for protection of inventions (including, but not limited to, patent term extensions, pediatric exclusivity or supplementary protection certificate); (b) any patent application including, without limitation, any continuation, divisional, substitution, continuation-in-part, provisional applications and converted provisional applications; and (c) all foreign counterparts of any of the foregoing.
1.35. “Registration Trial” means a [**Redacted**] clinical trial which could be sufficient to support Regulatory Filings [**Redacted**]
1.36. “Product(s)” means any pharmaceutical preparations containing the Licensed Compound as an active ingredient.
1.37. “Regulatory Authority” means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau, or other governmental entity with authority over the research, development, manufacture, commercialization, or other use (including the granting of Marketing Approvals) of the Product(s) in any region in the Territory.
1.38. “Regulatory Filings” means, collectively, all INDs for the Licensed Compound, the DMF, any application for Marketing Approval, Marketing Approvals, and other filings, such as annual reports, required by any Regulatory Authority in any region in the Territory.
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1.39. “Subject Study Phase” means all pre-data collection tasks carried out by a CRO, including, without limitation, site and investigator selection, finance management (including execution of a site contract), supporting of EC/IRB submission, investigator meeting, study initiation activities, interim monitoring activities, pharmacovigilance, and study close-out activities.
1.40. “Sublicense” means an agreement into which Innovent enters with a third party that is not an Innovent Affiliate for the purpose of (a) granting certain rights under the AnHeart Technology, including without limitation AnHeart Patent set forth in Exhibit A; (b) granting an option to certain rights set forth in Section 2.4; or (c) forbearing the exercise of any rights, granted to Innovent under this Agreement. “Sublicensee” means a third party with whom Innovent enters into a Sublicense.
1.41. “Term” has the meaning provided in Section 10.1
1.42. “Territory” means the People’s Republic of China (mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region) and Taiwan (each may be referred to as a region for purpose of this Agreement).
1.43. “Third Party” means any legal person or entity other than a Party or an Affiliate of a Party.
1.44. “Upstream License Agreements” means (a) the DS License Agreement and its amendments, [**Redacted**], and (c) any other contract or agreement between AnHeart (or any of its Affiliates, as applicable) and any Third Party pursuant to which AnHeart acquires Control of any AnHeart Technology for purposes of this Agreement.
1.45. “Valid Claim” means any claim of an [**Redacted**].
2. License Grants.
2.1. Scope of Grant. In consideration of and subject to the terms and conditions of this Agreement, AnHeart grants to Innovent and its Affiliates a sub-licensable, royalty-bearing, exclusive right and sublicense in the Field in the Territory under the AnHeart Technology to use, offer for sale, sell, market, distribute, and import the Licensed Compound and Product(s). Notwithstanding the foregoing, the Parties acknowledge and agree that [**Redacted**].
2.2. Sublicense. After [**Redacted**], Innovent may, upon AnHeart consent not to be unreasonably withheld or delayed, grant Sublicenses of its rights under this Agreement; provided that Innovent shall ensure that its Sublicense agreements incorporate sufficient terms and conditions which will enable Innovent to comply with this Agreement. Innovent shall be liable to AnHeart for any material breach of the terms of this Agreement by a Sublicensee without regard to whether AnHeart consents to such Sublicensee.
2.3. No Other Rights. It is expressly understood that Innovent is not granted any rights to the AnHeart Technology, except as expressly provided in paragraph 2.1.
2.4. Option to License [**Redacted**] and ROFN.
2.4.1. Option to License [**Redacted**]. In consideration of [**Redacted**], the Parties have agreed on the key terms of the option as set forth in Exhibit B which is binding to the Parties pursuant to which Innovent may have the option to license [**Redacted**] from AnHeart (the “Option”). AnHeart shall promptly notify Innovent in writing upon [**Redacted**]. Within [**Redacted**] Business Days after Innovent receives such written notification (“Option Exercise Period”), Innovent shall have the right to exercise the Option for [**Redacted**] by providing written notice to AnHeart (“Option Exercise Notice”) and AnHeart must exclusively negotiate with Innovent in good faith for [**Redacted**] days after its receipt of the Option Exercise Notice to execute the definitive agreement reflecting the key terms agreed upon (the “Option DA Negotiation Period”). The Option expires at the earliest of [**Redacted**].
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2.4.2. ROFR of [**Redacted**]. Prior to achieving [**Redacted**] of [**Redacted**] for any indication anywhere in the world, Innovent shall have the right of first refusal (“ROFR”) exercisable at any time. In the event AnHeart intends to seek a Third Party partner in Development of [**Redacted**] [**Redacted**], AnHeart must promptly send a written notice to Innovent to notify Innovent of the intention and the relevant terms and conditions offered by such Third Party partner accepted by AnHeart (the “ROFR Notice”). For the avoidance of doubt, the notice shall contain the complete data package of updated information that is the same information shared with the Third Party partner. If Innovent elects to exercise the ROFR, it must notify AnHeart in writing (“ROFR Exercise Notice”) within [**Redacted**] days] (“ROFR Exercise Period”) after receipt of the ROFR Notice, and the Parties shall execute the definitive agreement reflecting the terms and conditions as set forth in the ROFR Notice within [**Redacted**] days] (“ROFR Execution Period”) following the expiry of the ROFR Exercise Period. The ROFR expires at the earliest of [**Redacted**].
2.4.3. ROFN of [**Redacted**]. If Option expires for any reason and AnHeart still controls the commercial rights of [**Redacted**] in the Territory [**Redacted**] months after the expiration of the Option, Innovent shall have the Right of First Negotiation (“ROFN”) for the AnHeart’s [**Redacted**] at any time AnHeart seeks a Third Party commercialization partner for [**Redacted**] in a region in the Territory (“ROFN Period”). In the event AnHeart intends to seek a Third Party commercial partner for [**Redacted**] solely for such region in the Territory, AnHeart must promptly send a written notice to Innovent to notify Innovent of the intention (the “ROFN Notice”). If Innovent elects to exercise the ROFN, it must notify AnHeart in writing (“ROFN Exercise Notice”) within [**Redacted**] Business Days after receipt of the ROFN Notice (“ROFN Exercise Period”). AnHeart must exclusively negotiate with Innovent in good faith for [**Redacted**] days after its receipt of the ROFN Exercise Notice to agree on the key terms for the commercialization agreement (“ROFN TS Negotiation Period”). If the key terms are agreed upon during the ROFN TS Negotiation Period, the Parties have another [**Redacted**] days to negotiate and execute the definitive agreement reflecting the key terms agreed upon (the “ROFN DA Negotiation Period”). In the earliest event [**Redacted**].
3. Development and Commercialization.
3.1. Development. AnHeart and all of its Affiliates will use Commercially Reasonable Efforts to develop the Licensed Compound and Product(s) for [**Redacted**] indications, [**Redacted**], if such assistance request is unreasonable in the opinion of Innovent, Innovent may exercise its discretion to provide such assistance at AnHeart’s sole cost and expense. [**Redacted**]. For the avoidance of doubt, AnHeart shall be responsible for [**Redacted**].
3.1.1. Innovent’s [**Redacted**] Co-Development rights. Innovent may carry out [**Redacted**]. Innovent shall also have right to co-Develop the Licensed Compound and Product(s) in [**Redacted**].
3.2. Regulatory Submissions.
3.2.1. AnHeart and all of its Affiliates will use Commercially Reasonable Efforts to prepare and file with the applicable Regulatory Authorities those Regulatory Filings to obtain Marketing Approvals of the Licensed Compound and Product(s) for [**Redacted**] indications, [**Redacted**], , [**Redacted**]. Innovent and all of its Affiliates shall, at its own cost and expense, reasonably assist AnHeart on strategic planning related to regulatory interactions and filings in mainland China. [**Redacted**]. Innovent shall have sole rights to submit Regulatory Filings in Taiwan, Hong Kong and Macau at its own cost and expense.
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3.2.2. To the extent not prohibited by any Applicable Law or by Regulatory Authority, AnHeart shall promptly, but no later than [**Redacted**] Business Days after the receipt, provide Innovent with an electronic copy of material Regulatory Materials and material correspondence with Regulatory Authorities received from Regulatory Authorities materially related to Licensed Compound and Product(s).
3.2.3. AnHeart shall provide Innovent with drafts of any material documents or correspondence reasonably in advance before submitting to any relevant Governmental Authority in mainland China that pertains to the Licensed Compound and/or Product. AnHeart will reasonably consult in advance with Innovent with respect to any such material Regulatory Filings to be made by AnHeart and shall reasonably consider and incorporate Innovent’s comments and suggestions in and not make any such material Regulatory Filing in mainland China without the prior written consent of Innovent, which will not be unreasonably withheld or delayed but in no occasion later than [**Redacted**] Business Days after being notified of such planned Regulatory Filings in mainland China. In addition, AnHeart shall provide Innovent with reasonable advance notice of any meeting or conference call with any relevant Governmental Authority relating to any such material Regulatory Filing for the Product(s) in mainland China, and Innovent shall have the right to participate in any such meeting or conference call as well as have the right to participate in all preparation, internal caucus, and debriefing sessions related to such meetings or conference calls to the extent permitted by Applicable Laws. AnHeart shall furnish Innovent with copies of all material documents or correspondence AnHeart has with or receives from any relevant Governmental Authority, and reports concerning conversations or meetings with any relevant Governmental Authority, in each case materially related to the Product(s) in the Territory (including without limitation any minutes from a meeting with respect thereto) within a reasonable time. If Innovent is in charge of certain Regulatory Filings with any relevant Regulatory Authority, Innovent shall have the same rights and obligations as AnHeart has under Sections 3.2.2 and 3.2.3.
3.2.4. If the Parties decide the MAH shall be transferred to Innovent, AnHeart shall reasonably provide cooperation and assistance for the transfer, [**Redacted**].
3.3. Compliance. Both Parties shall, and shall cause its Affiliates to, and shall contractually obligate its subcontractors to, conduct all activities under this Agreement in compliance in all material respects with all applicable legal requirements and regulatory standards including, for the avoidance of doubt, Good Laboratory Practice (“GLP”), Good Clinical Practice (“GCP”) and Good Manufacturing Practice (“GMP”), where necessary. The Parties acknowledge that certain of these activities may not require that GLP, GCP or GMP standards be followed and therefore such activities need not be performed under such guidelines.
3.4. Pharmacovigilance Agreement. In the case that either Party, its Affiliate, or Sublicensee obtains the information concerning pharmacovigilance data (e.g., safety information regarding case reports, a product labeling change, safety measures and others) for any Product(s), such Party shall notify the other Party (and, in respect of AnHeart, its Affiliate, or Sublicensee) of such information. The details of this notification procedure shall be agreed separately from this Agreement by a pharmacovigilance
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agreement which shall be executed between the parties within [**Redacted**] days after the Effective Date. Such pharmacovigilance agreement will include (a) roles and responsibilities related to safety management of the Product for Development and Commercialization phases, (b) safety data exchange between the Parties, (c) safety surveillance and signal detection, (d) risk management, (e) timely reporting by each Party to the other Party of (i) Adverse Events related to the Product and Adverse Event handling, and (ii) any negative interactions with Regulatory Authorities with respect to the Product. Responsibilities and data exchange will be allocated and governed by each Party’s regulatory responsibilities for the Products in accordance with Applicable Law.
3.5. Commercialization.
3.5.1. Subject to the terms and conditions of this Agreement, Innovent shall have the sole responsibility and the exclusive authority to Commercialize Products throughout the Territory. Innovent, either directly or through its Affiliates shall use Commercially Reasonable Efforts to launch the Product(s) in the Field as soon as reasonably practicable after receipt of the Marketing Approval therefor in each of the regions within the Territory, and thereafter to market, promote and sell Product(s) in the Field in such regions. Innovent shall be responsible for all of its costs and expenses in connection with the Commercialization of the Product(s) in the Territory. Upon request, AnHeart and its Affiliates shall use Commercially Reasonable Efforts to assist Innovent and its Affiliates in the commercialization efforts at Innovent’s sole and own cost and expenses.
3.5.2. Each Party shall provide the other Party a reasonable opportunity to review any [**Redacted**].
3.5.3. During the Term of this Agreement, the Parties agree that Innovent shall cause the distributor to participate in the tendering process for the Product(s) of such provinces or areas in the Territory as decided by Innovent, and AnHeart will offer administrative assistance to Innovent in connection with the tendering process in the Territory to the extent as required and permissible by Applicable Laws or reasonably requested by Innovent. Innovent shall fulfil, or assist AnHeart to fulfil, as the case may be, the supply obligation of all tendering commitments.
3.5.4. Innovent shall have the exclusive rights to determine the pricing and drug reimbursement of the Product(s) in the Territory, [**Redacted**]Drug Lists in mainland China. AnHeart will offer administrative assistance to Innovent in connection with the enlisting in the Territory to the extent as required and permissible by Applicable Laws per Innovent’s reasonable requests.
3.5.5. The Parties will further negotiate in good faith to revise the relevant distribution model on Commercialization of the Product(s) in [**Redacted**].
3.6. Manufacturing.
3.6.1. AnHeart will be responsible for manufacturing of all of the Licensed Compound and Product(s) that are necessary for further development and commercialization of such Licensed Compound and Products(s). Manufacturing of the Licensed Compound and Product(s) may be done by AnHeart directly, or a contract manufacturer. AnHeart will supply the Licensed Compound and Products to Innovent for commercial sales.
3.6.2. Manufacturing Working Group. The Parties shall establish a Joint Manufacturing Working Group (the “Manufacturing Working Group”) under the JSC for the purpose of ensuring excellence in the execution of all manufacturing aspects of the Product(s) through the close collaboration of the representatives of the Parties as members of the Manufacturing Working Group. The Manufacturing Working Group shall have equal membership from each Party, with there being at least
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one (1) member from each Party. The Manufacturing Working Group shall have the authority to review and discuss all the manufacturing plans and any other relevant documents and oversee all the manufacturing activities, to the extent such plans, documents and activities are directly related to the Products to be delivered to Innovent, provided that Innovent shall have the right to provide comments to such plans, documents and activities to AnHeart, if AnHeart unreasonably refuses the comments, Innovent may submit the relevant matters to JSC for its decision.
3.6.3. AnHeart will be MAH and be responsible for maintaining the MAH status in the Territory. The [**Redacted**].
3.6.4. Supply Agreement. [**Redacted**], the Parties shall enter into and adopt a supply agreement (the “Supply Agreement”) to be negotiated in good faith. The Supply Agreement shall include customary supply terms, Product costs, forecast obligations, supply covenants and access to Manufacturing records and facilities, including the right for Innovent at its discretion to have a person in the plant at any Manufacturing site used by AnHeart during Manufacturing activities related to the Licensed Compound and/or Product. The Supply Agreement will be subject to and be consistent with the terms of this Agreement and in the event of any conflict between the terms of the Supply Agreement and this Agreement with respect to the Manufacture and supply of Product, the Supply Agreement shall specify such conflicts and the terms of the Supply Agreement will control. The Supply Agreement may be modified from time to time by mutual written agreement of the Parties. The [**Redacted**]. For the avoidance of doubt, the [**Redacted**]. However, the Parties may [**Redacted**].
3.6.5. Quality Agreement. Within [**Redacted**] days after the submission of the first NDA to the NMPA for the Product, the Parties shall enter into a Quality Agreement setting forth the responsibilities and procedures associated with the Licensed Compound and/or the Product regarding recalls, changes, deviations, complaint handling, quality-specific audit rights with respect to compliance with cGMP, and other quality-related matters. The Quality Agreement will be subject to and be consistent with the terms of this Agreement; provided that, to the extent there is any conflict between the terms and conditions of such Quality Agreement and this Agreement with respect to the matters covered by the Quality Agreement, the Quality Agreement shall specify such conflicts and its terms shall control.
3.7. Competing Programs.
3.7.1 Competing Molecules. During the Term, either Party or their respective Affiliates shall not develop or commercialize any Competing Molecules in the Territory without consent by both Parties.
3.7.2 Acquired Molecules. If during the Term, as a result of a merger or other transaction, either Party acquires, or is acquired by a Third Party that is developing and/or distributing, marketing, or selling, either on its own or through an Affiliate or licensee, a product that contains Competing Molecules, the surviving entity [**Redacted**] such Competing Molecules within [**Redacted**] calendar days after the acquisition transaction is completed.
3.7.3 Confidential Information. During and after the Term, Innovent and its Affiliates shall not use any AnHeart Technology or any Confidential Information received form AnHeart for any purpose, including to research, develop, manufacture, or commercialize any molecule other than the Licensed Compound and Product, unless otherwise expressly allowed under the terms of this Agreement. During and after the Term, AnHeart and its Affiliates shall not use any Confidential Information of Innovent or its Affiliates for any purpose other than fulfilling its obligations under this Agreement, unless otherwise expressly allowed under the terms of this Agreement.
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4. Governance and Data Transfer.
4.1. Joint Steering Committee. The Parties shall establish a joint steering committee (“Joint Steering Committee”) and any other appropriate governing bodies within [**Redacted**] days after the Effective Date. In particular, the JSC shall be responsible for the following items as they relate to the Territory:
a) providing guidance, and reviewing research and development activities for the Product(s), including the regulatory strategy and manufacturing strategy for the Product(s);
b) executing and managing the Supply Agreement regarding the supply of the Product(s) under this Agreement;
c) review and discuss major issues in the Commercialization, including without limitation to reviewing and discussing on plan and strategy for Commercialization of the Product(s), reviewing marketing and promotional materials of the Product(s) in the Territory, reviewing the reports on Commercialization provided by Innovent, discussing on implementation of the antibribery and anti-corruption controls and passing rectification decisions whenever necessary;
d) forming additional subcommittees or working groups as necessary, and providing guidance and overseeing the activities of each such subcommittee or working group;
e) discussing and seeking alignment on any disputed issues submitted to the JSC by each subcommittee or working group established by the JSC;
f) providing a forum to obtain updates on the Development, commercialization, implementation, and ongoing operation of each Party’s compliance programs as it pertains to the Product(s) in the Territory;
g) coordinating post-termination transition activities pursuant to Article 10; and
h) reviewing, discussing and approving the publications or presentations pursuant to Section 7.4; and
i) any other matter as set forth hereunder which requires JSC review and/or determination.
4.2. The Joint Steering Committee and any other governing bodies shall be composed of equal number of representatives from each Party. Meetings of the Joint Steering Committee shall be scheduled from time to time by mutual agreement of the Parties or upon request of one Party but in no event less than once every [**Redacted**] months. Each Party would appoint an alliance manager (Director Level or above) responsible for day-to-day communications between the Parties. The alliance managers would also be observers in the Joint Steering Committee. If the Joint Steering Committee is not able to reach agreement on any material matter, it would be escalated to the companies’ senior representatives herein designated in the case of Innovent, [**Redacted**], in the case of AnHeart, [**Redacted**], or as later appointed. If the senior representatives are not able to reach agreement, Innovent shall have the casting vote if the matter relates solely to the Commercialization of the Product(s) in the Territory and [**Redacted**]. For any other matters, the Parties agree to discuss amicably and use Commercially Reasonable Efforts to reach an agreement.
4.3. Subcommittee(s). The JSC shall establish a Joint Development Committee (“JDC”) as subcommittee of the JSC as set forth in this Section 4.3. In addition, from time to time, the JSC may establish and dissolve, when no longer needed, such other subcommittee(s) of the JSC as the JSC may find necessary or desirable from time to time. Except as agreed by the Parties or otherwise provided in this Agreement, the membership and decision-making of such subcommittee(s) shall mirror the membership and decision-making of the JSC, except that, unless otherwise provided in this Agreement, if any subcommittee(s) is unable to decide or resolve unanimously any matter properly presented to it for action within [**Redacted**] Business Days, at the request of either Party, the issue shall be referred to the JSC for resolution. Such subcommittee(s) shall otherwise be constituted and have such responsibility as the JSC approves. Such subcommittees shall have no authority (a) to amend or interpret this Agreement, or (b) to determine whether or not a breach of this Agreement has occurred.
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4.3.1. Joint Development Committee. At the organizational meeting of the JSC, the Parties will form a JDC that will meet a minimum of at least [**Redacted**] times per Calendar Year in a manner and location as mutually agreed to: (i) select and approve [**Redacted**] for development in the Territory [**Redacted**]; and (ii) approve [**Redacted**] in the Territory for [**Redacted**] of the Licensed Compound and Product(s). The JDC will have equal membership from both Parties and there shall be at least two (2) members from each Party.
4.4. Data Transfer. AnHeart will transfer to Innovent or its Affiliates all the data or study reports or other information that are needed for Innovent’s fulfilment of its obligations under this Agreement (including the data as set forth in Exhibit C and any pre-clinical data). Such transfer of documents, reports, data, analytical reports, and any other information will be done through an electronic data room or other reasonable means, as determined by AnHeart after consulting with Innovent.
5. Payments.
5.1. Upfront Payment. Innovent will pay AnHeart a non-refundable, non-creditable payment of [**Redacted**] within [**Redacted**] Business Days after the Effective Date upon Innovent’s receipt of such invoice.
5.2. Research and Development Reimbursement. Upon the receipt of such invoices, Innovent will pay AnHeart a non-refundable, non-creditable payment of [**Redacted**] (the “R&D Reimbursement”), to be paid in three annual installments of [**Redacted**] US Dollars within [**Redacted**] Business Days after the Effective Date, [**Redacted**] US Dollars within [**Redacted**] Business Days after the first anniversary date, and [**Redacted**] US Dollars within [**Redacted**] Business Days after the second anniversary date of the Effective Date, respectively.
5.3. Development Milestones. Innovent will pay AnHeart the following development milestones within [**Redacted**] Business Days based upon events described in the below table for the Development made by AnHeart under this Agreement. In no case shall any milestone be paid more than once for a given event, regardless of the number of Products that subsequently achieves a given event and even if such Product is later used in a Combination Product. All amounts are shown in U.S. Dollars. The maximum total amount payable under this Section 5.3 shall not exceed [**Redacted**] U.S. Dollars [**Redacted**].
| Development Milestone |
Payment (USD $) | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
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| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
5.4. Sales Milestone Payments. Innovent will pay to AnHeart the following payments upon the first achievement of the following levels of cumulative annual Net Sales of all Product(s) by Innovent, its Affiliates, and its Sublicensees in the Territory, within [**Redacted**] business days after the close of the Calendar Quarter in which the documented event has been achieved, upon Innovent’s receipt of such invoice. In no case shall any milestone be paid more than once for a given event. All amounts are shown in U.S. Dollars. The maximum total amount payable under this Section 5.4 shall not exceed one hundred and five million U.S. Dollars (US$105,000,000).
| Annual Net Sales in |
Payment Amount (US $) | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
5.5. Royalty Payments.
5.5.1. Royalty Rates. Innovent will pay AnHeart royalties quarterly as calculated by multiplying the applicable royalty rate set forth below by the corresponding amount of incremental Net Sales of all Product(s) sold by Innovent and its Affiliates:
| [**Redacted**] |
[**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
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Royalties owed to AnHeart will be calculated for all Product(s) in aggregate subject to the methodology for calculating Net Sales of a Product when the Product is sold as part of a Combination Product as described in Section 1.28. For clarity, (a) the applicable royalty rate with respect to all Product(s) shall apply for the aggregate annual Net Sales within such tier if the aggregate Net Sales of all Product(s) throughout the Territory are within such applicable royalty tier (and not, for clarity, on a region-by-region basis) and (b) the above tiered royalties are calculated such that the higher tiered royalties are only paid after the annual Net Sales exceed the top threshold of the previous tier and then only on that portion of Net Sales that exceed the previous tier.
5.5.2. Term of Royalty Payments. On a Product-by-Product, region-by-region basis, Innovent’s obligation to pay royalties under Section 5.5.1 above shall be payable during the period of time commencing on the date of First Commercial Sale of such Product in such region in the Territory and continuing until the later to occur of: (a) the expiration of the last Valid Claim in an AnHeart Patent that Covers the Licensed Compound and/or Product(s) in such region in the Territory, and (b) ten (10) years from the First Commercial Sale of a Product containing a Licensed Compound in such region in the Territory (the “Term of Royalty Payment”). After the expiration of the royalty term in a region under this Section 5.5.2, Subject to Sections 5.5.3, 5.5.4 and 5.5.5, Innovent will have a fully paid-up license under the AnHeart Technology to make, use, sell, offer for sale, and import the Licensed Compound and the Product(s) for use in the Field in the region in the Territory.
5.5.3. Payments for Third Party Licenses. AnHeart will remain responsible for all obligations arising from licenses from Third Parties executed prior to the Effective Date, [**Redacted**]. Innovent will be responsible, at its own expense, for obtaining any required licenses to intellectual property from a Third Party that, in the absence of such license, would be infringed by the use, import or sale of a Licensed Compound or a Product in the Territory. Innovent shall, in its sole discretion and at its sole expense, determine which Third Party licenses are necessary, and shall negotiate and execute all such licenses directly with the Third Party licensors (a “Third Party License”). If Innovent does enter into such Third Party License, Innovent is allowed to deduct a [**Redacted**] of the royalty obligations due to such Third Party from any royalties due by Innovent to AnHeart with a maximum deduction cap of [**Redacted**] of all royalties in any given year. Attached, as Exhibit D, is an example of the calculation of deduction of Third-Party License payments under this Section 5.5.3.
5.5.4. Royalty Step-down Provision.
(a) Notwithstanding Section 5.5.1, on a Product-by-Product, region-by-region and Calendar Quarter-by-Calendar Quarter basis, Innovent shall have the right to reduce applicable royalty payments as follows:
(b) If there is a commercial sale of Generic Equivalents of such Product by a Third Party or Third Parties in such region prior to the end of the Royalty Term in that region and to the extent such Generic Equivalent is not in infringement of any of AnHeart Technology, Net Sales of the corresponding Product subsequently decrease for [**Redacted**] consecutive Calendar Quarters by more than [**Redacted**] from the level of Net Sales achieved prior to the Generic Equivalents entry in that region, then the royalty rate owed to AnHeart shall be reduced by [**Redacted**] in that region. If subsequent to such Generic Equivalents entry the Net Sales of the Product decrease by more than [**Redacted**] for [**Redacted**] consecutive Calendar Quarters from the level of Net Sales achieved prior to the Generic Equivalents entry in that region, and such decrease is related to the Generic Equivalents entry in that region, then the royalty rate owed to AnHeart shall be reduced by [**Redacted**] in that region. A “Generic Equivalent” of a Product means, with reference to a Product, any biologic or pharmaceutical product that is sold by a Third Party (other than a licensee of Innovent or any of its Affiliates) and that is approved for marketing or sale by a Regulatory Authority in reliance on or using data from the Regulatory Filings for the Product that were submitted by AnHeart, its Affiliates, and that (A) contains the Licensed Compound and (B) is a “therapeutically equivalent”, “biosimilar”, “comparable”, or “interchangeable” product or meets such equivalent determination by the applicable Regulatory Authorities.
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5.5.5. Alternative Structure of Royalty Settlement. Notwithstanding anything to the contrary under this Agreement, the Parties will, in a way benefiting both Parties and without changing the economic essence as agreed in Section 5.5, discuss and enter into an alternative structure to settle the royalty payment (in whole or in part) as well as the supportive mechanism to such alternative structure [**Redacted**]. Such alternative structure shall include without limitation [**Redacted**] to reflect the economics allocated by royalty payment.
5.6. Payments and Reports. All royalty payments due to AnHeart under this Agreement are due and payable within [**Redacted**] calendar days of the close of the calendar quarter during which the corresponding Net Sales are recognized. Together with any such payment, Innovent will deliver a report specifying in the aggregate: (a) total gross invoiced amount from sales of each Product by Innovent and its Affiliates; (b) amounts deducted by category (e.g., normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of the Product) from gross invoiced amounts to calculate Net Sales; (c) Net Sales; and (d) royalties payable; and (e) a forecast of Net Sales and royalties to be paid to AnHeart for each of the next [**Redacted**] quarters. Innovent shall send the first such report within [**Redacted**] calendar days of receiving the first Marketing Approval anywhere in the Territory, provided that such first report need only include a non-binding forecast (i.e., no royalty payment will be due) of Net Sales for the next [**Redacted**] quarters.
5.7. Payment Method. All payments due to AnHeart under this Agreement will be made by bank wire transfer in immediately available funds to an account shown in invoices to be issued to Innovent. All payments hereunder shall be made in the legal currency of the United States or in the legal currency of mainland China as the parties may choose to. All references to “$” or “Dollars” herein refer to U.S. Dollars. Innovent shall be responsible for paying all transfer and other fees related to completing all bank wire transfers required under this Agreement, except for the transfer fee imposed by the bank designated by AnHeart.
5.8. Currency Conversion. If any currency conversion is required in connection with the calculation of amounts payable hereunder, such conversion will be made using the average of the buying and selling exchange rate for conversion of the foreign currency and U.S. Dollars, quoted for current transactions reported in [**Redacted**] to which such payment pertains.
5.9. Late Payments. Innovent shall pay interest to AnHeart on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate per annum equal to the lesser of the London Interbank Offered Rate of interest plus one and a [**Redacted**], as reported by The Wall Street Journal for the applicable period, to the extent permitted by Applicable Law, calculated on the number of days such payment is delinquent. This Section 5.8 will in no way limit any other remedies available to AnHeart.
5.10. Taxes.
5.10.1. Withholding Taxes. If Innovent is required to withhold any tax to the tax or revenue authorities in the Territory regarding any payment to AnHeart, such amount may be deducted from the payment to be made by Innovent, provided that Innovent takes all reasonable and lawful actions to avoid or minimize such withholding and promptly notifies AnHeart so that AnHeart may also take lawful actions to avoid or minimize such withholding. Innovent will promptly furnish AnHeart with copies of any tax certificate or other documentation evidencing such withholding, as necessary to enable AnHeart to support a claim, if permissible, for income tax credit in respect of any amount so withheld. Each Party agrees to cooperate with the other Party in claiming exemptions from such deductions or withholdings under any agreement or treaty in effect from time to time.
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5.10.2. Value Added Taxes. All amount to be paid by Innovent to AnHeart pursuant to this Agreement shall be exclusive of any value added tax occurred due to the payment of such amount, which will be paid by Innovent upon receipt of a valid value added tax invoice. For the avoidance of doubt, the invoice amount shall be inclusive of the payment amount under this Agreement and the value added tax, and irrespective of whether the sums may be netted for settlement purposes. For illustrative purpose, the actual amounts to be paid by Innovent to AnHeart under this Agreement shall be equal to the invoice amount, and shall also be equal to the following:
Payment amount under this Agreement × (1+ applicable rate of value added tax).
5.11. Records. Innovent will keep and will cause its Affiliates and Sublicensees if any to keep, complete, true and accurate books of accounts and records, in compliance with Applicable Laws and the terms and conditions of this Agreement, sufficient to determine and establish the calculation of Net Sales and royalties payable under this Agreement for a period of [**Redacted**] years after the year in which the sale of the Product(s) generating the same occurred.
5.12. Inspection of Records. At the request of AnHeart, Innovent, its Affiliates and its Sublicensees if any will permit an independent certified public accountant appointed by AnHeart, to inspect the books and records described in Section 5.11, provided that such inspection shall not more than once each Calendar Year, and the books and records for any given time period shall not be inspected more than once within a Calendar Year. AnHeart shall submit a reasonable audit plan, including audit scope, to Innovent prior to audit implementation. Any inspection conducted under this Section 5.12 will be at AnHeart’s expense, unless such inspection reveals any underpayment of [**Redacted**] or more of any amount due to AnHeart during the audited period, in which case the full costs of such inspection will be paid by Innovent. If the independent certified public accountant determines that additional royalties or milestones are owed, or that royalties or milestones were overpaid, during such period, Innovent will pay AnHeart the additional royalties or milestones, within [**Redacted**] days from the date the independent certified public accountants’ written report is received by the paying Party; provided, however, that, in the event that the independent certified public accountant determines that the royalties or milestones were overpaid, during such period, AnHeart will pay Innovent the amount of such overpayment within [**Redacted**] days of the date the independent certified public accountants’ written report is received by AnHeart and the full costs of such inspection will be paid by Innovent. Notwithstanding any provision to the contrary in this Agreement, if [**Redacted**]. For the avoidance of doubt, if [**Redacted**].
5.13. Compliance Audit.
5.13.1. Audit by AnHeart. AnHeart shall have the right, not more than once per Calendar Year, upon [**Redacted**] Business days’ prior written notice and during normal business hours, to audit all sites operated by Innovent and protocols and procedures used (or proposed to be used) by or on behalf of Innovent limited to the specific areas for which Innovent is responsible for the Product, such as, marketing, sales and distribution of the Product(s) pursuant to this Agreement, including, but not limited to, any product quality maintenance, product security, storage, transportation, distribution, and the materials and equipment used therein (in addition to the associated protocols and procedures). AnHeart may be accompanied by any independent technical experts or consultants that AnHeart deems appropriate, provided, that such persons are subject to confidentiality obligations no less restrictive than those set forth in this Agreement. Innovent shall provide AnHeart with reasonable assistance in performing such audit, including access to key associated personnel to discuss any associated queries of AnHeart. Innovent shall not charge any costs or expenses to AnHeart for any such audit. AnHeart is responsible for its direct costs of performing such audits. If any items
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are identified as requesting follow-up action, then Innovent shall respond to AnHeart in writing within [**Redacted**] days following receipt of AnHeart’s such request, and the response shall state actions Innovent plans to take to correct and the proposed timing(s). Notwithstanding the foregoing limitation to performing audits once during each calendar year, AnHeart may perform more than one audit in a Calendar Year, (i) in order for Innovent to demonstrate that any items requiring follow-up action have been resolved or (ii) in the event AnHeart has any reasonable quality or compliance-related concerns with respect to Innovent’s performance in the Commercialization of the Product(s).
5.13.2. Audit by Innovent. Upon [**Redacted**] Business Days’ prior written notice to AnHeart, and during normal business hours, AnHeart shall allow Innovent and/or its authorized representative or agents, to inspect the premises where the Product(s) manufacturing and operations are conducted, including Third Party contractor facilities, for purposes of overseeing and auditing the Product(s) manufacture and operations including but not limited to quality, health, safety and environment. The Parties agree that any such audit shall not be conducted more than once every Calendar Year. Notwithstanding the foregoing sentence, Innovent shall have the right to conduct an additional audit in preparation for a regulatory inspection associated with a new Product. Notwithstanding the above, for sufficient cause Innovent may have immediate access to conduct additional inspections or audits. Any such audit conducted for cause shall not supplant or negate the right for the annual audit. AnHeart shall use Commercially Reasonable Efforts to timely correct any deficiencies communicated to it in an audit.
6. Intellectual Property.
6.1. Ownership of Licensed Intellectual Property. Subject to the licenses granted in Article 2 of this Agreement, each Party will retain all right, title and interest in and to, and ownership or rights of, all Patents and other intellectual property conceived, discovered, developed, reduced to practice, or otherwise made solely by or on behalf of such Party (or its Affiliates. or its or their Sublicensees). Subject to the licenses and other rights granted herein, as between the Parties, each Party will own an equal, undivided interest in any and all Joint Know-how and Joint Patents. Inventorship and ownership rights in Inventions and other Know-how created, developed, conceived and/or reduced to practice after the Effective Date under this Agreement will be determined under the intellectual property laws of the United States, irrespective of where such creation, development, conception, discovery, development or making occurs.
6.2. Filing, Prosecution and Maintenance.
6.2.1. AnHeart Patents. Using counsel of its choice, AnHeart shall be responsible, at its sole expense, for preparing, filing, prosecuting, and/or maintaining the AnHeart Patents that Cover the Licensed Compound and/or Product(s), including preparing and filing requests for patent term extensions, supplemental protection certificates, pediatric exclusivity, or similar protections that extend the term of such AnHeart Patents in the Territory, provided that it shall copy Innovent on documents received from or filed with the Patent Offices in the Territory, provide Innovent with draft submissions to the Patent Offices prior to filing, and consider in good faith comments provided by Innovent. If AnHeart decides that it will no longer prosecute or maintain a AnHeart Patent, it will give Innovent reasonable notice of its decision, which will include sufficient time prior to the expiration or termination of all relevant deadlines for taking necessary actions to preserve the rights in such AnHeart Patent, and will allow Innovent to assume control over and continue prosecuting and maintaining such AnHeart Patent in AnHeart’s name at Innovent’s sole expense. [**Redacted**] defending the AnHeart Patents from any challenges to their validity or enforceability, including responding to oppositions, reissue or reexamination proceedings,
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or interferences, brought by any Third Party, whether before a patent authority or judicial body in the Territory. [**Redacted**] will reasonably cooperate with [**Redacted**] including providing reasonable assistance to Innovent (including executing any documents as may reasonably be required), in the defense of AnHeart Patents that Cover the Licensed Compound and/or Product(s).
6.2.2. Innovent Patents. Innovent will be responsible, at its sole expense, for preparing, filing, prosecuting, and maintaining Innovent Patents if any that are useful to research, develop or commercialize the Licensed Compound or Product(s) in the Territory. If Innovent, in its sole discretion, decides that it will no longer prosecute or maintain an Innovent Patent, it will give AnHeart reasonable notice of its decision, which will include sufficient time prior to the expiration or termination of all relevant deadlines for taking necessary actions to preserve the rights in such Innovent Patent, and will allow AnHeart to assume control over and continue prosecuting and maintaining such Innovent Patent in Innovent’s name at AnHeart’s sole expense.
6.2.3. Grant Back. For and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Innovent shall assign and does hereby assign its rights outside the Territory in Innovent Technology and Joint Technology to AnHeart or its designee and upon such assignment.
6.2.4. Joint Patent. The Parties will be jointly responsible for preparing, filing, prosecuting, and maintaining Joint Patents that are useful to research, develop or commercialize the Licensed Compound or Product(s) with Innovent being responsible and bearing all the costs in the Territory and AnHeart being responsible and bearing all costs outside the Territory. If either Party, in its sole discretion, decides that it will no longer prosecute or maintain a Joint Patent, it will give the other Party reasonable notice of its decision, which will include sufficient time prior to the expiration or termination of all relevant deadlines for taking necessary actions to preserve the rights in such Joint Patent, and will allow the other Party to assume control over and continue prosecuting and maintaining such Joint Patent. AnHeart shall grant Innovent a sub-licensable, royalty-bearing, exclusive right and license to its rights and interest in any Joint Patent in the Field in the Territory, under the same terms as set forth in Section 2.1. Without the written consent of the other party, either party shall not [**Redacted**].
6.2.5. Regulatory Exclusivity. [**Redacted**] seek regulatory and/or data exclusivity for a Product in the Territory, [**Redacted**] will be responsible, at its sole expense, for preparing and filing such requests with the applicable Regulatory Authority. [**Redacted**] will, upon request, provide reasonable support to [**Redacted**] in preparing and filing such requests at [**Redacted**] costs.
6.3. Defense of Infringement Claims by Third Parties.
6.3.1. Liability. If a Third Party files or threatens to file an infringement claim against either Party or both Parties related to the manufacture, use, offer for sale, sale, importation or exportation of a Licensed Compound or Product in the Territory, Innovent shall have the first right (but not obligation) to defend such suit at its own expense and AnHeart shall assist and cooperate with Innovent, at its own expense, to the extent necessary in the defense of such suits. Subject to Section 5.5.3 and [**Redacted**] hereunder, Innovent will be responsible for the payment of damages awarded to the Third Party plaintiff or any amount due pursuant to any settlement entered into by it with such Third Party. For avoidance of any doubt, [**Redacted**] of damage paid by Innovent may be deducted from royalty due to AnHeart in the proportion set forth in Section 5.5.3 or otherwise agreed on by both Parties.
6.3.2. Control. Innovent will solely control the defense of infringement claim(s) brought against either Party or both Parties by Third Parties, including the right to control settlement of such claim(s), provided that Innovent may not agree to terms in the settlement that will adversely affect AnHeart’s rights or interests unless AnHeart has given prior written consent. Notwithstanding Innovent’s right to control the
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defense of claim(s) of infringement, if AnHeart is named as a defendant, it will have the right to participate in such case, including by engaging separate counsel, at its sole expense. Without affecting or limiting Innovent’s right to control the defense of infringement claims by Third Parties, if AnHeart elects to engage separate counsel, the Parties shall cooperate in defending and/or settling such claims.
6.4. Enforcement Actions Against Third Parties.
6.4.1. Notification. If either Party learns of any infringement, unauthorized use, misappropriation or ownership claim, or threatened infringement of any AnHeart Technology by a Third Party with respect to the Licensed Compound or Product(s) anywhere within the Territory, such Party will promptly notify the other Party in writing and will promptly provide the other Party with available evidence of such infringement or other such claim.
6.4.2. Control. Innovent will have the first right, but not the obligation, to institute an infringement suit, initiate administrative proceedings, or take other appropriate action against a Third Party for any alleged infringement of any AnHeart Technology anywhere within the Territory. If Innovent does not secure actual cessation of the offending activities, or institute an infringement proceeding or other administrative proceeding against an offending Third Party, Innovent will notify AnHeart of such circumstances as soon as reasonably practicable, but in any case no later than [**Redacted**] days of learning of such infringement or threatened infringement. Upon receiving such notice, AnHeart will have the right, but not the obligation, at its sole discretion, to take appropriate actions in the name of either Party or both Parties. Each Party will execute all necessary and proper documents, and take such actions as are necessary and appropriate to allow the other Party to institute and prosecute such infringement actions and will otherwise cooperate in instituting and prosecuting such actions (including, without limitation, consenting to being named as a nominal party thereto).
6.4.3. Expenses. The costs and expenses of any such enforcement actions against Third Parties (including fees of attorneys and other professionals) will be paid by the Party instituting the action, or, if the Parties elect to cooperate in instituting and maintaining such action, such costs and expenses will be borne by the Parties in such proportions as they may agree in writing. Any damages paid by Third Parties as a result of such an enforcement action (whether by way of settlement or otherwise) will be applied first to reimburse both Parties for all costs and expenses incurred. If such funds are not sufficient to reimburse all expenses of both Parties, all funds will be divided on a pro rata basis in the same proportion as the costs and expenses incurred. If any funds remain after all expenses of both Parties have been reimbursed, such excess funds will be [**Redacted**].
6.5. Trademarks. If a Product receives Marketing Approval and will be marketed pursuant to the terms of this Agreement in the Territory, Innovent will have the right to, at its own expense, select, apply for, register, maintain, extend or abandon the trademark or trademarks under which the Product(s) will be marketed in the Territory by Innovent and its Affiliates upon written consent by AnHeart. Innovent will own all trademarks used to market the Product(s) in the Territory at its own expense.
7. Confidentiality.
7.1. Confidential Information. Except to the extent expressly authorized by this Section 7 or otherwise agreed in a writing signed by both Parties, during and for [**Redacted**] years thereafter, except in the case of Confidential Information of a Party that has been identified in writing by such Party as a trade secret, in which case, the obligation contained in this Section 7.1 with respect to such Confidential Information shall be perpetual, the Party receiving the Confidential Information of the other Party or its Affiliates (such receiving Party, the “Receiving Party”) shall keep confidential and not publish or otherwise disclose or use for any purpose other than as explicitly provided for in this Agreement any confidential and proprietary information or materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise) that are disclosed or provided to it by the other Party or
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an Affiliate of the other Party (each a “Disclosing Party”) or otherwise received or accessed by the Receiving Party, its Affiliates, or its Sublicensees in the course of performing its obligations under this Agreement including, but not limited to, any trade secrets, Know-How, Product specifications, formulae, processes, techniques and information relating to the Disclosing Party’s past, present and future marketing, financial, and research and development activities for any product of the Disclosing Party and the pricing and customer lists, customer data and other customer information thereof (collectively, “Confidential Information”). Confidential Information of each Party includes the terms and conditions of this Agreement.
7.2. Exceptions. Notwithstanding the foregoing, Confidential Information does not include information or materials to the extent that it can be established by the Receiving Party that such information or material:
7.2.1. is already lawfully known to the Receiving Party, other than under an obligation of confidentiality at the time of disclosure by the Disclosing Party as evidenced by written records kept in the ordinary course of business, or other documentary proof of actual use by the Receiving Party;
7.2.2. is generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;
7.2.3. becomes generally available to the public or otherwise part of the public domain after its disclosure to the Receiving Party and other than through any act or omission of the Receiving Party, its Affiliates, or its Sublicensees in violation of this Agreement;
7.2.4. is independently developed by the Receiving Party as demonstrated by documented evidence prepared contemporaneously with such independent development; or
7.2.5. is lawfully disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation not to disclose such information to others.
7.3. Authorized Disclosure. Notwithstanding Section 7.1, the Receiving Party may disclose Confidential Information of the Disclosing Party:
7.3.1. to its respective employees, consultants, and advisors, and to the employees, consultants, and advisors of such Receiving Party’s Affiliates, sublicensees or potential investors or sublicensees, who have a need to know such Confidential Information in connection with the activities or transactions contemplated in this Agreement and have an obligation to treat such Confidential Information as confidential under terms no less restrictive than those set forth herein; or
7.3.2. in its publicly filed financial statements or other public statements pursuant to Applicable Laws, regulations, and stock exchange rules or otherwise disclosed pursuant to Applicable Law; provided, that: (a) the terms of this Agreement are redacted to the greatest extent possible; and (b) such Receiving Party provides the Disclosing Party with a copy of the proposed text of such statements or disclosure (including any exhibits containing this Agreement) sufficiently in advance of the scheduled release or publication thereof to afford the Disclosing Party a reasonable opportunity to review and comment on the proposed text (including redacted versions of this Agreement).
7.3.3. to governmental authorities to facilitate the issuance of Marketing Approvals for Product; provided that reasonable measures are taken to assure confidential treatment of such information;
7.3.4. to the extent such disclosure is reasonably necessary in filing or prosecuting patent, copyright, and trademark applications, prosecuting or defending litigation, complying with applicable governmental regulations, conducting preclinical activities or clinical trials, and marketing a Product;
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7.3.5. to Third Parties in connection with a Receiving Party’s efforts to secure financing or enter into strategic partnerships, provided such information is disclosed only on a need-to-know basis and under confidentiality provisions at least as stringent as those in this Agreement;
7.3.6. that is required to be disclosed in response to a valid order by a court or other governmental body and provided that the Receiving Party provides the Disclosing Party with prompt notice of such requirement so that the Disclosing Party may seek a protective order or other appropriate remedy, then the Receiving Party may furnish only that portion of the Confidential Information which the Receiving Party is legally compelled to disclose; or
7.3.7. that is required to be disclosed in connection with any legal or regulatory requirements or obligations, including SEC filings or Regulatory Filings, provided that the Receiving Party offers reasonable cooperation to the Disclosing Party in an attempt, as may be permitted and appropriate, to redact or seek confidential treatment of sensitive Confidential Information.
7.4. Publications. Both parties shall retain the right to make scientific presentations and publications with respect to the Licensed Compound and Product(s) in the Territory, provided that each Party will submit such presentations and publications to JSC reasonably in advance for discussion and review. [**Redacted**] shall have the final decision-making authority on such presentations and publications, and will consider or incorporate [**Redacted**] comments in good faith. [**Redacted**] shall have the final decision-making authority on such publications and presentations, and will consider or incorporate [**Redacted**] comments in good faith. For publications [**Redacted**] shall have the final decision-making authority on such publications and presentations, and will consider or incorporate [**Redacted**] comments in good faith..
7.4.1. If Innovent or its Affiliate proposes a publication related to a Licensed Compound or a Product Innovent will first submit an early draft of such publication to AnHeart, whether they are to be presented orally or in written form, at least [**Redacted**] calendar days prior to submission for publication or presentation. AnHeart may review such proposed publication/presentation in order to avoid unauthorized disclosure of its Confidential Information and to preserve the patentability of inventions and will, as soon as reasonably possible, but no more than [**Redacted**] calendar days from receipt of the advance copy of the proposed publication, inform Innovent if:
(a) its proposed publication contains Confidential Information (as defined in Section 7.1) of AnHeart, in which case AnHeart or its Affiliate will delete such Confidential Information from its proposed publication; and/or
(b) its proposed publication could be expected to have a material adverse effect on any Patent, Know-How, compound, or product of AnHeart, in which case Innovent or its Affiliate will delay such proposed publication for a reasonable period to permit the timely preparation and first filing of patent application(s) covering the information involved.
(c) This Section 7.4.1 does not apply to any disclosures permitted pursuant to Section 7.2.
7.5. Press Releases. Either Party may issue any press release relating to the signing or milestones in this Agreement upon the other Party’s prior written approval within [**Redacted**] Business Days, which approval will not be unreasonably withheld or delayed.
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7.6. Restrictions on Use. During and after the Term, the Receiving Party shall not use, and shall ensure that its Affiliates, and its Sublicensees do not use any Confidential Information disclosed to it by a Disclosing Party or otherwise received or accessed in the course of performing its obligations under this Agreement for any purpose other than as expressly provided herein.
7.7. Return/Destruction of Confidential Information. At the Disclosing Party’s election, the Receiving Party will return (at Disclosing Party’s expense) or destroy all tangible materials comprising, bearing, or containing any Confidential Information of the Disclosing Party relating to the terminated Product that are in the Receiving Party’s or its Affiliates’ possession or control and provide written certification of such destruction (except to the extent any information is the Confidential Information of both Parties or to the extent that the Receiving Party has the continuing right to use the Confidential Information under this Agreement); provided, that, the Receiving Party may retain one copy of such Confidential Information for its legal archives mandatorily required by Applicable Law.
8. Representations, Warranties and Covenants.
8.1. Representations and Warranties of Both Parties. Each Party represents and warrants to the other, as of the Effective Date, that:
8.1.1. it is duly organized and validly existing under the laws of its jurisdiction of incorporation, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;
8.1.2. it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder and that it has the right to grant to the other Party the licenses and sublicenses granted pursuant to this Agreement, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action. For the avoidance of doubt, AnHeart has obtained written approval from DS to grant Innovent the license and other rights hereunder;
8.1.3. this Agreement is legally binding upon it and, upon execution by the other Party, shall be enforceable in accordance with its terms except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and subject to the general principles of equity (regardless of whether enforcement is sought in a court of law or equity);
8.1.4. the execution, delivery and performance of this Agreement by such Party does not knowingly conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation of any governmental agency or Regulatory Authority having jurisdiction over it;
8.1.5. it has not granted any right to any Third Party that would knowingly conflict with the rights granted to the other Party hereunder;
8.1.6. it has not been debarred under the Generic Drug Enforcement Act of 1992 (21 U.S.C. §301 et seq.), is not under investigation for debarment action, has not been disqualified as an investigator pursuant to 21 C.F.R. §312.70, does not have a disqualification hearing pending and is not currently employing any person or entity that has been so debarred or disqualified to perform any of its obligations under this Agreement. It shall promptly notify the other Party if it is so debarred or disqualified and shall terminate any so debarred or disqualified individual’s or entity’s participation in the performance of any of its obligations under this Agreement promptly upon its awareness of such debarment or disqualification; and
8.1.7. it is not aware of any action, suit or inquiry or investigation instituted by any person or governmental agency that questions or threatens the validity of this Agreement.
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8.2. Representations and Warranties of AnHeart. AnHeart represents and warrants to Innovent, as of the Effective Date,:
(a) AnHeart is not aware of any requirement of a Third Party license for the commercialization of the Licensed Compound in the Territory;
(b) there are no legal claims, judgments or settlements against or owed by AnHeart or, to the best knowledge of AnHeart, pending legal claims or litigation, in each case relating to the Licensed Compound or Product. AnHeart has not received any notice from a Third Party alleging infringement or misappropriation the intellectual or other property rights of any Third Party due to the manufacture, use, sale, offer to sell, or import of the Licensed Compound or Product in the Territory, and to its knowledge, the practice of AnHeart Technology will not infringe or misappropriate the intellectual or other property rights of any Third Party;
(c) there are no legal claims, judgments or settlements against or owed by AnHeart or pending legal claims or litigation, in each case relating to the AnHeart Patents. To its best knowledge, AnHeart Patents are subsisting, valid and enforceable. AnHeart has not received any notice challenging the inventorship, ownership, validity or enforceability of the AnHeart Patents;
(d) AnHeart Controls the AnHeart Technology, and has the right to grant to Innovent the sublicense that it purports to grant hereunder and has not granted any Third Party rights that would interfere or be inconsistent with Innovent’s rights hereunder;
(e) AnHeart Technology are not subject to any existing royalty (aside from the royalty, milestones, and other payments owed by AnHeart Inc. to Daiichi Sankyo) or other undisclosed payment obligations to any Third Party;
(f) [**Redacted**] relating to the [**Redacted**] the Licensed Compound and/or Product [**Redacted**]
(g) [**Redacted**] having to do with the Licensed Compound and Product. [**Redacted**] of the Licensed Compound and Product;
(h) AnHeart has provided to Innovent as of the Effective Date a true, correct and complete copy of each Upstream License Agreement [**Redacted**] and each Third Party agreement that would materially affect the rights or obligations of Innovent under this Agreement, and each such copy includes any and all amendments, restatements, side letters, and other modifications thereto, as each such agreement is in effect as of the Effective Date;
(i) AnHeart will timely provide to Innovent a true, correct and complete copy of each CMC and/or COGS related documents that would reasonably be expected to affect the rights or obligations of Innovent under this Agreement, and each such copy includes any and all amendments, restatements, side letters, and other modifications thereto, as each such agreement is in effect as of the Effective Date.
8.3. Representations and Warranties of Innovent. Innovent represents and warrants to Innovent, as of the Effective Date and during the Term of this Agreement that it shall comply with all applicable Anti-Bribery Requirements and shall not make any payment, either directly or indirectly, of money or other benefits or assets to government authorities or officials or physicians, or make any payment to, or receive any payment from employees or consultants of AnHeart, or other related business entities or persons, where it would constitute a violation of Anti-Bribery Requirements. Regardless of its legality, Innovent shall make no payment either directly or indirectly to the abovementioned entities and persons if such payment is for the purpose of influencing decisions or actions related to the subject matter of this Agreement.
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8.4. Covenants of Innovent.
8.4.1. Innovent shall, and shall cause its Affiliates and the Sublicensees to, comply with all Applicable Law with respect to the Commercialization of the Product(s). Without limitation to the foregoing, Innovent shall, and shall cause each of its Affiliates and the Sublicensees to, in all material respects, conform its and their practices and procedures relating to the Commercialization of the Product(s) to any Applicable Law;); and
8.4.2. Innovent shall ensure that all transactions during the Commercialization of the Product(s) will be accurately and completely reflected in its books and records, in sufficient detail to verify compliance with its obligations under this Agreement and which shall be in compliance with Applicable Law and properly reflect all work done and results achieved in the performance of its Commercialization activities. Innovent shall ensure such records be retained for at least [**Redacted**]years after the expiration or termination of this Agreement or for such longer period as may be required by Applicable Law; and
8.4.3. Innovent will provide reasonable assistance as reasonably requested by AnHeart (at AnHeart’s expense) to assist AnHeart in performing any activity for the purpose of compliance with the applicable Anti-Bribery Requirements or other regulatory requirements to which this Agreement relates, including without limitation to carrying out compliance audit in accordance with Section 5.13.
8.5. Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 8, EACH PARTY DISCLAIMS ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND UNDER THIS AGREEMENT (INCLUDING WITH RESPECT TO ANY MATERIALS PROVIDED UNDER THIS AGREEMENT), EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR VALIDITY OF PATENT CLAIMS, WHETHER ISSUED OR PENDING (AS APPLICABLE)
8.6. Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STATUTE, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES. THE FOREGOING LIMITATION OF LIABILITY, HOWEVER, SHALL NOT LIMIT THE OBLIGATIONS OF EITHER PARTY TO INDEMNIFY THE OTHER PARTY FROM AND AGAINST THIRD PARTY CLAIMS UNDER ARTICLE 9, EACH PARTY’S CONFIDENTIALITY OBLIGATION UNDER ARTICLE 7, AND ANHEART’S EXCLUSIVITY OBLIGATIONS UNDER SECTION 2.1 & 8.2(d).
9. Indemnification.
9.1. Indemnification by AnHeart. AnHeart will defend, hold harmless and indemnify (collectively “Indemnify”) Innovent and its Affiliates, and their respective agents, directors, contractors, representatives, officers and employees (collectively “Innovent Indemnitees”) from and against any liability or expense, including without limitation reasonable legal expenses and attorneys’ fees, (collectively “Losses”) resulting from suits, claims, actions and demands, in each case brought by a Third Party (each, a “Third Party Claim”) relating to or arising from: (a) a material breach of any of AnHeart’s representations, warranties or covenants under Sections 8.1 and 8.2 or other obligations pursuant to this Agreement; or (b) any gross negligence or willful misconduct by AnHeart, its Affiliates or their
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respective officers, directors, employees in the exercise of any of AnHeart’s rights or the performance of any of AnHeart’s obligations under this Agreement. AnHeart’s obligation to Indemnify the Innovent Indemnitees pursuant to this Section 9.1 will not apply to the extent that any such Losses arise from the gross negligence, willful misconduct or wrongful acts or omissions of any Innovent Indemnitee; or are Losses for which Innovent is obligated to Indemnify the AnHeart Indemnitees pursuant to Section 9.2.
9.2. Indemnification by Innovent. Innovent will Indemnify AnHeart and its Affiliates, and their respective agents, directors, contractors, representatives, officers and employees (collectively “AnHeart Indemnitees”) from and against any and all Losses resulting from Third Party Claims relating to or arising from: (a) a material breach of any Innovent’s representations, warranties or covenants under Section 8.1 or other obligations pursuant to this Agreement; or (b) any gross negligence or willful misconduct by Innovent, its Affiliates, or their respective officers, directors, employees in the exercise of any of Innovent’s rights or the performance of any of Innovent’s obligations under this Agreement, or any tort claims of personal injury (including death) or property damage relating to or arising out of any sale, offer for sale or importation of any Product in the Territory by Innovent, its Affiliates, and/or its Sublicensees, or any claims relating to or arising out of the marketing or sales activities of Innovent or its Affiliates in the Territory. Innovent’s obligation to Indemnify the AnHeart Indemnitees pursuant to this Section 9.2 will not apply to the extent that any such Losses arise from the gross negligence, willful misconduct or wrongful acts or omissions of any AnHeart Indemnitee, or are Losses for which AnHeart is obligated to Indemnify the Innovent Indemnitees pursuant to Section 9.1.
9.3. Procedure. To be eligible to be indemnified hereunder, any Innovent Indemnitee under Section 9.1, or AnHeart Indemnitee under Section 9.2, as the case may be (an “Indemnitee”) seeking indemnification, must provide the indemnifying Party with prompt notice of the Third Party Claim giving rise to the claimed indemnification obligation and must assign the exclusive ability to defend or settle any such claim to the indemnifying Party; provided that any delay or failure to provide such notice shall not constitute a waiver or release of, or otherwise limit, the Indemnitee’s rights to indemnification under Section 9.1 or Section 9.2 as applicable, except to the extent that such delay or failure materially prejudices the Indemnifying Party’s ability to defend against the relevant claims. However, that the indemnifying Party may not enter into any settlement that admits fault, wrongdoing or damages on the part of the Indemnitee without such Indemnitee’s written consent, such consent not to be unreasonably withheld or delayed. The Indemnitee will cooperate with reasonable requests from the indemnifying Party and/or the Indemnifying Party’s insurer, at the indemnifying Party’s expense, and will have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party. Without affecting or limiting the indemnifying Party’s right to control the defense of the Third Party Claim, if the Indemnitee elects to engage separate counsel, the Parties shall cooperate in defending and/or settling such claims.
9.4. Complete Indemnification. Indemnification under this Article 9 will include the reasonable costs and expenses of the Indemnitee relating to legal fees and expenses and damages awarded to the Indemnitee in connection with enforcement of Sections 9.1 and 9.2.
9.5. Allocation. If a claim is based in part on an indemnified claim, as described in Sections 9.1 and 9.2, and in part on a non-indemnified claim, or is based in part on a claim described in Section 9.1 and in part on a claim described in Section 9.2, any payments and reasonable attorney fees incurred in connection with such claims will be apportioned between the Parties in accordance with the degree of fault attributable to each Party.
9.6. Insurance. During the Term and for [**Redacted**] years thereafter, AnHeart will maintain a policy of insurance at levels sufficient to support its indemnification obligations, but in any case such insurance must provide adequate coverage for clinical trials liability, products liability, and comprehensive general liability. During the Term and for [**Redacted**] years thereafter, Innovent will maintain a policy of insurance or the equivalent amount in self-insurance at levels sufficient to support its indemnification obligations and obligations in relation to the Commercialization of the Product(s) in the Territory. Upon the request by either Party, the other Party shall provide evidence of such insurance.
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10. Term and Termination.
10.1. Term. This Agreement is effective as of the Effective Date and, unless earlier terminated pursuant to the other provisions of this Article 10, will continue in full force and effect until the earlier of (i) Innovent and all of its Affiliates cease all commercial activity related to all Products throughout the Territory, (ii) the termination of the DS License Agreement [**Redacted**] (the “Term”).
10.2. Termination by AnHeart.
10.2.1. Termination for Innovent’s Material Breach. AnHeart may terminate this Agreement, without prejudice to any other remedies available to it at law or in equity, if Innovent or its Affiliate commits a material breach of this Agreement including without limitation a material breach of any of its representations and warranties, covenants and undertakings in Section 8.3 that, in the case of a material breach capable of remedy (including the non-payment of the undisputed amounts of sums due from Innovent hereunder), has not have been remedied within ninety (90) days of receiving a notice from AnHeart identifying the breach and requiring its remedy, or if such material breach cannot be cured within ninety (90) days, Innovent does not commence and diligently continue actions to cure such breach during such ninety (90) days.
10.2.2. To the extent permitted by law, AnHeart may terminate this Agreement immediately if: (a) Innovent becomes insolvent, or makes or seeks to make or arrange an assignment for the benefit of creditors; (b) proceedings in voluntary bankruptcy are initiated by or on behalf of Innovent or proceedings in involuntary bankruptcy are initiated against Innovent (and, in the case of any such involuntary proceeding, not dismissed within ninety (90) days); or (c) a receiver or trustee of Innovent’s property is appointed and not discharged within ninety (90) days.
10.2.3. AnHeart may terminate this Agreement immediately upon written notice if Innovent or its Affiliate initiates or joins any challenge, whether in a court of law or in an administrative proceeding, to the validity or enforceability of an AnHeart Patent.
10.3. Termination by Innovent.
10.3.1. Termination for AnHeart’s Material Breach. Innovent may terminate this Agreement, without prejudice to any other remedies available to it at law or in equity, if AnHeart commits a material breach of this Agreement that, in the case of a material breach capable of remedy, has not been remedied within ninety (90) days of receiving a notice from Innovent identifying the breach and requiring its remedy, or if such material breach cannot be cured within such ninety (90) day period, AnHeart does not commence and diligently continue actions to cure such breach during such sixty (60) days.
10.3.2. To the extent permitted by law, Innovent may terminate this Agreement immediately if: (a) AnHeart becomes insolvent, or makes or seeks to make or arrange an assignment for the benefit of creditors; (b) proceedings in voluntary bankruptcy are initiated by or on behalf of AnHeart or proceedings in involuntary bankruptcy are initiated against AnHeart (and, in the case of any such involuntary proceeding, not dismissed within ninety (90) days); or (c) a receiver or trustee of AnHeart’s property is appointed and not discharged within ninety (90) days.
10.3.3. Innovent may terminate this Agreement upon one (1) month prior written notice if it has bona fide material concerns regarding the lack of safety for human use and toxicity of the Licensed Compound or the lack of efficacy of the Licensed Compound. The notice under this Section 10.3.3 will specify in detail the basis for such termination, including a reasonable description of such concerns.
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10.4. Accrued Obligations/Survival. Expiration or termination of this Agreement for any reason does not release either Party from any obligation or liability which, at the time of such expiration or termination, has already accrued to the other Party or which is attributable to a period prior to such expiration or termination. Section 3.7.3 (Confidential Information), Section 5.9 (Late Payments), Section 5.11 (Records), Article 7 (Confidentiality), Section 8.6 (Limitation of Liability), Article 9 (Indemnification.), this Section 10.4 (Accrued Obligations/Survival), Section 10.5 (Effects of Terminations), Section 11 (Dispute Resolution), Section 12.13 (Governing Law) and Section 12.15 (Notices) shall survive expiration or termination of this Agreement for any reason.
10.5. Effects of Terminations.
10.5.1. If Innovent terminates this Agreement its entirety or terminates its activities in a particular region in the Territory pursuant to Section 10.3 in each case, then:
(a) If there are any ongoing clinical trials being conducted by or on behalf of Innovent or its Affiliate at the time the notice of termination is sent, Innovent will, as of the termination date: (i) promptly transfer to AnHeart or its designee some or all of such clinical trials and the activities related to or supporting such trials; or (ii) terminate such clinical trials; in each case upon request from AnHeart and at AnHeart’s sole discretion.
(b) If requested by AnHeart, Innovent will: (i) promptly transfer to AnHeart or its designee copies of all data, reports, records, materials that relate to the Product(s), (ii) provide AnHeart or its designee with all information necessary or desirable to cross-reference or assume responsibility for any Regulatory Filings, as the case may be, in Innovent’s name with respect to the Product(s) in the Territory, and (iii) return to AnHeart all relevant records and materials in Innovent’s possession or control containing Confidential Information of AnHeart relating to the Product(s).
(c) Innovent will engage in good faith negotiation regarding the commercial terms and consideration for an exclusive royalty-bearing license, with the right to sublicense, under any Patents and Know- how that are Controlled by Innovent that are necessary or useful for AnHeart to make, have made, use, sell, offer for sale, import, and export the Licensed Compound or the Product(s) in the Territory.
(d) If requested by AnHeart, Innovent will grant and will cause to be granted to AnHeart an exclusive royalty-bearing license, with the right to sublicense, to use any Trademarks specific to the Product in such Terminated region. Upon termination of this Agreement, at the request of AnHeart, Innovent will engage in good faith negotiation regarding the commercial terms and consideration for an exclusive royalty-bearing license, with the right to sublicense for AnHeart or its designee to use any Trademarks specific to the Product(s). It is understood that such license will not include the Innovent name or any trademark, trade name, or logo of Innovent itself.
(e) The licenses granted to Innovent under Section 2.1 will terminate in the Territory if this Agreement is terminated.
10.5.2. If AnHeart terminates this Agreement in its entirety or terminates its activities in a particular region in the Territory pursuant to Section 10.2, then:
(a) If there are any ongoing clinical trials with respect to a Product being conducted by or on behalf of Innovent or its Affiliates at the time of notice of termination, Innovent shall, as of the termination date, promptly transfer some or all of such clinical trials and the activities related to or supporting such trials to AnHeart or its designee, or complete or terminate such clinical trials, in each case as requested by AnHeart [**Redacted**].
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(b) If requested by AnHeart, Innovent will promptly assign and transfer to AnHeart or its designee all Regulatory Filings for Product(s) that are held by Innovent or its Affiliates, and shall take such actions and execute such other instruments, assignments and documents as may be necessary to effect the transfer of rights under the Regulatory Filings to AnHeart or its designee. If Applicable Law prevents or delays the transfer of ownership of a Regulatory Filing, Innovent shall grant AnHeart or its designee a permanent, exclusive right of access and reference to such Regulatory Filing for a Product, and shall fully cooperate to make the benefits of such Regulatory Filings available to AnHeart or its designee. At the request of AnHeart, within [**Redacted**] calendar days of such termination, Innovent will provide to AnHeart or its designee copies of all such Regulatory Filings, and of all preclinical and clinical data (including investigator reports, both preliminary and final, statistical analyses, expert opinions and reports, safety, and other electronic databases) and other Know-How controlled by Innovent.
(c) Notwithstanding other provisions in this Section 10.5.2, (i) if AnHeart terminates this Agreement in its entirety pursuant to Section 10.2.1 or Section 10.2.3, upon AnHeart’s request and subject to Section 10.5.4, Innovent will grant AnHeart an exclusive, fully paid-up license, with the right to sublicense, under any Patents and Know-how that are Controlled by Innovent that are reasonably necessary or useful to make, have made, use, sell, offer for sale, import, and export the Licensed Compounds or the Product(s) in the Territory; and if (ii) AnHeart terminates this Agreement in its entirety pursuant to Section 10.2.2, subject to Section 10.5.4, Innovent will engage in good faith negotiation regarding the commercial terms and consideration for an exclusive royalty-bearing license, with the right to sublicense, under any Patents and Know- how that are Controlled by Innovent that are necessary or useful for AnHeart to make, have made, use, sell, offer for sale, import, and export the Licensed Compound or the Product(s) in the Territory.
(d) Upon AnHeart’s request, Innovent will grant AnHeart or its designee an exclusive, fully paid-up license, with the right to sublicense, to use any Trademarks specific to the Product(s) in the Territory. It is understood that such assignment will not include the Innovent name or any trademark, trade name, or logo of Innovent itself.
(e) If requested by AnHeart in writing, Innovent will reasonably cooperate with AnHeart or its designee to facilitate a smooth, orderly, and prompt transition of the development and commercialization of the Product(s) to AnHeart or its designee upon termination, [**Redacted**].
(f) The licenses granted to Innovent under Section 2.1 will terminate in the Territory if this Agreement is terminated.
10.5.3. Each Party acknowledges that the other Party’s obligations following any termination are subject to, and may be limited by, all Applicable Laws, rules, regulations, or contractual restrictions.
10.5.4. Wind-Down. To avoid a disruption in the supply of the terminated Product in the terminated Territory or region, if this Agreement is terminated by the either Party after the First Commercial Sale of the terminated Product in the terminated region (if the termination is solely with respect to the terminated region) or in the Territory (if the termination is with respect to the Agreement in its entirety), Innovent and its Affiliates and subcontractors or other related parties (the “Innovent Related Parties”) may, at their discretion, continue to distribute and sell such terminated Product in the terminated region (if the termination is solely with respect to the terminated region) or in the Territory (if the termination is with respect to the Agreement in its entirety), in accordance with the terms and
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conditions of this Agreement, for a period reasonably sufficient for them to sell off all amounts of terminated Product in their inventory as amicably negotiated and agreed by the Parties, which under no circumstance shall not to exceed [**Redacted**] months from the effective date of such termination (the “Wind-Down Period”). During the Wind-Down Period, Innovent shall continue to make any and all applicable payments to AnHeart for the terminated Product sold or disposed by Innovent or Innovent Related Parties. After the Wind-Down Period, Innovent or Innovent Related Parties shall not sell the terminated Product in the terminated region (if the termination is solely with respect to the terminated region) or in the Territory (if the termination is with respect to the Agreement in its entirety). Within [**Redacted**] days of expiration of the Wind-Down Period, Innovent shall notify AnHeart of any quantity of the terminated Product remaining in Innovent’s and Innovent Related Parties’ inventory and AnHeart [**Redacted**] to purchase any such quantities of the terminated Product, as applicable, from Innovent and Innovent Related Parties [**Redacted**].
11. Dispute Resolution.
11.1. Between the Parties. In the event of a dispute between the Parties arising out of or related to the terms of this Agreement, either Party may request that the Parties engage in good faith discussions to resolve such dispute. Within [**Redacted**] calendar days of such request, each Party will appoint an appropriate representative to engage discussions to resolve the dispute in a mutually acceptable manner. Such representative will have a reasonable level of expertise in the subject matter of the dispute and possess the requisite authority to resolve the dispute. If such representatives are unable to resolve the dispute within [**Redacted**] calendar days, either Party may provide a written request to submit the dispute for discussions between Executive Officers appointed by the respective Chief Executive Officers of each Party. If the Executive Officers are unable to resolve the dispute within [**Redacted**] calendar days after referral, either Party may provide a written request to refer the dispute for arbitration.
11.2. Arbitration. In the event of a dispute, that cannot be resolved through good faith negotiations as set forth above, the dispute shall be referred to and finally resolved by arbitration in the following manner:
(g) The dispute shall be settled by [**Redacted**] in accordance with the arbitration rules of [**Redacted**] (the “[**Redacted**] Rules”) in force when the Arbitration Notice is submitted in accordance with the [**Redacted**] Rules. There shall be three (3) arbitrators.
(h) The arbitral proceedings shall be conducted in English. To the extent that the [**Redacted**] Rules are in conflict with the provisions of this Article 11.2, including the provisions concerning the appointment of the arbitrator, the provisions of this Article 11.2 shall prevail.
(i) Each Party to the arbitration shall cooperate with each other Party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other Party in connection with such arbitral proceedings, subject only to any confidentiality obligations binding on such Party.
(j) The award of the arbitral tribunal shall be final and binding upon the Parties a party thereto, and the prevailing Party may apply to a court of competent jurisdiction for enforcement of such award.
(k) The existence, nature, and results of, as well as any documents relating to, any arbitration shall be treated as Confidential Information by the Parties.
(l) Each Party shall have the right to seek injunctive or other equitable relief from a court of competent jurisdiction that may be necessary to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.
12. Miscellaneous Provisions.
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12.1. Relationship of the Parties. AnHeart and Innovent agree that the relationship between them established by this Agreement is that of independent contractors. The Parties further agree that this Agreement does not, is not intended to, and should not be construed to establish an employment, agency, partnership, joint venture, or any other relationship between them. Except as may be specifically provided herein, neither Party has any right, power, or authority, nor may they represent themselves as having any right, power, or authority, to assume, create or incur any expense, liability, or obligation, express or implied, on behalf of the other Party, or otherwise act as an agent for the other Party for any purpose.
12.2. No Third Party Beneficiaries. No person or entity other than AnHeart, Innovent and their respective Affiliates, permitted assignees and sublicensees may be deemed an intended beneficiary or have any right to enforce any obligation of this Agreement.
12.3. Subordination. Notwithstanding any provisions in this Agreement, rights and license granted to Innovent under this Agreement are subordinate to those granted to AnHeart [**Redacted**].
12.4. Assignments. Neither Party may assign this Agreement or any of its rights or obligations hereunder to any Third Party without the written consent of the other Party, except subject to Section 12.5, in the context of a merger, acquisition, sale or other transaction involving all or substantially all of the assets of the Party seeking to assign and that are related to this Agreement, in which case such Party in its sole discretion may assign its rights and obligations under this Agreement. Notwithstanding the foregoing, Innovent may assign this Agreement or any of its rights or obligations hereunder to any of its Affiliates without the written consent of AnHeart. No assignment or transfer of this Agreement is valid or effective unless and until the assignee/transferee agrees in writing to be bound by the provisions of this Agreement. The terms and conditions of this Agreement will be binding on and inure to the benefit of the successors and permitted assigns of the Parties. Any attempted assignment not in accordance with the terms of this Agreement will be void.
12.5. Effects of Change of Control. If there is a Change of Control, then the Party experiencing such Change of Control (“Acquired Party”) shall provide written notice to the other Party (“Non-Acquired Party”) at least [**Redacted**] days prior to completion of such Change of Control, subject to any confidentiality obligations of the Acquired Party then in effect (but in any event shall notify the Non-Acquired Party within [**Redacted**] days after completion of such Change of Control).
12.6. Termination of DS License Agreement. AnHeart agrees to promptly notify Innovent upon its delivery of a notice of termination of the DS License Agreement to DS or upon its receipt of a notice of termination of the termination of the DS License Agreement, [**Redacted**].
12.7. Termination or amendment of Technology License Agreement. If there is any amendment or cancellation of the [**Redacted**], AnHeart will ensure and will cause AnHeart US to ensure that Innovent’s rights and obligations under this Agreement shall not be adversely affected.
12.8. Performance by Affiliates. Innovent may perform its obligations under this Agreement through one or more Affiliates without the need to obtain prior approval from AnHeart. Innovent will nonetheless remain solely responsible for the performance of its obligations under this Agreement by its Affiliate(s) and for any breach of the terms of this Agreement by its Affiliate(s).
12.9. No Implied Waivers; Rights Cumulative. The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement does not constitute a waiver of that right or excuse a similar subsequent failure to perform such term or condition. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver is effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, may be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by law or otherwise, are cumulative and not in the alternative to any other rights or remedies that may be available to such Party.
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12.10. Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable under law in any jurisdiction, the Parties will negotiate in good faith a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions of this Agreement will remain in full force and effect in such jurisdiction and will be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible. A holding of invalidity, illegality, or unenforceability of a provision in one jurisdiction will not affect the validity, legality, or enforceability of such provision in any other jurisdiction.
12.11. Entire Agreement; Amendments. This Agreement, together with all appendices, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all previous arrangements, whether written or oral, with respect to the subject matter contained herein. Any amendment or modification to this Agreement must be made in a writing signed by both Parties.
12.12. Force Majeure. Neither Party will be liable to the other Party for failure or delay in performing of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by; epidemic, earthquake, riot, civil commotion, rebellion, insurrection, invasion, fire, acts of God, war, terrorist acts, strike, storm, flood, or governmental acts or restriction, or other cause that is beyond the reasonable control of the affected Party. The Party affected by such force majeure must provide the other Party with full particulars thereof (including its best estimate of the likely extent and duration of the interference with its activities) as soon as it becomes aware of the same, but in no event more than [**Redacted**] calendar days after becoming aware of it. The affected Party will use Commercially Reasonable Efforts to overcome the difficulties created by the force majeure and to resume performance of its obligations as soon as practicable. In such event, the Parties will meet promptly to determine an equitable solution to minimize or accommodate the effects of any such event, including the possibility of terminating this Agreement.
12.13. Governing Law. This Agreement shall be governed by, and any disputes, claims or controversies in connection with this Agreement, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, or termination, shall be resolved in accordance with, the laws of [**Redacted**] without regard to its conflict of laws rules.
12.14. [Intentionally Left Blank].
12.15. Notices. Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by email (receipt verified) or by express courier service or five (5) calendar days after it was sent by registered letter, return receipt requested (or its equivalent), provided that no postal strike or other disruption is then in effect or comes into effect within [**Redacted**] calendar days after such mailing, to the Party to which it is directed at its address or email shown below or such other address or email as such Party shall have last given by notice to the other Party. If such notice, request, delivery, approval, or consent is transmitted by email, the sending Party shall also transmit an identical copy of such documentation to the receiving Party by express courier service at the address shown below or to such other addresses and emails as a Party may designate by written notice.
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If to Innovent, addressed to:
Innovent Biologics (Suzhou) Co. Ltd.,
168 Dongping Street, Suzhou Industrial Park, China 215123
Attn: [**Redacted**]
With a copy to:
Innovent Biologics(Suzhou) Co. Ltd.,
168 Dongping Street, Suzhou Industrial Park, China 215123
Attn: [**Redacted**]
If to AnHeart, addressed to:
AnHeart Therapeutics (Hangzhou) Co., Ltd.
Room 423, Building No. 1, Heda Pharma Town,
No. 291 Fucheng Road, Xiasha, Qiantangxin District
Hangzhou, Zhejiang 310018 China
Attention: [**Redacted**]
Telephone: [**Redacted**]
Email: [**Redacted**]
12.16. No Strict Construction. This Agreement has been prepared jointly by the Parties and should not be strictly construed against either Party.
12.17. Interpretation. The captions and headings in this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. Unless specified to the contrary, references to Sections or Appendix mean those particular Sections and Appendices to this Agreement and references to this Agreement include all attachments hereto. Unless context otherwise clearly requires, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation;” (b) the word “day” or “year” means a calendar day or year unless otherwise specified; (c) the word “notice” means notice in writing (whether or not specifically stated); (d) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this Agreement (including any exhibits); (e) the word “or” shall be construed as the inclusive meaning identified with the phrase “and/or;”; (f) words using the singular or plural number also include the plural or singular number, respectively; and (g) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement law, rule or regulation thereof.
12.18. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, and all of which together, will constitute one and the same. This Agreement may be executed and delivered electronically and upon such delivery such electronic signature will be deemed to have the same effect as if the original signature had been delivered to the other Party.
12.19. Use of Name. Except as otherwise provided herein, neither Party has any right, express or implied, to use the name or other designation of the other Party or any other trade name, trademark, or logo of the other Party in any manner or for any purpose in connection with the performance of this Agreement, except for use in connection with notices or filings required by law, rule, or regulation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, AnHeart and Innovent have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
| INNOVENT BIOLOGICS (SUZHOU) CO. LTD. (信达生物制药（苏州）有限公司)(Company Seal) |
ANHEART THERAPEUTICS (HANGZHOU) CO., LTD. (葆元生物医药科技（杭州）有限公司) (Company Seal) | |||
| Signature:
/s/ De-Chao Michael Yu |
Signature:
/s/ Junyuan Wang | |||
| Printed Name: De-Chao Michael Yu | Printed Name: Junyuan Wang | |||
| Title: Chief Executive Officer | Title: Chief Executive Officer | |||
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Exhibit A
ANHEART PATENTS
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
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The molecular structure of AB-106
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Exhibit B
Key Terms for [**Redacted**]
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| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] |
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Execution Version
Exhibit C
Data Transfer
The Parties will work together in good faith to compile a list of documents for the data transfer.
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Execution Version
Exhibit D
Deduction of Third-Party License Payment(s)
According to Section 5.5.3, If Innovent does enter into such Third Party License, Innovent is allowed to deduct a [**Redacted**] of the royalty obligations due to such Third Party from any royalties due by Innovent to AnHeart with a maximum deduction cap of [**Redacted**] of all royalties in any given year.
[**Redacted**].
Page 40 of 40
Exhibit 10.2
Confidential
Execution Version
In accordance with Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted because the information (i) is not material and (ii) would likely cause competitive harm to Nuvation Bio if publicly disclosed. The omissions have been indicated by “[**Redacted**]”.
AMENDMENT TO
COLLABORATION AND LICENSE AGREEMENT
BETWEEN
ANHEART THERAPEUTICS (HANGZHOU) CO., LTD.
(葆元生物医药科技（杭州）有限公司 )
AND
INNOVENT BIOLOGICS (SUZHOU) CO., LTD.
(信达生物制药（苏州）有限公司 )
Date November 30, 2022
Confidential
Execution Version
This Amendment to Collaboration and License Agreement (this “Amendment”) is entered into as of [ ] (the “Execution Date”) by and between AnHeart Therapeutics (Hangzhou) Co., Ltd. (葆元生物医药科技（杭州）有限公司), a Chinese corporation having an office and place of business at Room 401-19, Building 6, Yinhai Science and Technology Innovation Center, No. 501 Fucheng Road, Xiasha Street, Qiantang District, Hangzhou City, Zhejiang Province, China (“AnHeart”); and Innovent Biologics (Suzhou) Co. Ltd., (信达生物制药（苏州）有限公司), a Chinese corporation having an office and place of business at 168 Dongping Street, Suzhou Industrial Park, Suzhou City, Jiangsu Province, China (“Innovent”). AnHeart and Innovent are each referred to herein by name, individually as a “Party”, or collectively as the “Parties”.
RECITALS
WHEREAS, the Parties have entered into the Collaboration and License Agreement (the “Agreement”) dated as of May 31, 2021, under which, subject to the terms and conditions of the Agreement, AnHeart grants to Innovent and its Affiliates a sub-licensable, royalty-bearing, exclusive right and sublicense in the Field in the Territory under the AnHeart Technology to use, offer for sale, sell, market, distribute, and import the Licensed Compound and Product(s).
WHEREAS, pursuant to Section 5.2 of the Agreement, Innovent shall pay AnHeart a non-refundable, non-creditable payment of [**Redacted**] Dollars within [**Redacted**] Business Days after the first anniversary date of the Agreement.
WHEREAS, pursuant to Section 5.3 of the Agreement, if [**Redacted**], Innovent shall pay AnHeart a milestone payment of [**Redacted**] US Dollars within [**Redacted**] Business Days after the event described above. The Parties acknowledge [**Redacted**]
WHEREAS, the Parties intend to enter into this Amendment to amend and supplement certain terms of the Agreement in relation to the payment and some other matters by Innovent to AnHeart.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements and covenants set forth herein, the Parties agree as follows:
SECTION 1
DEFINITIONS
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.
SECTION 2
AMENDMENTS TO THE AGREEMENT
Section 2.01 Amendment to Section 1 of the Agreement.
2.01.1. Section 1.38 of the Agreement shall be deleted and replaced with following:
“1.38. “Regulatory Filings” means, collectively, all INDs for the Licensed Compound, the DMF, any NDA application, any supplementary applications, any designations such as BTDs, ODDs, and any other applications for Marketing Approval, and other filings, such as annual reports, DSUR, required by any Regulatory Authority in any region in the Territory; and correspondence, communication and feedback with or from the relevant Regulatory Authority in the Territory.”
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2.01.2. The following paragraphs shall be inserted to Section 1 of the Agreement after the definition of “Valid Claim”:
“1.46 “[**Redacted**]” means the [**Redacted**] The dates of [**Redacted**] are described under the Exhibits E and F respectively, subject to any adjustment pursuant to Section [**Redacted**]”
Section 2.02 Amendment to Article 3 of the Agreement.
2.02.1. The following sentences shall be added after the last sentence of Section 3.2.3 of the Agreement:
“Regarding Innovent’s final review of any NDA submission package, the draft submitted for such review [**Redacted**] For the avoidance of doubt, subject to the prior written approval of Innovent, the NDA filings of Product shall [**Redacted**] for the packaging, label and insert of Product.”
2.02.2. The following Section shall be added after Section 3.2.4 of the Agreement:
“3.2.5 Rolling Review. For expediting the reviewing process under this Agreement, the Parties agree to set up the rolling review process for any Regulatory Filings. Under such process, both Parties agree to within reasonable period share any Regulatory Filings through instant documents-sharing tools (e.g. sharepoint online) with the other Party for its review. For the purpose of clarity, with respect to any NDA submission package, AnHeart will share with Innovent the reasonably complete draft of M1 to M5 sections on a section-to-section basis. AnHeart shall have sole discretion to decide whether such draft section of M1 to M5 is reasonably complete, as well as when to provide Innovent with such reasonably complete draft, subject to the timetable in Exhibit E and Exhibit F (as adjusted pursuant to Section 3.8).”
2.02.5. The following Section shall be added after Section 3.7.3 of the Agreement:
“3.8 Timelines. Subject to 5.3.2(d), AnHeart shall follow the Development and Regulatory Filing timelines described under Exhibits E and F. For clarity, the Parties may mutually agree to a timeline or an adjustment to timeline related to Development and/or Regulatory Filing under this Agreement through JDC meeting(s) and in writing. If the Parties cannot reach a consensus to such timeline or adjustment, AnHeart shall have the final decision-making authority to it.”
Section 2.03 Amendment to Section 5.2 of the Agreement.
Section 5.2 of the Agreement shall be amended and restated in its entirety to read as follows:
“5.2 Research and Development Reimbursement. Upon the receipt of such invoices, Innovent will pay AnHeart a non-refundable, non-creditable payment of [**Redacted**] US Dollars [**Redacted**] (the “R&D Reimbursement”), to be paid in four installments of (i) [**Redacted**] US Dollars within [**Redacted**] Business Days after the Effective Date which Innovent has fully paid and AnHeart has fully received, (ii) [**Redacted**] US Dollars immediately upon the execution of the Amendment, (iii) [**Redacted**] US Dollars to AnHeart within [**Redacted**] Business Days after [**Redacted**] and (iv) [**Redacted**] US Dollars within [**Redacted**] Business Days after the second anniversary date of the Effective Date, respectively.”
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Execution Version
Section 2.04 Amendment to Section 5.3 of the Agreement.
Section 5.3 of the Agreement shall be amended and restated in its entirety to read as follows:
“5.3 Development Milestones.
5.3.1 Innovent will pay AnHeart the following development milestones within twenty (20) Business Days based upon events described in the below table for the Development made by AnHeart under this Agreement. In no case shall any milestone be paid more than once for a given event, regardless of the number of Products that subsequently achieves a given event and even if such Product is later used in a Combination Product. All amounts are shown in U.S. Dollars. The maximum total amount payable under this Section 5.3 shall not exceed [**Redacted**] U.S. Dollars (US[**Redacted**]).
| Development Milestone |
Payment (USD $) | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] |
5.3.2 Notwithstanding the payment schedule in Section 5.3.1,
(a) Innovent shall pay the milestone payment of [**Redacted**] US Dollars relating to the achieved development milestone “[**Redacted**]” to AnHeart immediately upon the execution of the Amendment; and
(b) if AnHeart fails to [**Redacted**] for more than [**Redacted**] months after the NDA Filing Date described in Exhibit E and such delay is not caused by any force majeure event as provided under Section 12.12 (Force Majeure) of this Agreement or fault of Innovent, the payment for the development milestone of “[**Redacted**]” as set forth in the table in Section 5.3.1 shall be reduced from [**Redacted**] US Dollars [**Redacted**] to [**Redacted**] US Dollars [**Redacted**].”; and
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(c) if AnHeart fails to [**Redacted**] for more than [**Redacted**] months after the [**Redacted**] Date described in Exhibit F and such delay is not caused by any force majeure event as provided under Section 12.12 (Force Majeure) of this Agreement or fault of Innovent, the payment for the development milestone of “[**Redacted**]” as set forth in the table in Section 5.3.1 shall be reduced from [**Redacted**] US Dollars [**Redacted**] to [**Redacted**] US Dollars [**Redacted**].”; and
(d) The Parties agree that the [**Redacted**] described under Exhibits E and/or F respectively shall separately be extended for the total number of days equal to the sum of: (i) the number of days that equals to the positive result of the period of time (“Innovent Feedback Time”) that Innovent takes to provide final feedbacks on any corresponding [**Redacted**] minus [**Redacted**] days (for the purpose of clarity, Innovent Feedback Time commences from the date when AnHeart provides Innovent with the [**Redacted**]); and (ii) the number of days that equals to the positive result of the period of time that a Regulatory Authority takes to provide feedbacks on the corresponding [**Redacted**] minus [**Redacted**] days.”
Section 2.05 Amendment to Section 5.9 of the Agreement.
Section 5.9 of the Agreement shall be amended and restated in its entirety to read as follows:
“5.9 Late Payments. Innovent shall pay interest to AnHeart on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate per annum equal to the London Interbank Offered Rate of interest plus [**Redacted**], as reported by The Wall Street Journal for the applicable period, to the extent permitted by Applicable Law, calculated on the number of days such payment is delinquent. This Section 5.9 will in no way limit any other remedies available to AnHeart.”
SECTION 3
MISCELLANEOUS
Section 3.01 Entire Agreement.
This Amendment together with the Agreement constitutes the entire agreement of the Parties hereto with respect to the subject matter of the Agreement and supersedes all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof. Except as supplemented to or amended by this Amendment, all the other terms of the Agreement shall continue in full force and effect. References to the Agreement shall mean the Agreement as amended by this Amendment.
Section 3.02 Wavier
By entering into this Amendment, each Party agrees to release, discharge and waive any and all claims which it has or may have against the other Party, arising out of, or in connection with the other Party’s performance or breach of the Agreement (if any) before the Execution Date.
Section 3.03 Governing Law; Dispute Resolution.
This Amendment shall be governed by, and any disputes, claims or controversies in connection with this Amendment, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, or termination, shall be resolved in accordance with, the laws of the [**Redacted**] without regard to its conflict of laws rules. Any dispute arising out of or in connection with this Amendment shall be solved according to Section 11 of the Agreement.
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Section 3.04 Counterparts.
This Amendment may be executed and delivered (including by facsimile transmission and/or through PDF documents) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same amendment.
Section 3.05 Effectiveness.
This Amendment shall, after being duly executed by the Parties, come into effect and be binding upon the Parties since the Execution Date.
[Remainder of page intentionally left blank]
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Execution Version
IN WITNESS WHEREOF, AnHeart and Innovent have caused this Amendment to be executed by their duly authorized representatives as of the date first written above.
| ANHEART THERAPEUTICS (HANGZHOU) CO., LTD. (葆元生物医药科技（杭州）有限公司) (Company Seal) | ||
| Signature: | /s/ Junyuan Wang | |
| Printed Name: Junyuan Wang | ||
| Title: Chief Executive Officer | ||
Signature Page to Amendment to Collaboration and License Agreement
Confidential
Execution Version
IN WITNESS WHEREOF, AnHeart and Innovent have caused this Amendment to be executed by their duly authorized representatives as of the date first written above.
| INNOVENT BIOLOGICS (SUZHOU) CO., LTD. (信达生物制药（苏州）有限公司 )(Company Seal) | ||
| Signature: | /s/ Dan Qiaorong | |
| Printed Name: Dan Qiaorong | ||
| Title: Legal Representative | ||
Signature Page to Amendment to Collaboration and License Agreement
Confidential
Execution Version
Exhibit E
[**Redacted**] timeline, aligned on Aug-2022-JDC Meeting
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
Exhibit E to Collaboration and License Agreement
Confidential
Execution Version
Exhibit F
[**Redacted**] timeline, aligned on Aug-2022-JDC Meeting
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | |||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | ||
Exhibit F to Collaboration and License Agreement
Exhibit 10.3
CONFIDENTIAL
In accordance with Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted because the information (i) is not material and (ii) would likely cause competitive harm to Nuvation Bio if publicly disclosed. The omissions have been indicated by “[**Redacted**]”.
LICENSE AND COMMERCIALIZATION AGREEMENT
This License and Commercialization Agreement (this “Agreement”), dated October 27th, 2023 (the “Effective Date”), is entered into by and between: AnHeart Therapeutics Inc., a Delaware corporation having its office and place of business at 777 3rd avenue, New York, NY 10017, USA (“AnHeart”); and Nippon Kayaku Co., Ltd., a Japanese corporation having its office and place of business at 1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-0005, Japan (“NK”). AnHeart and NK are each referred to herein by name, individually as a “Party”, or collectively as the “Parties”.
RECITALS:
WHEREAS, AnHeart owns or controls certain rights to the Licensed Compound (hereinafter defined);
WHEREAS, NK desires to commercialize products containing the Licensed Compound for therapeutic uses in humans for cancer treatment in the Territory (hereinafter defined); and
WHEREAS, AnHeart desires to grant to NK, and NK desires to obtain from AnHeart, an exclusive license and sublicense to commercialize the Licensed Compound in the Territory on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements and covenants set forth herein, the Parties agree as follows:
1. Definitions.
As used in this Agreement, each capitalized term used herein shall have the meaning set forth below unless context clearly and unambiguously dictates otherwise.
1.1 “Abandoned AnHeart Patent” has the meaning set forth in Section 9.2.1.
1.2 “Affiliate” means, with respect to a legal person or entity, any other legal person or entity that controls, is controlled by or is under common control with such legal person or entity, for so long as such control exists. For purposes of this definition only, “control” shall mean: (a) beneficial ownership (direct or indirect) of more than fifty percent (50%) of the shares of the person entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, in the election of the corresponding managing authority); or (b) the de facto ability to control or direct the management of such person or entity.
1.3 “AnHeart” has the meaning set forth in the preamble.
1.4 “AnHeart Cure Period” has the meaning set forth in Section 13.3.1.
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1.5 “AnHeart Know-How” means any Know-How Controlled by AnHeart or any of its Affiliates as of the Effective Date or at any time during the Term that is related to the Licensed Compound or any Licensed Product(s) and the exploitation thereof in the Territory.
1.6 “AnHeart Patents” means any Patent Controlled by AnHeart or any of its Affiliates as of the Effective Date or at any time during the Term with a Valid Claim Covering the Licensed Compound or any Licensed Product, or that are otherwise reasonably necessary or useful for Commercializing the Licensed Compound or any Licensed Product in the Territory, or that would otherwise Cover manufacturing, using, selling, offering for sale, importing, or otherwise exploiting the Licensed Compound or any Licensed Product in the Territory. The AnHeart Patents as of the Effective Date in the Territory are set forth in Exhibit A.
1.7 “Anti-Bribery Requirement” means any Applicable Law, the principal purpose of which is to address prohibitions on bribery or other unlawful payments in the Territory, including the Foreign Corrupt Practices Act in the US and all equivalent laws in any other applicable jurisdiction.
1.8 “Applicable Law” means any law, statute, ordinance, code, rule or regulation that has been enacted by a Governmental Authority (including, without limitation, any Regulatory Authority) and is in force as of the Effective Date or comes into force during the Term, in each case to the extent that the same is applicable to the performance by the Parties of their respective obligations under this Agreement.
1.9 “Business Day” means any day other than a Saturday, a Sunday, or a day on which commercial banks located in the United States or Japan are authorized or required by law to remain closed.
1.10 “Calendar Quarter” means each period of three (3) consecutive calendar months, ending March 31, June 30, September 30, and December 31.
1.11 “Calendar Year” means the period of time beginning on January 1 and ending December 31, except for the first year which shall begin on the Effective Date and end on December 31 of the Calendar Year in which the Effective Date is encompassed and the last year of the Term shall begin on January 1 of the last Calendar Year of the Term and end on the last day of the Term.
1.12 “Combination Product(s)” means any pharmaceutical product which (a) as a single formulation, comprises the Licensed Product and one or more additional active pharmaceutical or biologic ingredients approved by a Regulatory Authority and is suitable for sale as a distinct product in the Territory, or (b) in a single package or container intended for coordinated use and sold for a single price, comprises the Licensed Product and one or more additional active pharmaceutical or biologic ingredients approved by a Regulatory Authority in the Territory.
1.13 “Commercially Reasonable Efforts” means, with respect to a Party, those efforts and resources, as applicable, relating to a certain activity or activities, including, without limitation, the research, development and commercialization of a product, which a reasonably comparable pharmaceutical company would use for a product owned by it, or to which it has rights, which is of similar market potential, at a similar stage in its product life, taking into account the establishment of the product in the marketplace, the competitiveness of the marketplace, the proprietary position of the product, the regulatory structure involved, the profitability of the product and other relevant factors.
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1.14 “Commercialization” or “Commercialize” means any activities associated with using, marketing, promoting, distributing, offering for sale or selling and importing Licensed Product(s) and shall include activities (a) related to packaging or product labelling or (b) required to fulfill ongoing regulatory obligations after receipt of Marketing Approval.
1.15 “Commercial Supply Agreement” has the meaning set forth in Section 6.2.
1.16 “Competing Product” means (a) any pharmaceutical product other than a Licensed Product that is [**Redacted**].
1.17 “Confidential Information” has the meaning provided in Section 10.1.
1.18 “Control”, when used in reference to intellectual property rights, means possession of the ability (whether by license or ownership, or through an Affiliate having possession by license or ownership) to grant a license or sublicense under such intellectual property rights within the scope set forth in this Agreement, without violating the terms of any written agreement with any Third Party. “Controlled” has corelative meaning.
1.19 “Cover”, “Covering” or “Covered” means, with respect to a Patent, that, but for ownership by or a license granted to a Party under a Valid Claim included in such Patent, the practice by such Party of an invention claimed in such Patent would infringe such Valid Claim (or in the case of a Patent that is a patent application, would infringe a Valid Claim in such patent application if it were to issue as a patent).
1.20 “Development” or “Develop” means non-clinical, clinical and regulatory activities with respect to the Licensed Compound, the Licensed Product(s) or companion diagnostics therefor, including (a) investigator-initiated trials, (b) the submission of filings with applicable Regulatory Authorities to seek Marketing Approval, and (c) clinical trials conducted after Marketing Approval.
1.21 “DMF” means a Drug Master File as more fully defined in 21 C.F.R. §314.420 in the United States or similar documents filed with a Regulatory Authority in another jurisdiction.
1.22 “DS License Agreement” means that certain Third Party License by and between AnHeart and Daiichi Sankyo Company, Limited, dated as of December 7, 2018 and any amendment thereof.
1.23 “Effective Date” has the meaning set forth in the preamble.
1.24 “Extending” means taking any actions to extend the term of a Patent, including preparing and filing requests for patent term extensions, supplemental protection certificates, pediatric exclusivity or similar protections. “Extend” and “Extension” have correlative meaning.
1.25 “Field” means the prevention, or treatment of any indication in humans.
1.26 “First Commercial Sale” means the date on which the Licensed Product is first sold by NK, its Affiliate or Sublicensees to Third Parties for use or consumption by end users in the Territory after all required Marketing Approvals have been granted, or such sale is otherwise permitted, by the Regulatory Authority in the Territory, excluding (a) any sale for to an Affiliate or Sublicensee, unless such Affiliate or Sublicensee is the last person or entity in the distribution chain of the Licensed Product; or (b) any use of such Licensed Product in clinical trials or non-clinical development activities with respect to such Licensed Product by or on behalf of a Party, or disposal or transfer of such Licensed Product for a bona fide charitable purpose, compassionate use, or samples if no monetary consideration is received for such use or transfer.
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1.27 “GCP” means the then current standards for clinical trials for pharmaceuticals, as set forth in the ICH guidelines and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good clinical practice as are required by the FDA, European Union and other organizations and governmental agencies in countries in which a Licensed Product is intended to be sold to the extent such standards are not less stringent than the ICH guidelines.
1.28 “GLP” means the applicable then-current standards for laboratory activities for pharmaceuticals or biologicals, as set forth in 21 C.F.R. part 58, as amended from time to time, or guidance documents promulgated thereunder, together with any similar standards of good laboratory practice as are required by any Regulatory Authority in any applicable jurisdiction.
1.29 “GMP” means the applicable then-current quality assurance standards that ensure that pharmaceutical products are consistently produced and controlled in accordance with the quality standards appropriate to their intended use as defined in 21 C.F.R. § 210 and 211, European Directive 2003/94/EC, Annex 16, Japanese drug manufacturing regulations, ICH guidelines, and other applicable guidance or equivalent laws in other jurisdictions.
1.30 “Governmental Authority” means any agency, department, authority, body, institution or other instrumentality of any national, state, country, city or other political subdivision.
1.31 “GxP” means, collectively, all applicable good practice quality guidelines and regulations, encompassing such internationally recognized standards as GMP, Good Clinical Practice (GCP), GLP, Good Distribution Practice (GDP), Good Quality Practice (GQP), Good Vigilance Practice (GVP), Good Post-Marketing Study Practice (GPSP), Good Review Practice (GRP), and any other applicable practice, in each case (a) as such terms are defined from time to time by the FDA or other applicable Governmental Authorities pursuant to its regulations, guidelines or otherwise and (b) applicable from time to time to the Development, manufacturing, Commercialization, importing or other exploitation of the Licensed Compound or Licensed Product(s) or any intermediate thereof pursuant to Applicable Law.
1.32 “Indemnify” is defined in Section 12.1
1.33 “Initial Indication” means ROS1 positive non-small cell lung cancer.
1.34 “Invention” means any new or useful process, machine, manufacture, or composition of matter relating to or comprising the Licensed Compound or a Licensed Product, and any improvement, enhancement, modification, or derivative work to any Licensed Technology that is conceived or first reduced to practice or first demonstrated to have utility during the Term in connection with either Parties’ activities with respect to the Licensed Compound and Licensed Product(s).
1.35 “Know-How” means confidential and/or proprietary technical or business information, including (a) any proprietary scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including databases, safety information, practices, methods, techniques, specifications, instructions, processes, formulations, formulae, methods, protocols, expertise, knowledge, know-how, inventions, discoveries, improvements, trade secrets, skill, experience, test data including pharmacological, pharmaceutical, physical, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data (including patient report forms, preliminary and final investigators’ reports, statistical analyses, expert opinions and reports, safety and other electronic databases, Regulatory Filings and communications, and the like), analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information and descriptions, results and data and (b) any proprietary biological, chemical or physical materials, that exists as of the Effective Date or is discovered, developed or acquired during the Term, and whether patentable or unpatentable. Know-How does not include any Patents.
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1.36 “Licensed Compound” means the compound claimed in the AnHeart Patent set forth in Exhibit A, which is identified by the internal AnHeart compound code AB-106 or INN name taletrectinib with the molecular structure set forth in Exhibit A, and any salts, hydrates, solvates, esters, and stereoisomers of such Licensed Compound.
1.37 “Licensed Product” means any product developed by AnHeart that contains the Licensed Compound, whether alone or in combination with other active pharmaceutical ingredient(s). Licensed Products include Combination Products.
1.38 “Licensed Technology” means the AnHeart Patents and the AnHeart Know-How.
1.39 “MAH” means the holder of a Marketing Approval.
1.40 “Marketing Approval” means, with respect to a Licensed Product or companion diagnostic, all approvals, licenses, registrations, or authorizations of each Regulatory Authority that is necessary for the manufacturing, use, storage, import, transport, sale, offer for sale and other exploitation of such Licensed Product or companion diagnostic in the Territory, but excluding pricing or reimbursement approval where governmental approval is required for pricing, or for the Licensed Product or companion diagnostic to be reimbursed by national health insurance in the Territory.
1.41 “Medical Affairs Activities” means activities directed to health care practitioners, such as physicians, pharmacists, nurse practitioners, and any other individual or entity that is a health care practitioner (as determined in accordance with the Applicable Laws), to provide each such health care practitioner with objective, scientific information to educate and inform, whether such information is provided directly, through congresses or venues for peer-to-peer scientific discourse, or otherwise.
1.42 “NDA” means a new drug application filed with the Regulatory Authority in the Territory to obtain permission to administer a Licensed Product to humans.
1.43 “Net Sales” means the gross amounts invoiced for Licensed Product sold by NK, its Affiliates or Sublicensees (each a “Selling Party”) in finished product form, packaged and labeled for sale in arm’s length transactions to Third Parties under this Agreement, less the following deductions from such gross amounts:
(a) normal and customary trade, cash and other discounts and allowances actually allowed by the Selling Party and taken by the customer;
(b) credits, price adjustments or allowances actually granted to the customer for damaged goods, returns or rejections of a Licensed Product;
(c) sales taxes or similar taxes, including duties or other governmental charges imposed on the sale of a Licensed Product (including value added taxes or other governmental charges, but excluding any income taxes), to the extent the Selling Party is not otherwise entitled to a credit or a refund for such taxes, duties or payments made;
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(d) chargeback payments, rebates, fees, and other adjustments, including those granted on price adjustments, billing errors, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups, health insurance carriers or other institutions, including those paid in connection with such sales to any governmental entity; and
(e) any invoiced freight, shipping, insurance and other transportation charges.
1.43.1 Net Sales does not include samples or Licensed Product for compassionate use and the like; for the avoidance of doubt, the Licensed Product for compassionate use shall include Licensed Products donated under any patient assistance program.
1.43.2 Net Sales, as set forth in this definition, will be calculated by applying the Selling Party’s standard accounting practices, in accordance with generally accepted accounting principles, used by the Selling Party, as consistently applied in its respective audited financial statements.
1.43.3 In the event that the Licensed Product is sold as part of a Combination Product, the Net Sales of the Licensed Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product by the fraction, A / (A+B) where A is the weighted average sale price of the Licensed Product when sold separately in finished form, and B is the weighted average sale price of the other active pharmaceutical or biologic ingredient(s) sold separately in finished form. In the event that the weighted average sale price of either the Licensed Product or the other active pharmaceutical or biologic ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Licensed Product, for the purposes of determining royalty payments, shall be determined by the Parties through negotiation in good faith.
1.43.4 Sales between or among NK, its Affiliates and Sublicensees shall be excluded from the computation of Net Sales if such sales are not intended for end use, but Net Sales will include the subsequent final sales to Third Parties by NK, its Affiliates or Sublicensees.
1.43.5 If NK, or its Affiliate sells or transfers units of a Licensed Product in conjunction with any other product, and in so doing sells or transfers such units for an amount less than the sum of the weighted average selling price for such units of such Licensed Product sold separately, for the purposes of determining Net Sales from such sales or transfers, Net Sales shall be, subject to the deductions from gross amounts provided in Section 1.43 (a) to (e) above, based upon the price of such Product sold to a similar size customer ordering a similar volume of units of the Licensed Product under similar terms and conditions, but sold separately.
1.44 “New Indication” means with respect to a Licensed Product, any prophylactic or therapeutic use for a particular disease or condition other than the Initial Indication, [**Redacted**]
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1.45 “NK” has the meaning set forth in the preamble.
1.46 “NK Know-How” means Know-How, including any Invention, that is related to the Licensed Compound or the Licensed Product(s) and conceived, discovered, developed, made and/or reduced to practice by or on behalf of employees, agents, or consultants of NK, its Affiliates or its or their Sublicensees during the Term.
1.47 “NK Patents” means Patents (a) with a Valid Claim Covering an Invention that is related to the Licensed Compound or the Licensed Product(s), or that is otherwise necessary for Commercialization of the Licensed Compound or the Licensed Product(s)), or that would otherwise Cover manufacturing, using, selling, offering for sale, or importing of the Licensed Product(s), and (b) that is conceived, discovered, developed, made and/or reduced to practice by or on behalf of employees, agents, or consultants of NK, its Affiliates or Sublicensees during the Term.
1.48 “NK Related Parties” has the meaning set forth in Section 13.5.1(d).
1.49 “NK Technology” means the NK Patents and the NK Know-How.
1.50 “Patents” means any of the following: (a) any issued and unexpired patent, including without limitation, any inventor’s certificate, substitution, extension, re-registration, confirmation, reissue, re-examination, re-validation, renewal or any similar governmental grant for protection of inventions (including, but not limited to, patent term extensions, pediatric exclusivity or supplementary protection certificate) and all other post-grant forms of any of the foregoing; (b) any patent application including, without limitation, any continuation, divisional, substitution, continuation-in-part, provisional applications converted provisional applications and all other pre-grant forms of any of the foregoing; and (c) all foreign counterparts of any of the foregoing.
1.51 “Prosecuting” means preparing, filing, prosecuting, obtaining the issuance of, maintaining and/or renewing a Patent. “Prosecute” and “Prosecution” have correlative meaning.
1.52 “Quality Agreement” has the meaning set forth in Section 6.3.
1.53 “Regulatory Authority” means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau, or other governmental entity with authority over the research, development, manufacture, commercialization, or other use (including the granting of Marketing Approvals) of the Licensed Product(s) in the Territory.
1.54 “Regulatory Filings” means any filing, application, or submission with any Regulatory Authority, including authorizations, approvals or clearances arising from the foregoing, including the DMF, any orphan drug designation application, any NDAs, application for Marketing Approval, Marketing Approvals, any safety-related filings, and all other filings, reports or correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings, telephone conferences or discussions with the relevant Regulatory Authority, in each case, with respect to the Licensed Product in the Territory.
1.55 “Regulatory Milestone Payment” has the meaning provided in Section 8.2.
1.56 “Royalty Payment” has the meaning set forth in Section 8.4.
1.57 “Royalty Report” has the meaning set forth in Section 8.6.
1.58 “Royalty Term” has the meaning set forth in Section 8.5.
1.59 “Rules” has the meaning set forth in Section 14.2(a).
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1.60 “Sales Milestone Payment” has the meaning provided in Section 8.3.
1.61 “Sublicense” means an agreement into which NK enters with an Affiliate or Third Party for the purpose of (a) granting certain rights under the Licensed Technology, including without limitation the AnHeart Patents set forth in Exhibit A or AnHeart Know-How or (b) forbearing the exercise of any rights granted to NK under this Agreement.
1.62 “Sublicensee” means a Third Party with whom NK enters into a Sublicense.
1.63 “Term” has the meaning provided in Section 13.1.
1.64 “Territory” means Japan.
1.65 “Third Party” means any legal person or entity other than a Party or an Affiliate of a Party.
1.66 “Upfront Payment” has the meaning provided in Section 8.1.
1.67 “U.S.” or “United States” means the United States of America and all of its territories and possessions.
1.68 “Valid Claim” means any claim of an [**Redacted**].
1.69 “Wind-Down Period” has the meaning set forth in Section 13.5.1(d).
2. License Grants.
2.1 Scope of Grant. In consideration of and subject to the terms and conditions of this Agreement, AnHeart grants to NK a sublicensable (subject to Section 2.2), royalty-bearing, exclusive (even as to AnHeart and its Affiliates) right and license or sublicense, as applicable, under the Licensed Technology to: (i) Commercialize the Licensed Product(s) in the Field and in the Territory and (ii) research, Develop and Commercialize the Licensed Compound or Licensed Product for New Indications in the Territory at NK’s sole cost and expense, provided that the foregoing right and license to research, Develop and Commercialize the Licensed Compound or Licensed Product for New Indications in the Territory ((ii) above) shall be subject to AnHeart’s prior approval of a written Development plan for such New Indication, such approval not to be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the Parties acknowledge and agree that AnHeart retains the exclusive right under the Licensed Technology to (i) make and have made, the Licensed Compound and Licensed Product(s) in the Territory and (ii) research and Develop the Licensed Compound or Licensed Product for any New Indication that NK decides not to Develop in the Territory.
2.2 Sublicense. NK may grant Sublicenses of its rights under Section 2.1 to its Affiliates and Third Parties; provided, however, that NK shall obtain the prior written consent of AnHeart which consent shall not be unreasonably withheld or delayed. NK shall ensure that each Sublicensee is bound by a written Sublicense that is consistent with, and expressly made subject to the applicable terms and conditions of this Agreement. NK shall be liable to AnHeart for any material breach of the terms of this Agreement by a Sublicensee without regard to whether AnHeart consents to such Sublicense.
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2.3 Third Party Licenses.
2.3.1 AnHeart will remain responsible for and shall satisfy all obligations arising under licenses from Third Parties (each, a “Third Party License”) executed prior to the Effective Date. AnHeart will also [**Redacted**] and shall be responsible for all obligations arising under such Third Party Licenses at AnHeart’s sole cost and expense. NK shall be responsible for obtaining any Third Party Licenses that are necessary for Commercialization of the Licensed Product [**Redacted**] in the Territory and shall be responsible for all obligations arising under such Third Party Licenses at NK’s sole cost and expense.
2.3.2 In the event that the DS License Agreement is terminated in whole or in part with respect to the Licensed Compound in the Territory, NK, its Affiliates or Sublicensees may negotiate a direct license of the right to continue to use the Licensed Technology licensed to AnHeart under the DS License Agreement to the full extent contemplated by this Agreement (a “Direct License”) and AnHeart will cooperate in good faith with respect to such negotiations. If NK obtains a Direct License, NK shall [**Redacted**]
2.4 No Other Rights. Except as otherwise expressly provided in this Agreement, under no circumstances will a Party, as a result of this Agreement, obtain any ownership interest, license right or other right in any Know-How, Patent, or other intellectual property rights of the other Party or any of its Affiliates, including items owned, controlled, developed, or acquired by the other Party or any of its Affiliates, or provided by the other Party to the first Party at any time pursuant to this Agreement.
3. Development for New Indications.
In NK’s [**Redacted**] and at its sole cost and expense, subject to Section 2.1, NK shall be responsible for the Development and Commercialization of the Licensed Compound or Licensed Product(s) in the Field in the Territory for any New Indications.
4. Regulatory Responsibilities.
4.1.1 General. NK or its local agent shall be responsible for seeking, obtaining, and maintaining Marketing Approval (and required registration of Japanese Accepted Names for Pharmaceuticals (JAN)) and pricing and reimbursement approvals for all Licensed Products in the Territory, at NK’s sole cost and expense (including such costs and expenses associated with approval of New Indications of the Licensed Product(s)). NK or its local agent shall hold and own all Regulatory Filings including the Marketing Approval in the Territory as MAH in the Territory. Without limiting the foregoing, subject to the terms and conditions of this Agreement, NK shall be responsible, at its sole cost and expense, for (i) any pre-NDA consultation with the Regulatory Authorities, (ii) the filing of all other Regulatory Filings including application for orphan drug designation, (iii) responding to inquiries and correspondence from the Regulatory Authorities with regard to such other Regulatory Filings and (iv) the submission of all required reports throughout Development, manufacture and Commercialization of the Licensed Product(s), in each case ((i) through (iv)) in or for the Territory, in compliance with all Applicable Laws. At the reasonable request and sole cost and expense of NK, AnHeart will reasonably assist NK in connection with NK’s activities under this Section 4.1.1 with respect to the Licensed Product in the Field in the Territory, including providing necessary documents or other materials required by Applicable Law; provided that, AnHeart will not unreasonably withhold, condition or delay such assistance. AnHeart may opt to provide guidance and support as appropriate on the strategic planning related issues in the Territory for the Licensed Product(s), including with respect to the strategy for interactions with the Regulatory Authorities and any Regulatory Filings.
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4.1.2 Regulatory Exclusivity. If NK decides to seek regulatory and/or data exclusivity for a Licensed Product for the Initial Indication or any New Indication in the Territory, NK will be responsible, at its sole expense, for preparing and filing such requests with the applicable Regulatory Authority. AnHeart will, upon NK’s reasonable request, provide reasonable support to NK in preparing and filing such requests at NK’s cost.
4.1.3 Medical Affairs. NK will, at its sole cost, be responsible for the execution of Medical Affairs Activities including investigator-initiated trials with respect to Licensed Product(s) in the Territory separate from or in accordance with AnHeart’s global medical affairs strategy.
4.2 Right of Reference. AnHeart hereby grants to NK a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) in the United States, or an equivalent right of access/reference in the Territory, to any data, including AnHeart’s clinical dossiers, Controlled by AnHeart that relates to any Licensed Product(s) for use by NK, its Affiliates and Sublicensees to Commercialize Licensed Product(s) in the Field in the Territory pursuant to this Agreement. If the Licensed Product is Developed for any New Indications, NK hereby grants to AnHeart a Right of Reference or an equivalent right of access/reference outside the Territory, to any data, including NK’s clinical dossiers, Controlled by NK that relates to any Licensed Product(s) for use by AnHeart and its Affiliates to Commercialize Licensed Product(s) in the Field outside the Territory for such New Indication. The Party granting such Right of Reference shall provide a signed statement to this effect, if requested by the other Party, in accordance with 21 C.F.R. § 314.50(g)(3) or the equivalent as required or otherwise provide appropriate notification of such right of such other Party to the applicable Regulatory Authority.
4.3 Pharmacovigilance Agreement. AnHeart or its agent shall, at AnHeart’s sole cost and expense, establish and maintain in compliance with Applicable Law the global safety database for the Licensed Product(s), and be responsible for entering information on all adverse events concerning each Licensed Product(s) occurring anywhere in the world, including the Territory, into such global safety database in compliance with all Applicable Laws. In the case that NK, its Affiliate, or Sublicensee obtains information concerning pharmacovigilance data (e.g., safety information regarding case reports, a product labeling change, safety measures and others) for the Licensed Product(s), NK shall notify AnHeart of such information. The details of this notification procedure shall be set forth in a pharmacovigilance agreement which shall be executed by the Parties within a reasonable time after the Effective Date.
5. Technology Transfer.
Promptly after the Effective Date, AnHeart will transfer to NK or to a contract research organization selected by NK and reasonably approved by AnHeart, (such approval not to be unreasonably withheld, conditioned or delayed), all AnHeart Know-How and documents necessary to Commercialize any Licensed Product(s) in the Field in the Territory, including such AnHeart Know-How as is set forth on Exhibit B hereto, and provide NK with a copy of all embodiments of the AnHeart Know-How in a format reasonably accessible to NK. Such transfer will be effected through a virtual data room or other reasonable means as determined by the Parties. Any such transfer shall incur no additional costs in connection with the Initial Indication. However, in connection with any New Indications, NK shall be responsible for reasonable costs incurred by AnHeart for such transfer.
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6. Commercialization.
6.1 General; Diligence.
6.1.1 NK shall be solely responsible for Commercialization of each Licensed Product in the Field in the Territory during the Term, at its own cost and expense. NK shall financially book all sales of the Licensed Product in the Territory. Subject to the terms and conditions of this Agreement, including AnHeart’s compliance with its obligations under the Commercial Supply Agreement (as defined below) and Section 2.3, upon Marketing Approval of a Licensed Product(s) in the Territory for the Initial Indication, NK shall, either directly or through its Affiliates or Sublicensees, use Commercially Reasonable Efforts to Commercialize at least [**Redacted**] Licensed Product in the Field in the Territory in accordance with the approved labeling therefor.
6.1.2 Upon AnHeart’s reasonable request in writing, NK shall provide AnHeart with an opportunity to review any promotional materials (including without limitation the artwork and patient leaflets, and materials used on the Internet and social media), packaging or product labelling for the Licensed Product(s) that NK intends to use in the course of the Commercialization of the Licensed Product(s) in the Territory and NK shall consider in good faith any comments provided by AnHeart.
6.2 Commercial Supply Agreement. AnHeart will manufacture and supply all Licensed Compound and Licensed Product(s) in compliance with the terms and conditions set forth in a commercial supply agreement executed by the Parties as soon as practicable, but no later than [**Redacted**] calendar days (or such other longer period mutually agreed between the Parties in writing) after the Effective Date (the “Commercial Supply Agreement”). Subject to the terms of such Commercial Supply Agreement, AnHeart will be responsible for manufacturing and supplying all of the Licensed Compound and Licensed Product(s) in such quantities as are necessary for further Development and Commercialization of Licensed Product(s) by NK in the Territory and will have full decision-making authority related thereto. AnHeart will supply the Licensed Product in bulk capsules to NK at [**Redacted**], the foregoing price being exclusive of any transportation, import taxes, export taxes and insurance fees and being subject to adjustment due to market and regulatory conditions, as further defined in the Commercial Supply Agreement.
6.3 Quality Agreement. Prior to manufacturing the final packaged product for the First Commercial Sale of the first Licensed Product for the Territory, NK, AnHeart and/or its local agent shall enter into a quality agreement setting forth the responsibilities and procedures associated with the Licensed Compound and/or the Licensed Product(s) regarding recalls, changes, deviations, complaint handling, quality-specific audit rights with respect to compliance with all applicable GxP and other quality-related matters (the “Quality Agreement”).
6.4 Exchange of Information. The Parties may from time-to-time exchange information necessary or useful for the Commercialization of the Licensed Compound or Licensed Product inside or outside the Territory including any updates of the research and development of companion diagnostics. Each Party shall designate a contact person for such exchange of information and provide the other Party with the contact information of such person.
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7. Companion Diagnostics.
AnHeart shall use Commercially Reasonable Efforts to Develop a companion diagnostic for use with the Licensed Product(s) in the Territory with [**Redacted**] or such other companion diagnostic company designated by AnHeart.
8. Payments.
8.1 Upfront Payment. NK will pay AnHeart a non-refundable, non-creditable payment of forty million US Dollars ($US40,000,000) (the “Upfront Payment”). AnHeart shall issue an invoice for the Upfront Payment to NK promptly on or after the Effective Date and NK will pay such invoice pursuant to Section 8.7.
8.2 Regulatory Milestone Payment. NK will pay AnHeart a non-refundable, non-creditable payment of twenty-five million US dollars (US$25,000,000) following the first [**Redacted**] for a Licensed Product in the Territory (the “Regulatory Milestone Payment”). Within [**Redacted**] Business Days of achievement of such milestone, NK will notify AnHeart of such achievement and AnHeart shall issue an invoice for the Regulatory Milestone Payment to NK promptly on or after such establishment. NK will pay such invoice pursuant to Section 8.7. In no case shall the Regulatory Milestone Payment be paid more than once.
8.3 Sales Milestone Payments. NK will pay to AnHeart the following non-refundable, non-creditable payments upon the first achievement of the following levels of annual Net Sales of all Licensed Product(s) in the Territory (each a “Sales Milestone Payment”). Within [**Redacted**] calendar days after the applicable Calendar Year where such annual Net Sales are achieved, NK will notify AnHeart of such achievement and AnHeart shall issue an invoice for the Sales Milestone Payment to NK promptly on or after the close of the Calendar Year in which the documented event has been achieved. NK will pay such invoice pursuant to Section 8.7. In no case shall any Sales Milestone Payment be paid more than once.
| Annual Net Sales in the Territory |
Payment Amount (US Dollars) | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
| [**Redacted**] | [**Redacted**] | |
8.4 Royalty Payments. NK will pay AnHeart a [**Redacted**] royalty on all Net Sales of all Licensed Product(s) in the Territory (the “Royalty Payment”). Royalties owed to AnHeart will be calculated for all Licensed Product(s) sold in the Territory in aggregate, subject to the methodology for calculating Net Sales of a Licensed Product when the Licensed Product is sold as part of a Combination Product as described in Section 1.43.3. AnHeart shall issue an invoice for the Royalty Payment to NK promptly after receipt of the Royalty Report and NK will pay such invoice pursuant to Section 8.7.
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8.5 Term of Royalty Payments. On a Licensed Product-by-Licensed Product basis, NK’s obligation to pay royalties under Section 8.4 above shall be payable during the period of time commencing on the date of the First Commercial Sale of such Licensed Product in the Territory and continuing until the date of the first sale of the first generic of such Licensed Product for which a drug reimbursement price is established in the Territory (the “Royalty Term”). Notwithstanding the foregoing, if the Royalty Term expires before the expiration of the period during which AnHeart has an obligation to pay royalties under the DS License Agreement, NK’s obligation to pay royalties under Section 8.4 above shall continue for such period to the extent necessary for AnHeart to satisfy such royalty obligations. In the event that the Royalty Term expires before the expiration of such royalty period under the DS License Agreement, upon reasonable request from time to time by NK, AnHeart shall provide NK with a certificate signed by a duly authorized representative of AnHeart setting forth AnHeart’s good faith basis that it continues to have an obligation to pay royalties under the DS License Agreement.
8.6 Royalty Reports. Within [**Redacted**] calendar days after the close of the Calendar Quarter during which the corresponding Net Sales are recognized, NK will deliver a report (a “Royalty Report”) specifying in the aggregate: (a) Net Sales; and (b) royalties payable. NK will deliver a forecast of Net Sales and royalties to be paid to AnHeart for each of the next [**Redacted**] Calendar Quarters within [**Redacted**] calendar days from the beginning of NK’s fiscal year. NK shall send the first such report within [**Redacted**] calendar days of receiving the first Marketing Approval in the Territory which will include Net Sales for the next [**Redacted**] Calendar Quarters.
8.7 Payment Schedule. All payments under this Agreement, including the Regulatory Milestone Payment, all Sales Milestone Payments and all Royalty Payments, will be due after [**Redacted**] calendar days of receipt of the invoice by NK from AnHeart except that the Upfront Payment shall be due after [**Redacted**] Business Days of receipt of the invoice by NK from AnHeart. For clarity, all invoices may be delivered electronically by email.
8.8 Payment Method. All payments due to AnHeart under this Agreement will be made by bank wire transfer in immediately available funds to an account shown in invoices to be issued to NK. All payments hereunder shall be made in the legal currency of the United States. All references to “$” or “Dollars” herein refer to U.S. Dollars and all references to “¥” or “JPY” refer to Japanese Yen. NK shall be responsible for paying all transfer and other fees related to completing all bank wire transfers required under this Agreement, except for the transfer fee imposed by the bank designated by AnHeart.
8.9 Currency Conversion. If any currency conversion is required in connection with the calculation of amounts payable hereunder, such conversion will be made using the average of the buying and selling exchange rate for conversion of the foreign currency and U.S. Dollars, quoted for current transactions reported in [**Redacted**] to which such payment pertains.
8.10 Late Payments. NK shall pay interest to AnHeart on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate per annum equal the Secured Overnight Financing Rate of interest plus [**Redacted**], as reported by The Wall Street Journal for the applicable period, to the extent permitted by Applicable Law, calculated on the number of days such payment is delinquent. This Section 8.10 will in no way limit any other remedies available to AnHeart.
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8.11 Taxes.
8.11.1 Withholding Taxes. If NK is required to withhold any tax to the tax or revenue authorities in the Territory regarding any payment to AnHeart, such amount may be deducted from the payment to be made by NK, provided that NK takes all reasonable and lawful actions to avoid or minimize such withholding and promptly notifies AnHeart so that AnHeart may also take lawful actions to avoid or minimize such withholding. NK will promptly furnish AnHeart with copies of any tax certificate or other documentation evidencing such withholding, as necessary to enable AnHeart to support a claim, if permissible, for income tax credit in respect of any amount so withheld. Each Party agrees to cooperate with the other Party in claiming exemptions from such deductions or withholdings under any agreement or treaty in effect from time to time.
8.11.2 Value Added Taxes. All amounts to be paid by NK to AnHeart pursuant to this Agreement shall be exclusive of any value added tax occurred due to the payment of such amount, which will be paid by NK upon receipt of a valid value added tax invoice. For the avoidance of doubt, the invoice amount shall be inclusive of the payment amount under this Agreement and the value added tax, and irrespective of whether the sums may be netted for settlement purposes. For illustrative purpose, the actual amounts to be paid by NK to AnHeart under this Agreement shall be equal to the invoice amount, and shall also be equal to the following:
Payment amount under this Agreement × (1+ applicable rate of value added tax).
8.12 Records. NK will keep and will cause its Affiliates and its or their Sublicensees, if any, to keep, complete, true and accurate books of accounts and records, in compliance with Applicable Laws and the terms and conditions of this Agreement, sufficient to determine and establish the calculation of Net Sales and royalties payable under this Agreement for a period of [**Redacted**] years after the year in which the sale of the Licensed Product(s) generating the same occurred.
8.13 Inspection of Records. At the request of AnHeart, NK, its Affiliates and its or their Sublicensees, will permit an independent certified public accountant appointed by AnHeart and reasonably acceptable to NK, to inspect the books and records described in Section 8.12, provided that such inspection shall not more than once each Calendar Year, and the books and records for any given time period shall not be inspected more than once within a Calendar Year. AnHeart shall submit a reasonable audit plan, including audit scope, to NK prior to audit implementation. Any inspection conducted under this Section 8.13 will be at AnHeart’s expense, unless such inspection reveals any underpayment of [**Redacted**] or more of any amount due to AnHeart during the audited period, in which case the full costs of such inspection will be paid by NK. If the independent certified public accountant determines that additional royalties or milestones are owed, during such period, NK will pay AnHeart the additional royalties or milestones, within [**Redacted**] calendar days from the date of receipt of AnHeart’s invoice for the additional royalties or milestones based on the independent certified public accountants’ written report is received by NK; provided, however, that, in the event that the independent certified public accountant determines that the royalties or milestones were overpaid, during such period, AnHeart will pay NK the amount of such overpayment within [**Redacted**] calendar days of the date the independent certified public accountants’ written report is received by AnHeart.
8.14 Compliance Audit. AnHeart shall have the right, not more than once per Calendar Year, upon [**Redacted**] Business Days’ (or such other longer period mutually agreed between the Parties in writing) prior written notice and during normal business hours, to audit all sites operated by NK and protocols and procedures used (or proposed to be used) by or on behalf of NK to Commercialize the Licensed Product(s) pursuant to this Agreement, including, but not limited to, any product quality maintenance, product security, storage, transportation, distribution, and the materials and equipment used
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therein (in addition to the associated protocols and procedures). AnHeart may be accompanied by any independent technical experts or consultants that AnHeart deems appropriate, provided, that such persons are subject to confidentiality obligations no less restrictive than those set forth in this Agreement. NK shall provide AnHeart with reasonable assistance in performing such audit, including access to key associated personnel to discuss any associated queries of AnHeart. NK shall not charge any costs or expenses to AnHeart for any such audit. AnHeart is responsible for its direct costs of performing such audits. If any items are identified as requesting follow-up action, then NK shall respond to AnHeart in writing within [**Redacted**] days (or such other longer period mutually agreed between the Parties in writing) following receipt of such request by AnHeart, and the response shall state actions NK plans to take to correct and the proposed timing(s). Notwithstanding the foregoing limitation to performing audits once during each calendar year, AnHeart may perform more than one audit in a Calendar Year, (i) in order for NK to demonstrate that any items requiring follow-up action have been resolved or (ii) in the event AnHeart has any reasonable quality or compliance-related concerns with respect to NK’s performance in the Commercialization of the Licensed Product(s).
9. Intellectual Property.
9.1 Ownership of Licensed Intellectual Property. Subject to the licenses and other rights granted herein, as between the Parties, each Party will retain all right, title and interest in and to, and ownership or rights of, all Patents and other intellectual property conceived, discovered, developed, reduced to practice, or otherwise made by or on behalf of such Party (or its Affiliates, or its or their licensees or Sublicensees, as applicable) and not by or on behalf of the other Party (or its Affiliates, or its or their licensees or Sublicensees, as applicable). Inventorship and ownership rights in Inventions and other Know-How created, developed, conceived and/or reduced to practice after the Effective Date under this Agreement will be determined under the intellectual property laws of the jurisdiction, where such creation, development, conception, discovery or making occurs.
9.2 Filing, Prosecution and Maintenance.
9.2.1 AnHeart Patents. Using counsel of its choice, AnHeart shall be responsible, at its sole expense, for Prosecuting and Extending the AnHeart Patents in the Territory. If AnHeart decides that it will no longer Prosecute an AnHeart Patent, it will give NK notice of its decision reasonably in advance of any expiration, termination or other relevant deadline sufficient for NK to take any necessary actions to preserve the rights in such AnHeart Patent and, upon the request of NK, will discuss in good faith such determination. AnHeart shall take into account any reasonable input from NK regarding the decision to cease Prosecution of any AnHeart Patent, provided that AnHeart shall have final authority to determine whether to continue to Prosecute such AnHeart Patent. Upon AnHeart’s determination not to continue to Prosecute such AnHeart Patent (such AnHeart Patent, an “Abandoned AnHeart Patent”), AnHeart shall allow NK, at its option, to assume control over and continue Prosecuting such Abandoned AnHeart Patent, at NK’s sole expense. If NK assumes control over the Prosecution such election, (a) NK have the right, but no obligation, to defend any Abandoned AnHeart Patent(s) from any challenges to their validity or enforceability, including responding to oppositions, reissue or reexamination proceedings, or interferences, brought by any Third Party, whether before a patent authority or judicial body in the Territory and (b) AnHeart will reasonably cooperate with NK, including providing reasonable assistance to NK (including executing any documents as may reasonably be required), in the defense of Abandoned AnHeart Patents that Cover the Licensed Compound and/or Licensed Product(s). [**Redacted**]. [**Redacted**] the amount of NK’s expense (if any) for maintenance fees associated with any issued Abandoned AnHeart Patent that is incurred by NK during any Calendar Quarter after AnHeart’s abandonment thereof, and such amount shall be [**Redacted**]. AnHeart shall update Exhibit
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A to include any new AnHeart Patents promptly after it obtains such new AnHeart Patents. For the avoidance of doubt, nothing in this Section 9.2.1 will be interpreted to limit or otherwise impair AnHeart’s right to compromise or settle any indemnified claim controlled by AnHeart in accordance with Section 12.1.
9.2.2 NK Patents. NK will be responsible, at its sole expense, for Prosecuting the NK Patents, if any, that are useful to research, Develop or Commercialize the Licensed Compound or Licensed Product(s) in the Territory. AnHeart will be responsible, at its sole expense, for Prosecuting the NK Patents, if any, that are useful to research, Develop or Commercialize the Licensed Compound or Licensed Product(s) outside the Territory.
9.2.3 Grant Back. For and in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NK (on behalf of itself, its Affiliates and its and their Sublicensees) hereby grants to AnHeart an exclusive, royalty-free, fully paid-up license, with the right to grant sublicenses through multiple tiers, under all NK Technology to make, have made, use, have used, offer for sale, sell, import and otherwise exploit the Licensed Compound and Licensed Product(s) outside of the Territory. The foregoing license shall survive termination of this Agreement.
9.3 Defense of Infringement Claims by Third Parties. Except to the extent [**Redacted**], if a Third Party files or threatens to file an infringement claim against either Party or both Parties related to the Licensed Compound or a Licensed Product(s) in the Territory, [**Redacted**] shall have the right but no obligation to lead the defense of any such claim, at its sole expense, and with legal counsel of its choice except to the extent that such claim [**Redacted**], in which case [**Redacted**] shall lead the defense of such claim. Should [**Redacted**] decide not to actively defend or fail to defend any such claim, suit, or proceeding by a Third Party relating to any Licensed Compound or Licensed Product in the Territory within [**Redacted**] calendar days of notice of such claim, suit, or proceeding, then [**Redacted**] will be entitled to take over, at its option, the defense of such proceedings. If the leading Party finds that the other Party’s assistance is necessary or desirable to any such suit, such other Party may cooperate in such defense at the leading Party’s sole cost and expense. Each Party shall reasonably cooperate with the Party conducting the defense of the claim. Each Party shall keep the other Party reasonably informed of all material developments in connection with any such claim, suit, or proceeding, and the Parties shall reasonably cooperate in conducting the defense of any such claim. Neither Party shall enter into any settlement in a manner that imposes any out-of-pocket costs or liability on, or involves any admission by, the other Party without such other Party’s prior written consent, not to be unreasonably withheld, conditioned or delayed.
9.4 Enforcement Actions Against Third Parties.
9.4.1 Notification. If either Party learns of any infringement, unauthorized use, misappropriation or ownership claim, or threatened infringement of any AnHeart Patents or NK Patents by a Third Party with respect to the Licensed Compound or Licensed Product(s) anywhere within the Territory, such Party will promptly notify the other Party in writing and will promptly provide the other Party with available evidence of such infringement or other such claim.
9.4.2 Control; Reimbursement of Expenses. AnHeart will have the sole right, but not the obligation, to institute an infringement suit, initiate administrative proceedings, or take other appropriate action against a Third Party for any alleged infringement of any AnHeart Patents anywhere within the Territory and of any NK Patents anywhere outside of the Territory. NK, upon AnHeart’s request, shall
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assist and cooperate in such enforcement, including by providing any information regarding technical details or other knowledge related to the Commercialization of the Licensed Compound or any Licensed Product in the Territory and related to any of the NK Patents outside of the Territory, at AnHeart’s sole cost and expense. NK will have the sole right, but not the obligation, to institute an infringement suit, initiate administrative proceedings, or take other appropriate action against a Third Party for any alleged infringement of any NK Patents anywhere within the Territory. Upon NK’s request, AnHeart shall assist and cooperate in such enforcement, including by providing any information regarding technical details or other knowledge related to the Licensed Compound or any Licensed Product in the Territory, at NK’s sole cost and expense. Any damages paid by Third Parties as a result of such an enforcement action (whether by way of settlement or otherwise) will be applied first to reimburse both Parties for all costs and expenses incurred. If such funds are not sufficient to reimburse all expenses of both Parties, all funds will be divided [**Redacted**]. If any funds remain after all expenses of both Parties have been reimbursed, such excess funds will be [**Redacted**].
9.5 Trademarks. NK will have the right to decide, at its sole discretion, the brand name and brand logo under which the Licensed Product(s) will be marketed in the Territory, and the right to, at its own expense, apply for, register, maintain or abandon the trademark(s) corresponding the said brand name and brand logo in the Territory. NK will own all trademarks corresponding to the said brand name and brand logo used to market the Licensed Product(s) in the Territory. Without limiting the foregoing, if NK chooses to use the same brand name as AnHeart registers for or uses to market Licensed Product(s) in the United States, AnHeart hereby grants NK and its Affiliates an exclusive, royalty-free, sublicensable license to use the trademark(s) to Commercialize the Licensed Product(s) in the Territory, provided that such use shall be in a manner approved by AnHeart (such approval not to be unreasonably withheld, conditioned or delayed) and in accordance with AnHeart’s reasonable trademark usage policy for such trademark(s) that are provided to NK in writing.
10. Confidentiality.
10.1 Confidential Information. Except to the extent expressly authorized by this Section 10 or otherwise agreed in a writing signed by both Parties, each Party (the “Receiving Party”) shall, during and [**Redacted**] years after the Term of this Agreement, keep confidential and not publish or otherwise disclose or use for any purpose other than as explicitly provided for in this Agreement any confidential and proprietary information or materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise) that are disclosed or provided to a Receiving Party, its Affiliate or Sublicensee, as applicable, by the other Party or an Affiliate or Sublicensee of the other Party (each a “Disclosing Party”) in the course of performing its obligations under this Agreement and identified as confidential or proprietary at the time of disclosure or provision, including, but not limited to, any trade secrets, Know-How, product specifications, formulae, processes, techniques and information relating to the Disclosing Party’s past, present and future marketing, financial, and research and development activities for any product of the Disclosing Party and the pricing and customer lists, customer data and other customer information thereof (collectively, “Confidential Information”). Confidential Information of each Party includes the terms and conditions of this Agreement.
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10.2 Exceptions. Notwithstanding the foregoing, Confidential Information does not include information or materials to the extent that it can be established by the Receiving Party that such information or material:
10.2.1 is already lawfully known to the Receiving Party, other than under an obligation of confidentiality at the time of disclosure by the Disclosing Party as evidenced by written records kept in the ordinary course of business, or other documentary proof of actual use by the Receiving Party;
10.2.2 is generally available to the public at the time of its disclosure to the Receiving Party;
10.2.3 becomes generally available to the public after its disclosure to the Receiving Party and other than through any act or omission of the Receiving Party, its Affiliates, or, with respect to NK, its Sublicensees in violation of this Agreement;
10.2.4 is independently developed by the Receiving Party as demonstrated by documented evidence prepared contemporaneously with such independent development; or
10.2.5 is lawfully disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation not to disclose such information to others.
10.3 Authorized Disclosure. Notwithstanding Section 10.1, the Receiving Party may disclose Confidential Information of the Disclosing Party:
10.3.1 to its respective employees, officers, directors, consultants, and advisors, and to the employees, officers, directors, consultants, and advisors of such Receiving Party’s Affiliates, (sub)licensees (including Sublicensees) or potential investors or (sub)licensees (including Sublicensees), who have a need to know such Confidential Information to the extent such disclosure is reasonably necessary in connection with performing its obligations or exercising its rights under this Agreement and have an obligation to treat such Confidential Information as confidential under terms no less restrictive than those set forth herein;
10.3.2 as required by any court or other Governmental Authority or as otherwise required by Applicable Laws (including, solely with respect to the terms of this Agreement, any such disclosures as are required by the rules or regulations of the United States Securities and Exchange Commission or similar regulatory authority in a country other than the United States or of any stock exchange or listing entity); provided, that, the Receiving Party provides the Disclosing Party with prompt notice of such requirement so that, to the extent legally permissible, the Disclosing Party may seek a protective order or other appropriate remedy, then the Receiving Party may furnish only that portion of the Confidential Information which the Receiving Party is legally compelled to disclose;
10.3.3 to Governmental Authorities to facilitate the issuance of Marketing Approvals for Licensed Product; provided that reasonable measures are taken to assure confidential treatment of such information;
10.3.4 to the extent such disclosure is reasonably necessary in filing or prosecuting patent, copyright, and trademark applications, prosecuting or defending litigation, complying with applicable governmental regulations, conducting preclinical activities or clinical trials, and marketing a Licensed Product; or
10.3.5 to Third Parties in connection with a Receiving Party’s efforts to secure financing or enter into strategic partnerships, provided such information is disclosed only on a need-to-know basis and under confidentiality provisions at least as stringent as those in this Agreement.
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10.4 Receiving Party’s Obligations for Authorized Disclosure. Any authorized disclosures under Section 10.3 shall not affect the Receiving Party’s confidentiality obligations under Section 10.1, and the Receiving Party shall remain bound by such obligations except to the extent permitted under Section 10.3. The Receiving Party shall be liable to the Disclosing Party for any unauthorized disclosure by any Third Party to whom the Receiving Party discloses the Confidential Information pursuant to Sections 10.3.1 and 10.3.5.
10.5 Publications.
10.5.1 [**Redacted**] shall retain the right to make scientific presentations and publications with respect to the Licensed Compound and Licensed Product(s) in the Territory.
10.5.2 [**Redacted**] shall have the right to make scientific presentations and publications (including, but not limited to, any publication prepared during Medical Affair Activities) with respect to the Licensed Compound and Licensed Product(s) in the Territory, provided that [**Redacted**] will provide a copy to [**Redacted**] reasonably in advance of such presentation or publication for discussion and review. Subject to the remainder of this Section 10.5, [**Redacted**] on scientific publications and presentations relating to the Licensed Compound and Licensed Product(s) in the Territory, and will consider or incorporate [**Redacted**] comments in good faith.
10.5.3 For any scientific publications and presentations related to data generated solely outside the Territory, AnHeart shall have the final decision-making authority on publications and presentations relating to the Licensed Compound and Licensed Product(s), and will consider or incorporate NK’s comments in good faith.
10.5.4 If [**Redacted**] or its Affiliate proposes a scientific presentation or publication related to the Licensed Compound or any Licensed Product(s), [**Redacted**] will first submit a draft of such presentation or publication to [**Redacted**], whether it is to be presented orally or in written form, at least [**Redacted**] calendar days prior to submission for publication or presentation. [**Redacted**] may review such proposed publication in order to avoid unauthorized disclosure of its Confidential Information and to preserve the patentability of inventions and will, as soon as reasonably possible, but no more than [**Redacted**] calendar days from receipt of the advance copy of the proposed publication, inform [**Redacted**] if:
(a) its proposed publication contains Confidential Information of [**Redacted**] in which case [**Redacted**] or its Affiliate will delete such Confidential Information from its proposed publication; and/or
(b) its proposed publication could be expected to have a material adverse effect on any Patent, Know-How, compound, or product of [**Redacted**], in which case [**Redacted**] or its Affiliate will delay such proposed publication for a reasonable period to permit the timely preparation and first filing of patent application(s) covering the information involved.
10.6 Press Releases. Neither Party may issue any press release relating this Agreement without the other Party’s prior written approval , which approval will not be unreasonably withheld or delayed. If such approval is not granted or denied by a Party within [**Redacted**] Business Days after a request from the other Party for such approval that accompanies a final draft of the press release, such approval will be deemed granted.
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10.7 Restrictions on Use. During and [**Redacted**] years after the Term, the Receiving Party shall not use, and shall ensure that its Affiliates, and its and their licensees or Sublicensees, as applicable, do not use any Confidential Information disclosed to it by a Disclosing Party or otherwise received or accessed in the course of performing its obligations under this Agreement for any purpose other than as expressly provided herein.
10.8 Return/Destruction of Confidential Information. Upon request from and at the election of the Disclosing Party, the Receiving Party will return (at Disclosing Party’s expense) or destroy all tangible materials comprising, bearing, or containing any Confidential Information of the Disclosing Party relating to the terminated Licensed Product(s) that are in the Receiving Party’s or its Affiliates’ possession or control and provide written certification of such destruction (except to the extent any information is the Confidential Information of both Parties or to the extent that the Receiving Party has the continuing right to use the Confidential Information under this Agreement); provided, that, the Receiving Party may retain one copy of such Confidential Information for its legal archives mandatorily required by Applicable Law.
11. Representations, Warranties and Covenants.
11.1 Representations and Warranties of Both Parties. Each Party represents and warrants to the other, as of the Effective Date, that:
11.1.1 it is duly organized and validly existing under the laws of its jurisdiction of incorporation, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;
11.1.2 it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder and that it has the right to grant to the other Party the licenses and sublicenses granted pursuant to this Agreement, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action;
11.1.3 this Agreement is legally binding upon it and, upon execution by the other Party, shall be enforceable in accordance with its terms except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and subject to the general principles of equity (regardless of whether enforcement is sought in a court of law or equity);
11.1.4 the execution, delivery and performance of this Agreement by such Party does not knowingly conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material law or regulation of any governmental agency or Regulatory Authority having jurisdiction over it;
11.1.5 it has not granted any right to any Third Party that would knowingly conflict with the rights granted to the other Party hereunder;
11.1.6 it has not been debarred under the Generic Drug Enforcement Act of 1992 (21 U.S.C. §301 et seq.), is not under investigation for debarment action, has not been disqualified as an investigator pursuant to 21 C.F.R. §312.70, does not have a disqualification hearing pending and is not currently employing any person or entity that has been so debarred or disqualified to perform any of its obligations under this Agreement. It shall promptly notify the other Party if it is so debarred or disqualified and shall terminate any so debarred or disqualified individual’s or entity’s participation in the performance of any of its obligations under this Agreement promptly upon its awareness of such debarment or disqualification; and
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11.1.7 it is not aware of any action, suit or inquiry or investigation instituted by any person or Governmental Authority that questions or threatens the validity of this Agreement.
11.2 Representations and Warranties of AnHeart. AnHeart represents and warrants to NK, as of the Effective Date:
(a) other than any Third Party License that has been obtained by AnHeart as of the Effective Date, AnHeart is not aware of any requirement of a Third Party License for the Commercialization of the Licensed Compound or any Licensed Product for the Initial Indication in the Territory;
(b) there are no legal claims, judgments or settlements against or owed by AnHeart or, written legal claims or filed litigation against AnHeart, in each case relating to the Licensed Compound or Licensed Product(s) and their use for the Initial Indication;
(c) AnHeart has not received any notice from a Third Party alleging infringement or misappropriation of the intellectual property rights or other property rights of any Third Party due to the manufacture, use, sale, offer to sell, or import of the Licensed Compound or Licensed Product for the Initial Indication in the Territory, and to its knowledge, the Licensed Compound, Licensed Product and the practice of Licensed Technology with respect to the Initial Indication will not infringe or misappropriate the intellectual or other property rights of any Third Party;
(d) there are no legal claims, judgments or settlements against or owed by AnHeart or pending legal claims or litigation, in each case relating to the AnHeart Patents and to its knowledge, the AnHeart Patents are subsisting, valid and enforceable and AnHeart has not received any notice challenging the inventorship, ownership, validity or enforceability of the AnHeart Patents;
(e) AnHeart Controls the Licensed Technology, and has the right to grant to NK the license and sublicense that it purports to grant hereunder with respect to the Initial Indication and has not granted any Third Party rights that would interfere or be inconsistent with NK’s rights hereunder;
(f) to its knowledge, AnHeart is not aware of any infringement or misappropriation by a Third Party of the Licensed Technology in the Territory;
(g) Exhibit A is a complete and correct list of all AnHeart Patents as of the Effective Date, and to its knowledge, there are no other Patents necessary for Commercialization of the Licensed Compound or any Licensed Product for the Initial Indication in the Territory;
(h) to its knowledge, [**Redacted**] with, the Licensed Compound and the Licensed Product in [**Redacted**] of Licensed Product(s) by NK in the Territory in accordance with Applicable Laws;
(i) [**Redacted**] relating to the Licensed Compound and the Licensed Product, including, without limitation, [**Redacted**], including the [**Redacted**] with respect to the Initial Indication; and
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(j) [**Redacted**] having to do with the Licensed Compound and Licensed Product(s) and [**Redacted**] the Licensed Compound and Licensed Product for the Initial Indication.
11.3 Covenants of AnHeart.
11.3.1 AnHeart shall comply with all applicable Anti-Bribery Requirements and shall not make any payment, either directly or indirectly, of money or other benefits or assets to Governmental Authorities or officials or physicians, or make any payment to, or receive any payment from employees or consultants of NK, or other related business entities or persons, where it would constitute a violation of Anti-Bribery Requirements. Regardless of its legality, AnHeart shall make no payment either directly or indirectly to the abovementioned Governmental Authorities, entities and persons if such payment is for the purpose of influencing decisions or actions related to the subject matter of this Agreement.
11.3.2 AnHeart shall provide reasonable assistance as reasonably requested by NK (at NK’s expense) to assist NK in performing any activity for the purpose of compliance with the applicable Anti-Bribery Requirements or other regulatory requirements to which this Agreement relates.
11.4 Representations and Warranties of NK. NK represents and warrants to AnHeart, as of the Effective Date:
11.4.1 that it is not actively researching, developing, or commercializing a Competing Product in the Territory;
11.4.2 that it is in compliance with applicable Anti-Bribery Requirements in the Territory; and
11.4.3 that no agent, broker, investment banker, financial advisor, firm, individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity is or shall be entitled, as a result of this Agreement, to any broker’s, finder’s, financial advisor’s or other similar fee or commission (or reimbursement of expenses) in connection with this Agreement.
11.5 Covenants of NK. As a material inducement to AnHeart’s entry into this Agreement, NK agrees as follows:
11.5.1 During the Term, none of NK or its Affiliates shall, either alone or with or for any Third Party, (a) Commercialize any Competing Product in the Territory or (b) grant a license to enable any Third Party to Commercialize a Competing Product in the Territory.
11.5.2 NK shall, and shall cause its Affiliates and the Sublicensees to, comply with all Applicable Laws with respect to the Commercialization of the Licensed Product(s). Without limitation to the foregoing, NK shall, and shall cause each of its Affiliates and the Sublicensees to, in all material respects, conform its and their practices and procedures relating to the Commercialization of the Licensed Product(s) to any Applicable Law.
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11.5.3 NK shall comply with all applicable Anti-Bribery Requirements and shall not make any payment, either directly or indirectly, of money or other benefits or assets to Governmental Authorities or officials or physicians, or make any payment to, or receive any payment from employees or consultants of AnHeart, or other related business entities or persons, where it would constitute a violation of Anti-Bribery Requirements. Regardless of its legality, NK shall make no payment either directly or indirectly to the abovementioned entities and persons if such payment is for the purpose of influencing decisions or actions related to the subject matter of this Agreement.
11.5.4 NK shall make commercially reasonably efforts to obtain orphan drug designation and marketing approval of Licensed Products for the Initial Indication.
11.5.5 NK shall provide reasonable assistance as reasonably requested by AnHeart (at AnHeart’s expense) to assist AnHeart in performing any activity for the purpose of compliance with the applicable Anti-Bribery Requirements or other regulatory requirements to which this Agreement relates.
11.6 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 11, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND UNDER THIS AGREEMENT (INCLUDING WITH RESPECT TO ANY MATERIALS PROVIDED UNDER THIS AGREEMENT), EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR VALIDITY OF PATENT CLAIMS, WHETHER ISSUED OR PENDING (AS APPLICABLE).
11.7 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT DAMAGES, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STATUTE, STRICT LIABILITY OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES. THE FOREGOING LIMITATION OF LIABILITY, HOWEVER, SHALL NOT APPLY TO: EITHER PARTY’S (A) OBLIGATIONS TO INDEMNIFY THE OTHER PARTY FROM AND AGAINST THIRD PARTY CLAIMS UNDER ARTICLE 12, (B) CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 10, (C) FRAUD OR INTENTIONAL MISCONDUCT.
12. Indemnification.
12.1 Indemnification by AnHeart. AnHeart will defend, hold harmless and indemnify (collectively “Indemnify”) NK and its Affiliates, and their respective Sublicensees, agents, directors, contractors, representatives, officers and employees (collectively “NK Indemnitees”) from and against any liability or expense, including without limitation reasonable legal expenses and attorneys’ fees, (collectively “Losses”) resulting from suits, claims, actions and demands, in each case brought by a Third Party (each, a “Third Party Claim”) to the extent relating to or arising from: (a) the breach by AnHeart of any representation, warranty, covenant or agreement made by AnHeart in this Agreement; (b) [**Redacted**]; or (c) any gross negligence
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or willful misconduct by any AnHeart Indemnitee. AnHeart’s obligation to Indemnify the NK Indemnitees pursuant to this Section 12.1 will not apply to the extent that any such Losses arise from the negligence, willful misconduct or wrongful acts or omissions of any NK Indemnitee or are Losses for which NK is obligated to Indemnify an AnHeart Indemnitee pursuant to Section 12.2.
12.2 Indemnification by NK. NK will Indemnify AnHeart and its Affiliates, and their respective agents, directors, contractors, representatives, officers and employees (collectively “AnHeart Indemnitees”) from and against any and all Losses resulting from Third Party Claims to the extent relating to or arising from: (a) the breach by NK of any representation, warranty, covenants or agreement made by NK under this Agreement; (b) any gross negligence or willful misconduct by any NK Indemnitee; (c) the exploitation by any NK Indemnitee of: (i) the Licensed Compound or (ii) any Licensed Product, in each case ((i) and (ii)) [**Redacted**]; or (d) Losses arising from or relating to [**Redacted**] Commercialization of the Licensed Compound or any Licensed Product(s) in the Territory. NK’s obligation to Indemnify the AnHeart Indemnitees pursuant to this Section 12.2 will not apply to the extent that any such Losses arise from the negligence, willful misconduct or wrongful acts or omissions of any AnHeart Indemnitee, or are Losses for which AnHeart is obligated to Indemnify the NK Indemnitees pursuant to Section 12.1.
12.3 Procedure. To be eligible to be indemnified hereunder, any NK Indemnitee under Section 12.1, or AnHeart Indemnitee under Section 12.2, as the case may be (an “Indemnitee”) seeking indemnification, must provide the indemnifying Party with prompt notice of the Third Party Claim giving rise to the claimed indemnification obligation and must assign the exclusive ability to defend or settle any such claim to the indemnifying Party; provided that any delay or failure to provide such notice shall not constitute a waiver or release of, or otherwise limit, the Indemnitee’s rights to indemnification under Section 12.1 or Section 12.2 as applicable, except to the extent that such delay or failure materially prejudices the indemnifying Party’s ability to defend against the relevant claims. Notwithstanding the foregoing, the indemnifying Party may not enter into any settlement that admits fault, wrongdoing or damages on the part of the Indemnitee without such Indemnitee’s written consent, provided that such consent shall not be unreasonably withheld or delayed. The Indemnitee will cooperate with reasonable requests from the indemnifying Party and/or the Indemnifying Party’s insurer, at the indemnifying Party’s expense, and will have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party. Without affecting or limiting the indemnifying Party’s right to control the defense of the Third Party Claim, if the Indemnitee elects to engage separate counsel, the Parties shall cooperate in defending and/or settling such claims.
12.4 Allocation. If a claim is based in part on an indemnified claim, as described in Section 12.1 or Section 12.2, and in part on a non-indemnified claim, or is based in part on a claim described in Section 12.1 and in part on a claim described in Section 12.2, any payments and reasonable attorney fees incurred in connection with such claims will be apportioned between the Parties in accordance with the degree of fault attributable to each Party.
12.5 Insurance. During the Term and for [**Redacted**] years thereafter, AnHeart will maintain a policy of insurance at levels sufficient to support its indemnification obligations, but in any case such insurance must provide adequate coverage for clinical trials liability, products liability, and comprehensive general liability. During the Term and for [**Redacted**] years thereafter, NK will maintain a policy of insurance or the equivalent amount in self-insurance at levels sufficient to support its indemnification obligations and obligations in relation to the Commercialization of the Licensed Product(s) in the Territory. Upon the request by either Party, the other Party shall provide evidence of such insurance.
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13. Term and Termination.
13.1 Term. This Agreement is effective as of the Effective Date and, unless earlier terminated pursuant to the other provisions of this Article 13, will continue in full force and effect on a Licensed Product-by-Licensed Product basis until the expiration of the Royalty Term with respect to such Licensed Product (the “Term”).
13.2 Termination by AnHeart.
13.2.1 AnHeart may terminate this Agreement, without prejudice to any other remedies available to it at law or in equity, if NK or its Affiliates commit a material breach of this Agreement that, in the case of a material breach capable of remedy, have not been remedied within ninety (90) calendar days (or such other longer period mutually agreed between the Parties in writing) of receiving a notice from AnHeart identifying the breach and requiring its remedy, or if such material breach cannot be cured within such period, NK does not commence and diligently continue actions to cure such breach during such period, provided that in no event shall such material breach be permitted to last more than [**Redacted**] days (or such other longer period mutually agreed between the Parties in writing).
13.2.2 To the extent permitted by Applicable Law, AnHeart may terminate this Agreement immediately if: (a) NK becomes insolvent, or makes or seeks to make or arrange an assignment for the benefit of creditors; (b) proceedings in voluntary bankruptcy are initiated by or on behalf of NK or proceedings in involuntary bankruptcy are initiated against NK (and, in the case of any such involuntary proceeding, not dismissed within [**Redacted**] calendar days (or such other longer period mutually agreed between the Parties in writing)); or (c) a receiver or trustee of NK’s property is appointed and not discharged within [**Redacted**] calendar days (or such other longer period mutually agreed between the Parties in writing).
13.2.3 AnHeart may terminate this Agreement immediately upon written notice if NK or its Affiliate initiates or joins any challenge, whether in a court of law or in an administrative proceeding, to the validity or enforceability of an AnHeart Patent.
13.3 Termination by NK.
13.3.1 NK may terminate this Agreement, without prejudice to any other remedies available to it at law or in equity, if AnHeart or its Affiliates commit a material breach of this Agreement that, in the case of a material breach capable of remedy, has not been remedied within ninety 90 calendar days of receiving a notice from NK identifying the breach and requiring its remedy (the “AnHeart Cure Period”), or if such material breach cannot be cured within the AnHeart Cure Period, AnHeart does not commence, during the AnHeart Cure Period, and diligently continue actions to cure such breach, provided that in no event shall such material breach be permitted to last more than [**Redacted**] days.
13.3.2 NK may terminate this Agreement upon ninety (90) calendar days prior written notice if it has bona fide material concerns regarding the lack of safety for human use and toxicity of the Licensed Compound(s) or any Licensed Product(s) or the lack of efficacy of the Licensed Compound or any Licensed Product(s). The notice under this Section 13.3.2 will specify in detail the basis for such termination, including a reasonable description of such concerns and the notice period shall be shortened in accordance with Applicable Law.
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13.3.3 At any time after the First Commercial Sale of a Licensed Product, NK may terminate this Agreement upon six (6) months written notice to AnHeart.
13.4 General Effects of Termination or Expiry.
13.4.1 Accrued Obligations/Survival. Expiration or termination of this Agreement for any reason does not release either Party from any obligation or liability which, at the time of such expiration or termination, has already accrued to the other Party or which is attributable to a period prior to such expiration or termination, provided that [**Redacted**] provided further that, if (a) [**Redacted**] cures the applicable breach during the [**Redacted**] Cure Period or (b) the arbitrators appointed in accordance with Section 14.2 or an appropriate Governmental Authority determines that AnHeart has not materially breached the Agreement, then, in each case ((a) and (b)), [**Redacted**] Section 1 (for the purpose of interpreting this Agreement), Section 8 (solely to the extent payable as of the effective date of expiration or termination), Section 9.1, Section 10, Section 11.7, Section 12, Section 13.4, Section 13.5, Section 14 and Section 15 shall survive any expiration or termination of this Agreement for any reason.
13.4.2 Expiration. Upon expiration of this Agreement with respect to a Licensed Product, but not earlier termination, subject to Section 8.5, the licenses granted to by AnHeart to NK pursuant to Section 2 with respect to such Licensed Product shall continue and convert into non-exclusive, perpetual, royalty free and fully-paid up licenses in the Field in the Territory. Upon expiration of this Agreement, the Receiving Party shall return to the Disclosing Party, or at the Disclosing Party’s request, destroy, all of the Disclosing Party’s or any of its Affiliates’ Confidential Information, except to the extent that the Receiving Party is otherwise required to retain a copy for compliance with Applicable Law or in accordance with its ordinary computer archive policies. Notwithstanding the foregoing, NK shall not be required to return or destroy Confidential Information of AnHeart to the extent such Confidential Information continues to be licensed to NK pursuant to this Section 13.4.2.
13.5 Consequences of Termination of this Agreement.
13.5.1 In the event of termination, but not expiration, of this Agreement for any reason
(a) with respect to the Licensed Compound and Licensed Product(s) all licenses granted to NK under Section 2 will automatically terminate and shall revert to AnHeart, except as necessary for NK to exercise its rights and fulfil its obligations during the Wind-Down Period;
(b) effective upon such termination, NK hereby grants to AnHeart a non-exclusive, royalty-free, fully-paid up, perpetual, irrevocable and sublicensable (through multiple tiers) license to use and practice any NK Technology that is necessary for the Commercialization of the Licensed Compound or Licensed Product(s) in the Field in the Territory;
(c) NK will, at AnHeart’s written request: (i) promptly transfer to AnHeart or its designee copies of all data, reports, records, and materials that relate to the Licensed Compound and Licensed Product(s) including materials related to Medical Affairs Activities; (ii) return to AnHeart all relevant records and materials in NK’s possession or control containing Confidential Information of
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AnHeart relating to the Licensed Product(s); (iii) assign, and will cause its Affiliates to assign, each trademark which has been used to Commercialize the Licensed Product(s) in the Territory; provided that, AnHeart will receive no rights to any NK name or any trademark, trade name, or logo of NK itself; (iv) assign any Regulatory Filings, including the Marketing Approval, to AnHeart or its designee; and (v) reasonably cooperate with AnHeart or its designee to facilitate a smooth, orderly, and prompt transition of the Commercialization of the Licensed Product(s) to AnHeart or its designee upon termination; and
(d) if this Agreement is terminated after the First Commercial Sale by NK, its Affiliates or its or their Sublicensees, of a Licensed Product in the Territory, NK, its Affiliates, Sublicensees, subcontractors or other related parties (the “NK Related Parties”) may, if required by Applicable Law or requested by a Regulatory Authority, continue to distribute and sell the Licensed Product(s) in the Territory, in accordance with the terms and conditions of this Agreement, for the longer of (a) the period of time required by Applicable Law or requested by a Regulatory Authority and (b) the shorter of: (i) the time it takes for NK to exhaust its inventory of Licensed Products and components thereof at the time of termination; and (ii) [**Redacted**] after termination or such longer period as required by Applicable Law or requested by a Regulatory Authority (the “Wind-Down Period”). During the Wind-Down Period, AnHeart shall continue to supply NK with the Licensed Product(s) in the quantity necessary for NK to comply with the requirements of Applicable Law or the request from a Regulatory Authority, and NK shall continue to make any and all applicable payments to AnHeart for the terminated Licensed Product sold or disposed by NK or the NK Related Parties. After the Wind-Down Period, NK or NK Related Parties shall not sell the terminated Licensed Product in the Territory. Within [**Redacted**] calendar days of expiration of the Wind-Down Period, NK shall notify AnHeart of any quantity of the terminated Licensed Product remaining in NK’s and NK Related Parties’ inventory, to the extent any exist, and AnHeart [**Redacted**], purchase any such quantities of the terminated Licensed Product and components thereof, as applicable, from NK and NK Related Parties [**Redacted**] shall be responsible for the shipping of any such inventory and components thereof. Upon termination of the Wind-Down Period, the Commercial Supply Agreement shall terminate.
14. Dispute Resolution.
14.1 Between the Parties. In the event of a dispute between the Parties arising out of or related to the terms of this Agreement, either Party may request that the Parties engage in good faith discussions to resolve such dispute. Within [**Redacted**] calendar days of such request, each Party will appoint an appropriate representative to engage discussions to resolve the dispute in a mutually acceptable manner. Such representative will have a reasonable level of expertise in the subject matter of the dispute and possess the requisite authority to resolve the dispute. If such representatives are unable to resolve the dispute within thirty [**Redacted**] days, either Party may provide a written request to submit the dispute for discussions between executive officers appointed by the respective chief executive officers of each Party. If the executive officers are unable to resolve the dispute within [**Redacted**] calendar days after referral, either Party may provide a written request to refer the dispute for arbitration.
14.2 Arbitration. In the event of a dispute, that cannot be resolved through good faith negotiations as set forth above, the dispute shall be referred to and finally resolved by arbitration in the following manner:
(a) The dispute shall be conducted according to the Rules of Arbitration of [**Redacted**] (the “Rules”) in effect as of the Effective Date, except as they may be modified herein or by mutual agreement by the Parties. The seat of arbitration shall be [**Redacted**]
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[**Redacted**]. All arbitration proceedings shall be conducted by three (3) arbitrators unless otherwise mutually agreed by the Parties. The claimant and the respondent shall each nominate an arbitrator in accordance with the Rules, and the third arbitrator, who shall be the president of the arbitral tribunal, shall be appointed by the two (2) arbitrators appointed by the claimant and the respondent in consultation with the Parties.
(b) The arbitral proceedings shall be conducted in English. To the extent that the Rules are in conflict with the provisions of this Section 14.2, including the provisions concerning the appointment of the arbitrator, the provisions of this Section 14.2 shall prevail.
(c) Each Party to the arbitration shall cooperate with each other Party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other Party in connection with such arbitral proceedings, subject only to any confidentiality obligations binding on such Party.
(d) The award of the arbitral tribunal shall be final and binding upon the Parties, and the prevailing Party may apply to a court of competent jurisdiction for enforcement of such award.
(e) The existence, nature, and results of, as well as any documents relating to, any arbitration shall be treated as Confidential Information by the Parties.
(f) Each Party shall have the right to seek injunctive or other equitable relief from a court of competent jurisdiction that may be necessary to avoid irreparable harm, maintain the status quo or preserve the subject matter of the arbitration.
15. Miscellaneous Provisions.
15.1 Relationship of the Parties. AnHeart and NK agree that the relationship between them established by this Agreement is that of independent contractors. The Parties further agree that this Agreement does not, is not intended to, and should not be construed to establish an employment, agency, partnership, joint venture, or any other relationship between them. Except as may be specifically provided herein, neither Party has any right, power, or authority, nor may they represent themselves as having any right, power, or authority, to assume, create or incur any expense, liability, or obligation, express or implied, on behalf of the other Party, or otherwise act as an agent for the other Party for any purpose.
15.2 No Third Party Beneficiaries. No person or entity other than AnHeart, NK, and their respective Affiliates and permitted assignees may be deemed an intended beneficiary or have any right to enforce any obligation of this Agreement.
15.3 Assignments. AnHeart may not assign this Agreement or any of its rights or obligations hereunder to any Third Party without the written consent of NK, provided that AnHeart may assign this Agreement to an Affiliate or in connection with a merger or the acquisition of all or substantially all of its assets. NK may not assign this Agreement or any of its rights or obligations hereunder to any Third Party without prior written consent of AnHeart. Subject to the foregoing, the terms and conditions of this Agreement will be binding on and inure to the benefit of the successors and permitted assigns of the Parties. Any attempted assignment not in accordance with the terms of this Agreement will be void.
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15.4 No Implied Waivers; Rights Cumulative. The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement does not constitute a waiver of that right or excuse a similar subsequent failure to perform such term or condition. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver is effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, may be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. Except as expressly set forth in this Agreement, all rights and remedies available to a Party, whether under this Agreement or afforded by law or otherwise, are cumulative and not in the alternative to any other rights or remedies that may be available to such Party.
15.5 Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable under law in any jurisdiction, the Parties will negotiate in good faith a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions of this Agreement will remain in full force and effect in such jurisdiction and will be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible. A holding of invalidity, illegality, or unenforceability of a provision in one jurisdiction will not affect the validity, legality, or enforceability of such provision in any other jurisdiction.
15.6 Entire Agreement; Amendments. This Agreement, together with all appendices, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all previous arrangements, whether written or oral, with respect to the subject matter contained herein. Any amendment or modification to this Agreement must be made in a writing signed by both Parties.
15.7 Force Majeure. Neither Party will be liable to the other Party for failure or delay in performing of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by; epidemic, pandemics, plague, chemical or radioactive contamination, riot, civil commotion, rebellion, blockade, insurrection, invasion, war, acts of war (whether war be declared or not), terrorist acts, earthquake, tsunami, hurricane, tornado, storm, typhoon, lighting, volcanic eruption, landslide, flood, fire, acts of God, strike, lockouts or other labor disturbances, or governmental acts, embargoes, or restriction, or other cause that is beyond the reasonable control of the affected Party. The Party affected by such force majeure must provide the other Party with full particulars thereof (including its best estimate of the likely extent and duration of the interference with its activities) as soon as reasonably practicable. The affected Party will use Commercially Reasonable Efforts to overcome the difficulties created by the force majeure and to resume performance of its obligations as soon as practicable. In such event, the Parties will meet and discuss promptly to determine an equitable solution to minimize or accommodate the effects of any such event, including the possibility of terminating this Agreement.
15.8 Governing Law. This Agreement shall be governed by, and any disputes, claims or controversies in connection with this Agreement, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, or termination, shall be resolved in accordance with, the laws of [**Redacted**], United States, excluding its conflicts of law provisions and further excluding the United Nations Convention on Contracts for the International Sale of Goods (CISG).
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15.9 Notices.
15.9.1 Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if:
(a) delivered in person;
(b) transmitted by email (receipt verified) ; or
(c) [**Redacted**] calendar days after it was sent by registered letter or express courier service, return receipt requested (or its equivalent), provided that no postal strike or other disruption is then in effect or comes into effect within [**Redacted**] calendar days after such mailing.
15.9.2 Any notice, request, delivery, approval or consent to the Party required or permitted to be given under this Agreement shall be directed at its address or email shown below or such other address or email as such Party shall have last given by notice to the other Party. If such notice, request, delivery, approval, or consent is transmitted by email, the sending Party shall also transmit an identical copy of such documentation to the receiving Party by express courier service at the address shown below or to such other addresses and emails as a Party may designate by written notice.
If to NK, addressed to:
Nippon Kayaku Co., Ltd.
1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-0005, JAPAN
Attention: [**Redacted**]
Telephone: [**Redacted**]
Email: [**Redacted**]
If to AnHeart, addressed to:
AnHeart Therapeutics Inc.
777 3rd avenue, suite 1704, New York, NY 10017, USA
Attention: [**Redacted**]
Telephone: [**Redacted**]
Email: [**Redacted**]
With a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: [**Redacted**]
Telephone: [**Redacted**]
Email: [**Redacted**]
15.10 Bankruptcy. All rights, licenses and options to the foregoing granted under this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy Code”) and any foreign equivalent thereof, licenses of rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code or such foreign equivalent. In the event of commencement of a bankruptcy proceeding by or against AnHeart under the Bankruptcy Code or such foreign equivalent, NK will be (a) permitted to fully exercise all of AnHeart’s rights and elections under the U.S. Bankruptcy Code and such foreign equivalent in any country having jurisdiction over a Party or its assets, (b) entitled to a complete copy of or access to in order to make a complete copy of all intellectual
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property that is licensed to NK hereunder, including a duplicate of all records (in whatever form existing, whether in hardcopy, electronic, photographic, or otherwise), a reasonable quantity of biological or chemical materials for reproducing, and any samples, prototypes, or other embodiments of such intellectual property not already in NK’s possession and to which NK would otherwise have been or be entitled pursuant to this Agreement, and (c) AnHeart will as promptly as reasonably possible but in any event within [**Redacted**] days of NK’s request, deliver all of the foregoing to NK or permit NK to access of the foregoing to make a copy or collect and take possession of the foregoing.
15.11 No Strict Construction. This Agreement has been prepared jointly by the Parties and should not be strictly construed against either Party.
15.12 Interpretation. The captions and headings in this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. Unless specified to the contrary, references to Sections or Appendix mean those particular Sections and Appendices to this Agreement and references to this Agreement include all attachments hereto. Unless context otherwise clearly requires, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation;” (b) the word “day” or “year” means a calendar day or year unless otherwise specified; (c) the word “notice” means notice in writing (whether or not specifically stated); (d) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this Agreement (including any exhibits); (e) the word “or” shall be construed as the inclusive meaning identified with the phrase “and/or;”; (f) words using the singular or plural number also include the plural or singular number, respectively; and (g) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement law, rule or regulation thereof.
15.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, and all of which together, will constitute one and the same.
15.14 Use of Name. Except as otherwise provided herein, neither Party has any right, express or implied, to use the name or other designation of the other Party or any other trade name, trademark, or logo of the other Party in any manner or for any purpose in connection with the performance of this Agreement, except for use in connection with notices or filings required by law, rule, or regulation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, AnHeart and NK have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
| NIPPON KAYAKU CO., LTD. | ANHEART THERAPEUTICS INC. | |
| Signature:
/s/ Atsuhiro Wakumoto |
Signature:
/s/ Junyuan Wang | |
| Printed Name: Atsuhiro Wakumoto | Printed Name: Junyuan Wang | |
| Title: President, Representative Director | Title: Chief Executive Officer | |
Page 32 of 35
Exhibit A
ANHEART PATENTS
Please refer to the table below for the listing of all Japanese patents and pending applications relating to the Licensed Compound.
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
| [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | [**Redacted**] | ||||
The molecular structure of taletrectinib:
Exhibit B
NK and AnHeart agree that the document list below shall be the AnHeart Know-How subject to technology transfer under Section 5 as of the Effective Date. The documents will be shared through Intralinks, SharePoint or a similar virtual dataroom. As some clinical studies are ongoing, NK and AnHeart agree that as these studies progress, some of the listed documents may be updated, replaced, or supplemented with new documents under Section 6.4 of this Agreement. NK shall be responsible for any translations at its own costs if the documents are not in Japanese.
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
| [**Redacted**] | [**Redacted**] |
[**Redacted**] | ||
[End of Agreement]
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No. 333-254176 on Form S-3 and Registration Statement Nos. 333-256910, 333-267110, 333-270614, 333-277646 and 333-278804 on Form S-8 of Nuvation Bio Inc. of our report dated March 28, 2024, relating to the financial statements of AnHeart Therapeutics Ltd. appearing in this Current Report on Form 8-K/A dated June 20, 2024.
/s/Deloitte Touche Tohmatsu Certified Public Accountants LLP
Hangzhou, the People’s Republic of China
June 20, 2024
Exhibit 99.1
ANHEART THERAPEUTICS LTD.
(Incorporated in the Cayman Islands with limited liability)
Report and Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Independent Auditor’s Report |
F-2-3 | |||
| Consolidated Balance Sheets as of December 31, 2023 and 2022 |
F-4 | |||
| Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2023 and 2022 |
F-5 | |||
| Consolidated Statements of Changes in Shareholders’ Deficit for the Years ended December 31, 2023 and 2022 |
F-6 | |||
| Consolidated Statements of Cash Flows for the Years ended December 31, 2023 and 2022 |
F-7 | |||
| Notes to the Consolidated Financial Statements |
F-8 |
F-1
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF ANHEART THERAPEUTICS LTD.:
Opinion
We have audited the consolidated financial statements of AnHeart Therapeutics Ltd. and subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ deficit and cash flows for the two years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
F-2
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF ANHEART THERAPEUTICS LTD.:
In performing an audit in accordance with GAAS, we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
| • | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Deloitte Touche Tohmatsu Certified Public Accountants LLP
Hangzhou, the People’s Republic of China
March 28, 2024
F-3
ANHEART THERAPEUTICS LTD.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2023 AND 2022
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| December 31, 2023 |
December 31, 2022 |
|||||||
| US$ | US$ | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
36,026 | 30,780 | ||||||
| Marketable securities |
— | 4,307 | ||||||
| Accounts receivable, net of allowance for credit loss of nil as of December 31, 2023 and 2022 |
3,472 | 1,721 | ||||||
| Prepaid expenses and other current assets |
1,943 | 1,826 | ||||||
|
|
|
|
|
|||||
| Total current assets |
41,441 | 38,634 | ||||||
| Property and equipment, net |
206 | 291 | ||||||
| Operating lease right-of-use assets |
457 | 804 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
42,104 | 39,729 | ||||||
|
|
|
|
|
|||||
| LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
8,778 | 7,625 | ||||||
| Operating lease liability, current portion |
420 | 532 | ||||||
| Contract liabilities, current portion |
11,748 | 8,723 | ||||||
| Short-term borrowings |
11,358 | 9,189 | ||||||
| Accrued expenses and other current liabilities |
4,981 | 2,717 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
37,285 | 28,786 | ||||||
| Warrant liabilities |
203 | 278 | ||||||
| Long-term borrowings |
326 | 383 | ||||||
| Contract liabilities, net of current portion |
11,160 | 2,425 | ||||||
| Operating lease liability, net of current portion |
35 | 280 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES |
49,009 | 32,152 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 11) |
||||||||
| Mezzanine equity: |
||||||||
| Series A convertible redeemable preferred shares, $.0001 par value; 12,000,000 shares authorized, issued and outstanding as of December 31, 2023 and 2022 |
61,242 | 56,706 | ||||||
| Series A+ convertible redeemable preferred shares, $.0001 par value; 10,784,344 shares authorized, issued and outstanding as of December 31, 2023 and 2022 |
49,113 | 45,475 | ||||||
| Series A-2 convertible redeemable preferred shares, $.0001 par value; 2,704,012 shares authorized, issued and outstanding as of December 31, 2023 and 2022 |
12,141 | 11,242 | ||||||
| Series B convertible redeemable preferred shares, $.0001 par value; 17,259,714 shares authorized, issued and outstanding as of December 31, 2023 and 2022 |
72,387 | 67,025 | ||||||
|
|
|
|
|
|||||
| TOTAL MEZZANINE EQUITY |
194,883 | 180,448 | ||||||
|
|
|
|
|
|||||
| Shareholders’ deficit: |
||||||||
| Ordinary shares, $.0001 par value; 6,400,000 shares authorized, issued and outstanding as of December 31, 2023 and 2022 |
1 | 1 | ||||||
| Additional paid-in capital |
— | — | ||||||
| Accumulated other comprehensive income |
853 | 594 | ||||||
| Accumulated deficit |
(202,642 | ) | (173,466 | ) | ||||
|
|
|
|
|
|||||
| TOTAL SHAREHOLDERS’ DEFICIT |
(201,788 | ) | (172,871 | ) | ||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
42,104 | 39,729 | ||||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ANHEART THERAPEUTICS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Revenue |
47,313 | 10,211 | ||||||
| Cost of revenue |
9,851 | 9,022 | ||||||
|
|
|
|
|
|||||
| Gross profit |
37,462 | 1,189 | ||||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development |
43,882 | 36,591 | ||||||
| Selling, general and administrative |
10,389 | 6,708 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
54,271 | 43,299 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(16,809 | ) | (42,110 | ) | ||||
|
|
|
|
|
|||||
| Other income (expense), net: |
||||||||
| Government subsidy income |
1,103 | 966 | ||||||
| Foreign exchange loss |
(426 | ) | (436 | ) | ||||
| Interest income |
426 | 406 | ||||||
| Interest expense |
(543 | ) | (428 | ) | ||||
| Other expenses |
(111 | ) | — | |||||
| Change in fair value of warrant liabilities |
28 | 13 | ||||||
|
|
|
|
|
|||||
| Total other income, net |
477 | 521 | ||||||
|
|
|
|
|
|||||
| Loss before provision for income taxes |
(16,332 | ) | (41,589 | ) | ||||
| Income tax expense |
(325 | ) | (10 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
(16,657 | ) | (41,599 | ) | ||||
| Accretion of convertible redeemable preferred shares to redemption value |
(14,435 | ) | (13,368 | ) | ||||
| Net loss attributable to ordinary shareholders of the Company |
(31,092 | ) | (54,967 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
(16,657 | ) | (41,599 | ) | ||||
| Other comprehensive income: |
||||||||
| Exchange difference arising on translation of foreign operations |
259 | 27 | ||||||
|
|
|
|
|
|||||
| Total comprehensive loss attributable to the Company |
(16,398 | ) | (41,572 | ) | ||||
| Accretion of convertible redeemable preferred shares to redemption value |
(14,435 | ) | (13,368 | ) | ||||
|
|
|
|
|
|||||
| Total comprehensive loss attributable to ordinary shareholders of the Company |
(30,833 | ) | (54,940 | ) | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ANHEART THERAPEUTICS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| Ordinary shares | Additional Paid-in Capital |
Accumulated other comprehensive income |
Accumulated deficit |
Total Shareholders’ Deficit |
||||||||||||||||||||
| Issued and Outstanding Shares |
Amount | |||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
| Balances at December 31, 2021 |
6,400,000 | 1 | — | 567 | (119,807 | ) | (119,239 | ) | ||||||||||||||||
| Share-based compensation |
— | — | 1,308 | — | — | 1,308 | ||||||||||||||||||
| Foreign currency translation gain |
— | — | — | 27 | — | 27 | ||||||||||||||||||
| Accretion of convertible redeemable preferred shares to redemption value |
— | — | (1,308 | ) | — | (12,060 | ) | (13,368 | ) | |||||||||||||||
| Net loss |
— | — | — | — | (41,599 | ) | (41,599 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances at December 31, 2022 |
6,400,000 | 1 | — | 594 | (173,466 | ) | (172,871 | ) | ||||||||||||||||
| Share-based compensation |
— | — | 1,916 | — | — | 1,916 | ||||||||||||||||||
| Foreign currency translation gain |
— | — | — | 259 | — | 259 | ||||||||||||||||||
| Accretion of convertible redeemable preferred shares to redemption value |
— | — | (1,916 | ) | — | (12,519 | ) | (14,435 | ) | |||||||||||||||
| Net loss |
— | — | — | — | (16,657 | ) | (16,657 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances at December 31, 2023 |
6,400,000 | 1 | — | 853 | (202,642 | ) | (201,788 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ANHEART THERAPEUTICS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(Amounts in thousands of U.S. Dollar (“US$”)
| Years Ended December 31, |
||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net loss |
(16,657 | ) | (41,599 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
185 | 136 | ||||||
| Share-based compensation |
1,916 | 1,308 | ||||||
| Noncash lease expense |
621 | 514 | ||||||
| Change in fair value of warrant liabilities |
(28 | ) | (13 | ) | ||||
| Amortization of borrowing discount of SSVB Loan |
46 | 147 | ||||||
| Unrealized foreign currency transaction loss |
426 | 436 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(1,751 | ) | 612 | |||||
| Prepaid expenses and other current assets |
(117 | ) | (916 | ) | ||||
| Accounts payable |
1,153 | 6,844 | ||||||
| Accrued expenses and other current liabilities |
2,264 | 38 | ||||||
| Contract liabilities |
11,760 | (4,129 | ) | |||||
| Operating lease liabilities |
(629 | ) | (532 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(811 | ) | (37,154 | ) | ||||
|
|
|
|
|
|||||
| Cash Flows from Investing Activities: |
||||||||
| Cash paid for marketable securities |
(19,505 | ) | (36,128 | ) | ||||
| Maturities of marketable securities |
23,571 | 31,908 | ||||||
| Purchases of property and equipment |
(105 | ) | (151 | ) | ||||
| Proceed from disposal of property and equipment |
1 | 36 | ||||||
|
|
|
|
|
|||||
| Net cash provided by (used in) investing activities |
3,962 | (4,335 | ) | |||||
|
|
|
|
|
|||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from borrowings |
14,147 | 10,179 | ||||||
| Payments on borrowings |
(11,963 | ) | (5,520 | ) | ||||
| Payment of issuance costs of convertible redeemable preferred shares |
— | (34 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
2,184 | 4,625 | ||||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
5,335 | (36,864 | ) | |||||
| Cash, cash equivalents, and restricted cash at beginning of year |
30,780 | 68,486 | ||||||
| Effect of foreign exchange rate changes on cash |
(89 | ) | (842 | ) | ||||
|
|
|
|
|
|||||
| Cash, cash equivalents, and restricted cash at end of year |
36,026 | 30,780 | ||||||
|
|
|
|
|
|||||
| Supplemental Disclosure of Cash Flow Information: |
||||||||
| Cash paid for interest |
490 | 291 | ||||||
| Cash paid for income taxes |
3 | 10 | ||||||
| Cash paid for amounts included in the measurement of operating lease liabilities |
680 | 580 | ||||||
|
Right-of-use-assets obtained in exchange for new operating lease liabilities |
297 | 330 | ||||||
| Accretion of convertible redeemable preferred shares to redemption value |
14,435 | 13,368 | ||||||
| Issue of warrants in connection with the SSVB loan (Note 7) |
— | 134 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 1. | Organization and principal activities |
Anheart Therapeutics Ltd., (“Anheart” or “Cayman Co”) and its subsidiaries (collectively referred to as “the Company”) are principally engaged in acquiring, developing, and commercializing innovative pharmaceutical products as novel precision oncology therapies. For the years ended December 31, 2023 and 2022, its primary operations were conducted in the United States and China.
As of December 31, 2023, the Company’s principal subsidiaries are as follows:
| Name of the entity |
Date of |
Place of |
Percentage of direct or indirect economic ownership |
Principle activities | ||||||
| AnHeart Therapeutics Inc. (“AnHeart US”) |
December 11, 2017 | Delaware, USA | 100 | % | Development and commercialization of innovative medicines | |||||
| AnBio Therapeutics (HK) Ltd. (“AnHeart HK”) |
May 28, 2021 | Hong Kong, China | 100 | % | Investment holding company | |||||
| AnHeart Therapeutics (Hangzhou) Co., Ltd. (“AnHeart HZ”) |
November 27, 2018 | Hangzhou, China | 100 | % | Development and commercialization of innovative medicines | |||||
| Baoquan Biomedical Technology (Shanghai) Co. Ltd. |
February 8, 2021 | Shanghai, China | 100 | % | Development and commercialization of innovative medicines | |||||
| NanGene Biomedical Co. Ltd. (“NanGene”) |
April 15, 2022 | Nanjing, China | 100 | % | Development and commercialization of innovative medicines | |||||
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated.
Liquidity and Going Concern
The Company has been incurring losses from operations since its inception, with net loss of $16,657 and $41,599 for the years ended December 31, 2023 and 2022, respectively. Accumulated deficit amounted to $202,642 as of December 31, 2023. Net cash used in operating activities was approximately $811 and $37,154 for the years ended December 31, 2023 and 2022, respectively. The Company has historically financed its operations primarily from the issuances of the Convertible Redeemable Preferred Shares (“CRPS”), proceeds from borrowings and cash received from collaboration and license Agreement with customers. Management expects operating losses and negative cash flows from operations to continue for the foreseeable future.
The Company has cash and cash equivalents available on hand of $36.0 million and net current assets of $4.2 million as of December 31, 2023. In addition, on March 25, 2024, the Company has entered into a definitive agreement with a third party to acquire the Company in an all-stock transaction (see Note 15). The Company together with the third party (the “combined company”) will continue to focus on executing the development strategy for pipelines. The Company believes it appropriate that the consolidated financial statements are prepared on going concern basis.
F-8
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Use of Estimates
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.
Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to accrued research and development expenses; valuation of share-based compensation arrangements; the fair value of convertible redeemable preferred shares; the fair value of the warrant liabilities; identifying separate accounting units and the standalone selling price of each performance obligation in the Company’s revenue arrangements; the incremental borrowing rate for determining lease liabilities and right-of-use assets and valuation allowance for deferred tax assets.
The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it has concluded to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ materially from those estimates or assumptions.
Functional Currency and Foreign Currency Translations
The Company’s reporting currency is the USD. The functional currency of the Company’s subsidiaries incorporated in PRC is RMB. The functional currency of the Company and its subsidiaries incorporated outside the PRC is USD.
Transactions denominated in currencies other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the net loss of the statements of operations and comprehensive loss.
Assets and liabilities of the Company with functional currency other than US$ are translated into US$ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates. Income and expense items are translated at average exchange rates during the fiscal year. Translation adjustments arising from these are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Cash equivalents are reflected at fair value based on quoted market prices as further described in Note 3.
Fair Value Measurements
The Company categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| • | Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| • | Level 2—Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and |
| • | Level 3—Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. |
F-9
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Property and Equipment
Property and equipment are tangible assets that are held for use in production or supply of services, or for administrative purpose are stated in the consolidated statements of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.
Leasehold improvements in the course of construction for administrative purposes are carried at cost, less any recognized impairment loss. Costs include any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and, for qualifying assets, borrowing costs capitalized in accordance with the Company’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognized so as to write off the cost of items of property and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
The above items of property and equipment are depreciated on a straight-line basis over the following estimated useful lives after taking into account the following residual values:
| Useful lives | Estimated residual value | |||
| Electronic equipment |
3 years | 5% | ||
| Furniture and Fixtures |
3 years | 5% | ||
| Leasehold Improvements |
Shorter of the lease term or 5 years | 0% |
Impairment of Long-lived Assets
As required under the applicable accounting guidance, the Company periodically reevaluates the original assumptions and rationale used in the establishment of the carrying value and estimated lives of all of its long-lived assets, including property and equipment. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. There were no impairments for the years ended December 31, 2023 and 2022.
Leases
The Company leases office premises in United States and China under operating leases and accounts for its leases under ASC 842. The Company determines whether an arrangement constitutes a lease and records lease liabilities and operating lease right-of-use (“ROU”) assets on its consolidated balance sheet at the lease commencement. The lease terms of leases vary from more than one year to five years. The Company’s lease agreements do not contain any significant residual value guarantees or restricted covenants. The Company measures the operating lease liabilities at the commencement date based on the present value of remaining lease payments over the lease term, which is computed using the Company’s incremental borrowing rate, an estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the lease term. The Company measures the operating lease ROU assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing operating lease expenses based on lease payments on a straight-line basis over the lease term when the lessor makes the underlying asset available to the Company. Some of the Company’s lease contracts include options to extend the leases for an additional period which has to be agreed with the lessors based on mutual negotiation. After considering the factors that create an economic incentive, the Company does not include renewal option periods in the lease term for which it is not reasonably certain to exercise.
F-10
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Revenue Recognition
The Company applies ASC, Topic 606, Revenue from Contracts with Customers (ASC 606) to account for its revenue transactions.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.
Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.
Accounts receivable represent amounts invoiced and revenues recognized prior to invoicing when the Company has satisfied its performance obligation and has the unconditional right to payment.
Collaborative Arrangement
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The Company adopted this standard for all periods presented.
At contract inception of agreements with collaboration elements, the Company analyses the agreements to assess whether they are within the scope of ASC 808 Collaborative arrangements (“ASC 808”) to determine whether such agreements involve joint operating activities performed by parties that are both (a) active participants in the activities and (b) exposed to significant risks and rewards dependent on the commercial success of such activities.
The Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization of drug products and drug candidates. The Company assesses and determines that none of the collaboration agreements entered into during the periods presented were within the scope of ASC808, as all of the agreements did not involve active participation by both parties in a joint research activity, therefore not qualify as collaborative arrangements under ASC 808.
The Company has determined that all the elements of the above collaborations are reflective of a vendor-customer relationship and therefore within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the five-step model under ASC 606 noted above. The Company recognizes revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
The Company’s collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of licenses to intellectual property rights, agreements to provide research and development services and other deliverables. The collaborative arrangements do not include a right of return for any deliverable. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. In developing the stand-alone selling price for a performance obligation, the Company considers competitor pricing for a similar or identical product, market awareness of and perception of the product, expected product life and current market trends. In general, the consideration allocated to each performance obligation is recognized when the respective obligation is satisfied either by delivering a good or providing a service, limited to the consideration that is not constrained. Non-refundable payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as contract liabilities.
F-11
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Collaborative Arrangement - continued
Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the contract, the Company recognizes revenue from the portion of the transaction price allocated to the license at a point in time, when the license is transferred to the customer and the customer is able to benefit from the license.
Research and development services: The portion of a transaction price allocated to research and development services performance obligations is deferred and recognized as revenue over time as delivery or performance of such services occurs based on the use of an input method.
Customer options: A customer’s right to choose, at its discretion, to make a payment for additional goods or services is generally considered an option. If the Company is not presently obligated to provide and does not have a right to consideration for delivering additional goods or services, the item is considered an option. The Company evaluates the customer options for material rights, such as the ability to acquire additional goods or services for free or a discount. Optional future services that reflect their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations and are accounted for as separate contracts. The optional future services do not include a material right to be accounted for as performance obligations.
Milestones payments: The Company’s collaboration agreement includes development and regulatory milestones. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.
Royalties: For sales-based royalties, including milestone payments based on the level of sales, the Company determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales-based royalty relates, the Company recognizes revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any sales-based royalty revenue resulting from the Company’s collaboration agreement.
The Company receives payments from its customers based on billing terms established in the contract. Up-front payments and fees are recorded as contract liabilities (e.g., deferred revenue) upon receipt or when due until the Company performs its obligations under the arrangement.
In the event of an early termination of a collaboration agreement, any contract liabilities would be recognized in the period in which all our obligations under the agreement have been fulfilled.
For a complete discussion of accounting for revenue, see Note 6, “Collaboration and License Agreements.”
Costs to Fulfill a Contract with a Customer
The compensation paid to obtain contracts were immaterial, therefore, the Company has not capitalized any costs for the years ended December 31, 2023 and 2022.
The Company is required to capitalize costs incurred to fulfill customer contracts. These costs are required to be amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates, compared to previously being expensed as incurred. Elements of the costs primarily include (i) payroll and other related costs of personnel related directly to the contract activities; (ii) costs related to pre-clinical testing and clinical trials such as payments to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), investigators, and clinical trial sites that conduct the contract activities; (iv) costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses; and (v) other research and development costs.
F-12
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of the costs associated with general management, professional fees for auditing, consulting and legal services, market research expenses and general overhead expenses.
Research and Development Expenses
Elements of research and development expenses primarily include (i) payroll and other related costs of personnel engaged in research and development activities; (ii) in-licensed patent costs of exclusive development rights of products granted to the Company; (iii) costs related to pre-clinical testing of the Company’s technologies under development and clinical trials such as payments to CROs and CMOs, investigators, and clinical trial sites that conduct our clinical studies; (iv) costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses; and (v) other research and development expenses. Research and development expenses are charged to expense as incurred and have no alternative future uses.
The Company has acquired rights to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new product compound, as well as pre-commercial milestone payments, are immediately expensed as acquired in-process research and development (“IPR&D”) in the period in which they are incurred, provided that the new product compound did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, and the product candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Milestone payments made to third parties subsequent to regulatory approval which meet the capitalization criteria would be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product. If the conditions enabling capitalization of development costs as an asset have not yet been met, all development expenditures are recognized in profit or loss when incurred.
Convertible redeemable preferred Shares
The Company has classified its convertible redeemable preferred shares as temporary equity in the accompanying consolidated balance sheets due to terms that allow for redemption of the shares upon the occurrence of a contingent event that is not solely within the Company’s control. The Company recorded the initial carrying amount of the convertible redeemable preferred shares with its issuance price, which approximated the issuance date fair value, after the reduction of the issuance cost. The Company uses interest method to accrete the carrying value of the preferred shares to their maximum redemption price as if redemption were to occur at the end of the reporting period. The change in redemption value is recorded as deemed dividend, and charged against retained earnings, or in the absence of retained earnings, against additional paid-in capital (“APIC”). Once APIC has been exhausted, additional charges are recorded by increasing the accumulated deficit.
Government subsidy income
Government subsidies primarily consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. For certain government subsidies, there are no defined rules and regulations to govern the criteria necessary for companies to receive such benefits, and the amount of financial subsidy is determined at the discretion of the relevant government authorities. The Company records government subsidies as non-operating other income when received from the local government authority, because the government subsidies are not subject to further performance obligations or future returns.
F-13
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Share-Based Compensation
The Company accounts for all share-based awards granted to employees and non-employees as share-based compensation expenses at fair value. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair value of the Company’s ordinary shares on the date of grant, the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the shares. As the Company is a privately held company, there is no historical data from which to base a calculation of expected volatility. The Company relies upon other information such as the historical, expected, or implied volatility of similar companies whose shares or option prices are publicly available. The annual risk-free rate will be determined by using the nominal treasury constant maturity rate published on the Federal Reserve website as of the date of grant. The Company will select a rate (or blend of rates) with an appropriate term based on the expected term. The Company has not paid, and does not anticipate paying, cash dividends on its ordinary share therefore, the expected dividend yield is assumed to be zero.
The Company classifies its stock option awards as equity and measures its awards at their grant date fair value and recognizes the compensation expense over the requisite service period for employees and non-employees. The service period will be from the grant date through the vesting end date. The Company elects to recognize forfeitures when they occur.
Share-based compensation is classified in the Company’s statements of operations and comprehensive loss based on the function to which the related services are provided. Any consideration paid by employees on exercising stock options and the corresponding portion previously credited to additional paid-in capital are credited to share capital.
See Note 9 for a summary of the share-based award activity under the Company’s share-based compensation plan.
Income Taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis, and operating losses and tax credits carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assets will not be realized.
The Company records liabilities related to uncertain tax positions when, despite the Company’s belief that the Company’s tax return positions are supportable, the Company believes that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense. The Company did not recognize any uncertain tax positions as of December 31, 2023 and 2022.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the changes in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive loss is reported in the consolidated statement of operations and comprehensive loss. Accumulated other comprehensive income (loss) of the Company includes foreign currency translation adjustments related to the Company and its subsidiaries whose functional currency is not US$.
F-14
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Concentration of risks
Concentration of credit risk
Assets that potentially subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, account receivables and other receivables. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. All of the Company’s cash and cash equivalents and marketable securities are held with financial institutions that Company management believes to be high credit quality. Prepaid expenses and other current assets mainly consists of deposits of rent, and prepaid expenses, which can be applied for deduction of future payments for expenses. The Company has no significant concentrations of credit risk with respect to its prepaid expenses and other current assets.
Concentration of customers and suppliers
Substantially all revenues were derived from customers located in China, Japan and Korea. For the year ended December 31, 2023, the revenues derived from customers located in China, Japan and Korea were $10,826, $34,329 and $2,158, respectively. For the year ended December 31, 2022, the revenues derived from customers located in China and Korea were $9,069 and $1,142, respectively.
Below customers represent more than 10% of the Company’s net revenue for the years ended December 31, 2023 and 2022.
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Customer A |
72.56 | % | — | |||||
| Customer B |
22.88 | % | 88.82 | % | ||||
| Customer C |
* | 11.18 | % | |||||
Below customers represent more than 10% of the Company’s balances of accounts receivable as of December 31, 2023 and 2022.
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Customer C |
100.00 | % | 100.00 | % | ||||
Below suppliers represent more than 10% of the Company’s total purchases for the years ended December 31, 2023 and 2022.
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Supplier A |
20.37 | % | 11.90 | % | ||||
| Supplier B |
10.06 | % | 13.10 | % | ||||
| * | represents the percentage less than 10%. |
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires that public entities on an annual basis, (1) in the rate reconciliation, disclose specific categories and provide additional information for reconciling items that meet a quantitative threshold; (2) about income taxes paid, disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and by individual jurisdiction in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received); and (3) disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) disaggregated by federal, state, and foreign. This update is effective for the Company in 2026. Early adoption is permitted. This guidance should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact on its financial statements of adopting this guidance.
F-15
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 3. | Fair Value Measurements |
The following tables present information about the Company’s assets and liabilities that are regularly measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2.
Financial assets and liabilities measured at fair value on a recurring basis are summarized as follows (in thousands):
| Fair value measurements as of December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| Liabilities |
||||||||||||||||
| Warrant liabilities |
— | — | 203 | 203 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
— | — | 203 | 203 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair value measurements as of December 31, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| Assets |
||||||||||||||||
| Marketable securities |
— | 4,307 | — | 4,307 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
— | 4,307 | — | 4,307 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities |
||||||||||||||||
| Warrant liabilities |
— | — | 278 | 278 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
— | — | 278 | 278 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Marketable securities consisted of structured deposits with commercial banks in the PRC due within 3 months with secured principal and variable interest rates indexed mainly to price of gold and are restricted as to withdrawal before maturity. In accordance with ASC 820, Fair Value Measurement, the Company elected the fair value option at the date of initial recognition to measure structured deposits at fair value on a recurring basis with changes in the fair value are recorded as interest income in the consolidated statements of operations and comprehensive loss. The fair values of these marketable securities as of December 31, 2022 were determined to be $4,307. The marketable securities were redeemed in 2023.
The Company utilized the Black-Scholes model to estimate the fair value of warrant liabilities at each reporting date. The application of the Black-Scholes model utilizes significant unobservable inputs and assumptions, including volatility. The Company measured expected volatility based on several inputs, including considering a peer group of publicly traded companies. As a result of the unobservable inputs used, the fair value measurement of these warrants reflected a Level 3 measurement within the fair value measurement hierarchy. The expected volatilities applied were 69.54% and 66.96% for the years ended December 31, 2023 and 2022, respectively.
In addition, there were no changes in valuation techniques or transfers between Level 1 and Level 2 or out of Level 3 during the years ended December 31, 2023 and 2022. The Company did not have any non-recurring fair value measurements on any assets or liabilities during the years ended December 31, 2023 and 2022.
The following table summarizes the activity for the Company’s Level 3 liabilities measured at fair value on a recurring basis:
| US$ | ||||
| Balance as of December 31, 2021 |
177 | |||
| Issuance of warrants |
134 | |||
| Changes in fair value |
(13 | ) | ||
| Foreign exchange difference |
(20 | ) | ||
|
|
|
|||
| Balance as of December 31, 2022 |
278 | |||
|
|
|
|||
| Number adjustment of warrants |
(46 | ) | ||
| Changes in fair value |
(28 | ) | ||
| Foreign exchange difference |
(1 | ) | ||
|
|
|
|||
| Balance as of December 31, 2023 |
203 | |||
|
|
|
|||
F-16
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 3. | Fair Value Measurements - continued |
As of December 31, 2023 and 2022, the Company’s financial assets and liabilities not measured at fair value included cash and cash equivalents, accounts receivable, other receivables included in prepaid expenses and other current assets, accounts payable, and short-term borrowings, of which the carrying value approximate fair value because of the short-term nature of these instruments. The carrying value of long-term borrowings approximates the fair value. In calculating the fair value of long-term borrowings, interest rate assumptions reflect current credit worthiness and market conditions available for borrowings with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.
| 4. | Property and Equipment, Net |
Property and equipment, net consisted of the following (in thousands):
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Electronic equipment |
342 | 315 | ||||||
| Furniture and Fixtures |
62 | 86 | ||||||
| Leasehold Improvements |
223 | 129 | ||||||
|
|
|
|
|
|||||
| Total |
627 | 530 | ||||||
| Less: Accumulated depreciation |
(421 | ) | (239 | ) | ||||
|
|
|
|
|
|||||
| Total property and equipment, net |
206 | 291 | ||||||
|
|
|
|
|
|||||
Depreciation expense amounted to $0.2 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively.
| 5. | Accrued Expenses and other current liabilities |
Accrued expenses consisted of the following (in thousands):
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Accrued payroll |
3,612 | 2,270 | ||||||
| Tax payable |
446 | 117 | ||||||
| Other accrued expenses |
923 | 330 | ||||||
|
|
|
|
|
|||||
| Total accrued expenses and other current liabilities |
4,981 | 2,717 | ||||||
|
|
|
|
|
|||||
| 6. | Collaboration and License Agreements |
The Company enters into collaborative arrangements for the research and development, and commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licenses of and options to out-license in-licensed compound to other parties, in-licenses of compound from other parties. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost reimbursement arrangements and royalty payments.
In-Licensing Arrangements with Daiichi Sankyo Company Ltd. (“DS”)
The Company has in-licensed the rights to develop, manufacture and, if approved, commercialize multiple development stage drug candidates globally or in specific territories. These arrangements typically include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments and royalty payments. All upfront and development milestones were expensed in research and development expense as incurred.
F-17
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Collaboration and License Agreements - continued |
In-Licensing Arrangements with Daiichi Sankyo Company Ltd. (“DS”) - continued
In December 2018, the Company entered into an agreement with DS that DS granted the Company the exclusive license to develop, manufacture and commercialize AB-106 (the “Licensed Compound”) and any pharmaceutical preparations containing the Licensed Compound as an active ingredient globally.
The Company paid a non-refundable upfront payment of $5 million and is obliged to pay payments upon achievement of development, regulatory and commercial milestones up to a total of $38 million. The Company is also obliged to pay royalties on net sales. The upfront payment was expensed in research and development expense in 2018 and the first and second development milestone of $3 million and $1 million were expensed in research and development expense during the years ended December 31, 2021 and 2023 respectively in accordance with the Company’s acquired IPR&D asset policy.
In September 2020, the Company entered into an agreement with DS that DS granted the Company the exclusive license to develop, manufacture and commercialize AB-218 and any pharmaceutical preparations containing AB-218 as an active ingredient globally other than Japan.
The Company is obliged to pay upfront payment of $7 million and payments upon achievement of development, regulatory and commercial milestones up to a total of $103 million. The Company is also obliged to pay royalties on net sales. The upfront payment was paid and expensed in research and development expense in 2020.
In September 2020, the Company entered into an agreement with DS that DS granted the Company the exclusive license to develop, manufacture and commercialize AB-329 and any pharmaceutical preparations containing AB-329 as an active ingredient globally.
The Company is obliged to pay upfront payment of $4 million and payments upon achievement of development, regulatory and commercial milestones up to a total of $160 million. The Company is also obliged to pay royalties on net sales. The upfront payment was paid and expensed in research and development expense in 2020.
Out-Licensing Arrangements
The Company’s revenue related to its out-licensing collaborative agreements consist of upfront license fees and research and development services revenue from its collaboration agreements with NewG Lab Co., Ltd. (“NewG Lab”), Innovent Biologics Co. Ltd. (“Innovent”) and Nippon Kayaku Co., Ltd. (“NK”) for AB-106.
The following table summarizes total revenue recognized for the years ended December 31, 2023 and 2022:
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Revenue |
||||||||
| License revenue |
34,773 | 556 | ||||||
| Research and development service revenue |
12,540 | 9,655 | ||||||
|
|
|
|
|
|||||
| Total |
47,313 | 10,211 | ||||||
|
|
|
|
|
|||||
The Company’s performance obligations are satisfied either over time or at a point in time. The disaggregated revenues by revenue streams and timing of transfer of services were as follows:
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| License revenue |
||||||||
| Point in time |
34,773 | 556 | ||||||
| Research and development service revenue |
||||||||
| Over time |
12,540 | 9,655 | ||||||
|
|
|
|
|
|||||
| 47,313 | 10,211 | |||||||
|
|
|
|
|
|||||
F-18
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Collaboration and License Agreements - continued |
Out-Licensing Arrangements - continued
Exclusive License Agreement with NewG Lab
In July 2020, the Company entered into an agreement with NewG Lab. under which the Company will grant a sub-licensable, royalty-bearing, exclusive right and license (the “Exclusive Sublicense”) to NewG Lab to develop and commercialize AB-106 in Korea (the “ NewG Lab Territory”), with NewG Lab responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development and for commercialization upon regulatory approvals. The Company also granted NewG Lab the option to obtain the same aforementioned rights to AB-106 in Malaysia (the “NewG Lab Option”).
Under the agreement the Company received a non-refundable upfront cash payment of $0.8 million from NewG Lab during the year ended December 31, 2020. The Company is eligible to receive up to $6.2 million upon the achievement of development and regulatory milestones, development costs reimbursements and royalties on future sales of AB-106 in the licensed territory. The development cost reimbursements are determined based on current market costs equivalent to what the CRO would charge for similar scope of work.
The Company evaluated the exclusive sublicense under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company identified the following material components under the agreement: (1) exclusive license for NewG Lab to develop and commercialize AB-106 in the NewG Lab Territory; and (2) provision of certain R&D services of AB-106 upon New Lab’s demand.
The Company determined that the license and the R&D services are distinct from each other and represent a single performance obligation respectively at the outset of the agreement. The Company concluded that, at the inception of the agreement, the NewG Lab Option did not constitute a material right as it does not represent a discount to the fair value of the exclusive license that NewG Lab would not have received without entering into the agreement and is therefore not considered a distinct performance obligation.
The Company determined that the transaction price as of the outset of the arrangement was the upfront payment of $0.8 million. The potential milestone payments and development cost reimbursements that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained due to uncertainty of achievement and the development cost reimbursements related to the R&D services are not yet certain before request.
The transaction price was allocated to the performance obligation of the license. The standalone selling price of the license performance obligation was determined using the adjusted market assessment approach based on the probability-weighted present value of forecasted cash flows associated with AB-106 in the NewG Lab Territory.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed which occurred during the year ended December 31, 2020. As such, the Company recognized the entire amount of the transaction price allocated to the license as license fee revenue of $0.8 million during the year ended December 31, 2020. One of the development milestones was achieved and the Company recognized the full milestone payment of $1.2 million allocated to the license as license fee revenue during the year ended December 31, 2021, which were received in 2022. There was no milestone payment reached or received during the year ended December 31, 2023. The revenue related to the R&D services will be recognized over the period as such service occurs. The Company recognized R&D service revenue of $2.2 million and $1.1 million during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, accounts receivable Lab was $3.5 million and $1.7 million, respectively.
Collaboration and License Agreement with Innovent
In May 2021, the Company entered into an agreement with Innovent, granting Innovent a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in the People’s Republic of China and Taiwan (the “Innovent Territory”). The Company is responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development with Innovent responsible for commercialization upon regulatory approvals. The Company also granted Innovent the option to obtain a license to commercialize AB-329 once the Company provides proof of concept behind the compound in a region in the Innovent Territory (the “Innovent Option”).
F-19
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Collaboration and License Agreements - continued |
Out-Licensing Arrangements - continued
Collaboration and License Agreement with Innovent - continued
Under the agreement the Company received a non-refundable upfront cash payment of $20 million and research and development reimbursements of $22 million from Innovent. The Company is eligible to receive up to up to $42 million upon the achievement of development and regulatory milestones, up to $105 million in sales-based milestones for products if aggregate net sales of such products meet certain thresholds and royalties from net sales of all products.
The Company evaluated the exclusive sublicense under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company identified the following material components under the agreement: (1) exclusive license for Innovent to commercialize AB-106 in the Innovent Territory; and (2) conducting and completing ongoing trials of AB-106 (R&D services).
The Company determined that the license represents a single performance obligation. The R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Innovent. The Company concluded that, at the inception of the agreement, the Innovent Option did not constitute a material right as it does not represent a discount to the fair value of the exclusive license that Innovent would not have received without entering into the agreement and is therefore not considered a distinct performance obligation.
The Company determined that the transaction price as of the outset of the agreement was the upfront payment of $20 million and research and development reimbursements of $22 million. The Company received a non-refundable upfront cash payment of $20 million during the year ended December 31, 2021 and received $8.0 million, $2.0 million and $12 million research and development reimbursements during the years ended December 31, 2021, 2022 and 2023 respectively. The potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained due to uncertainty of achievement. The transaction price was allocated to the two identified performance obligations based on a relative fair value basis. The standalone selling price of the license performance obligation was determined using the adjusted market assessment approach based on the probability-weighted present value of forecasted cash flows associated with AB-106 in the Innovent Territory. The standalone selling price of the R&D services was valued using a cost plus margin valuation approach based on the present value of estimated AB-106 clinical trial costs plus a reasonable margin. Based on the relative standalone selling prices of the two performance obligations, $7.3 million of the total transaction price was allocated to the license and $34.7 million was allocated to the R&D services. The estimates of the standalone selling prices involved management’s key assumptions such as estimated clinical trial costs, mark-up rate, probability of technical and regulatory success, and discount rates. These significant assumptions are forward looking and could be affected by future economic, regulatory and market conditions.
The Company received $3 million and $5 million milestone payment upon achievement of the milestone according to the term of the agreements during the years ended December 31, 2022 and 2023, respectively. The uncertainty related to such variable considerations were resolved, and these amounts were then included in the transaction price and allocated to the two performance obligations based on the relative standalone selling prices.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed which occurred during the year ended December 31, 2021. As such, the Company recognized $7.3 million during the year ended December 31, 2021 and $0.6 million and $0.9 million upon the receipts of milestone payments during the years ended December 31, 2022 and 2023, respectively. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as R&D services revenue are performed using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $9.9 million and $8.5 million during the years ended December 31, 2023 and 2022, respectively.
F-20
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Collaboration and License Agreements - continued |
Out-Licensing Arrangements - continued
Collaboration and License Agreement with NK
In October 2023, the Company entered into an agreement with NK, granting NK a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in Japan (the “NK Territory”). The Company is responsible for funding ongoing clinical trials of AB-106 in the NK Territory, with NK responsible for funding regulatory submissions in the NK Territory. The Company also granted NK a sub-licensable, royalty-bearing, exclusive right and license to research, develop and commercialize any new indications of AB-106 in the NK Territory (“NK New Indication Right”).
Under the agreement the Company received a non-refundable upfront cash payment of $40 million from NK. The Company is eligible to receive up to $25 million upon the achievement of development and regulatory milestones, up to $35 million in sales-based milestones for products if aggregate net sales of such products meet certain thresholds and royalties from net sales of all products.
The Company evaluated the exclusive sublicense under ASC 606 as all the material units of account within the agreement represented transactions with a customer. The Company identified the following material components under the agreement: (1) exclusive license for NK to commercialize AB-106 in the NK Territory; and (2) conducting and completing ongoing trials of AB-106 in the NK Territory (R&D services).
The Company determined that the license represents a single performance obligation. The R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to NK. The Company concluded that, at the inception of the agreement, the NK New Indication Right did not constitute a material right.
The Company determined that the transaction price as of the outset of the agreement was the upfront payment of $40 million. The Company received a non-refundable upfront cash payment of $40 million during the year ended December 31, 2023. The potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained due to uncertainty of achievement. The transaction price was allocated to the two identified performance obligations based on a relative fair value basis. The standalone selling price of the license performance obligation was determined using the adjusted market assessment approach based on the probability-weighted present value of forecasted cash flows associated with AB-106 in the NK Territory. The standalone selling price of the R&D services was valued using a cost-plus margin valuation approach based on the present value of estimated AB-106 clinical trial costs plus a reasonable margin. Based on the relative standalone selling prices of the two performance obligations, $33.9 million of the total transaction price was allocated to the license and $6.1 million was allocated to the R&D services. The estimates of the standalone selling prices involved management’s key assumptions such as forecasted future revenues, estimated clinical trial costs, mark-up rate, probability of technical and regulatory success, and discount rates. These significant assumptions are forward looking and could be affected by future economic, regulatory and market conditions.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed which occurred during the year ended December 31, 2023. As such, the Company recognized the entire amount of the transaction price allocated to the license as license revenue of $33.9 million during the year ended December 31, 2023. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as R&D services revenue are performed using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $0.5 million for the year ended December 31, 2023.
Contract assets and contract liabilities
When the Company satisfies its performance obligations by providing services to a customer before the customer pays consideration and before payment is due, the Company recognizes its rights to consideration as a contract asset.
The Company didn’t recognize any contract assets as of December 31, 2023 and 2022.
When a customer pays consideration before the Company provide services, the Company records its obligation as a contract liability. The Company expects to recognize all of this balance as revenue over the future 4 years.
F-21
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Collaboration and License Agreements - continued |
Contract assets and contract liabilities - continued
The contract liabilities of the Company as of December 31, 2023 and 2022 are listed in the table below.
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Research and development service revenue |
22,908 | 11,148 | ||||||
The balance of contract liabilities as of December 31, 2023 represents the transaction price allocated to the remaining performance obligations. The contract liability of $11,748 is expected to be recognized within one year and the rest in the following three years.
The contract liabilities as of December 31, 2022 and 2021 were $11,148 and $16,114, in which $7,518 and $7,586 recognized as revenue during the years ended 2023 and 2022 respectively. $2,399 and $901 were recognized as revenue during the years ended 2023 and 2022 respectively for the performance obligation satisfied in prior periods.
The compensation paid to obtain the contracts were immaterial, therefore, the Company has not capitalized any costs to obtain for the years ended December 31, 2023 and 2022.
The costs incurred to fulfill customer contracts was capitalized and amortized to cost of revenue on a systemic basis that is consistent with the transfer to the customer of R&D services to which the asset relates. For the years ended December 31, 2023 and 2022, $9,851 and $9,022 costs incurred to fulfill customer contracts were capitalized and expensed in the same year. As such, there were no balances of the asset as of December 31, 2023 and 2022.
| 7. | Borrowings |
From 2020 to 2023, the Company entered into loan agreements with Bank of Hangzhou to obtain short-term borrowings to supplement its working capital. As of December 31, 2023 and 2022, the outstanding balance net of repayments was $5.7 million and $4.2 million, respectively. For the years ended December 31, 2021, 2022 and 2023, the Company had drawn down $6.2 million, $4.9 million and $5.7 million and repaid $4.7 million, $3.8 million and $4.2 million, respectively. The fixed interest rate of these borrowings is 3.70% to 4.10% per annum.
In 2022, the Company entered into loan agreements with China Merchants Bank to obtained short-term borrowings to supplement its working capital. As of December 31, 2023 and 2022, the outstanding balance was nil and $2.9 million. For the year ended December 31, 2022, the Company had drawn down $3.0 million. For the year ended December 31, 2023, the Company had drawn down $2.8 million and repaid $5.7 million. The fixed interest rate of these borrowings is 3.98% per annum.
In 2023, the Company entered into loan agreements with China Zheshang Bank to obtain short-term borrowings to supplement its working capital. As of December 31, 2023, the outstanding balance was $1.4 million. For the year ended December 31, 2023, the Company had drawn down $1.4 million and repaid nil. The fixed interest rate of these borrowings is 4.5% per annum.
On April 21, 2021, the Company entered into a Loan and Security Agreement (“2021 SSVB Agreement”) with Shanghai Pudong Development Bank in Silicon Valley (“SSVB”) for up to $8.0 million or equivalent in optional currency RMB term loans (“SSVB Loan”). The SSVB Loan matures on April 21, 2024, at which time all outstanding balances are due. Draws on the line of credit are payable in equal instalments monthly over the shorter of 30 months or from the date the draw took place till the SSVB loan matures. Outstanding balances in CNY and USD will bear interest at a rate of 6.00% (6.50% before Series B financing) and 5.00% (5.50% before Series B financing), respectively. As of December 31, 2023 and 2022, the outstanding line of credit balance net of repayments was $0.4 million and $2.5 million, respectively. For the years ended December 31, 2021, 2022 and 2023, the Company had drawn down $2.7 million, $2.1 million and nil million and repaid $0.7 million, $1.7 million and $2.1 million, respectively. The weighted average interest rate of borrowings drawn under this agreement was 6% for the years ended December 31, 2023 and 2022.
F-22
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 7. | Borrowings - continued |
On April 4, 2023, the Company entered into a Loan and Security Agreement (“2023 SSVB Agreement”) with Shanghai Pudong Development Bank in Silicon Valley (“SSVB”) for up to 40.0 million RMB or equivalent in optional currency USD term loans (“SSVB Loan”). The SSVB Loan consists of a short-term working capital loan of 20 million RMB and a long-term loan of 20 million RMB, which matures on April 4, 2024 and April 4, 2025 respectively, at which time all outstanding balances are due. Draws on the line of credit for the short-term loans are payable on the maturity date of SSVB Loan. Draws on the line of credit for the long-term loans are payable in equal instalments monthly over the shorter of 24 months or from the date the draw took place till the SSVB loan matures. Outstanding balances will bear interest at a fixed rate of 4.25%. As of December 31, 2023, the outstanding line of credit balance net of repayments was $4.2 million. For the year ended December 31, 2023, the Company had drawn down $4.2 million and repaid nil. The weighted average interest rate of borrowings drawn under this agreement was 4.25% for the year ended December 31, 2023.
In connection with the 2021 SSVB Agreement, the Company issued to a related party of SSVB a warrant to purchase over a period of 5-years from the issuance date of the Warrant certain numbers of Series B Preferred Share at an exercise price of $3.5250 (“Exercise Price”). The numbers of Series B Preferred Share that the Warrant can be exercised for will be 10% of the total amount withdrawn under the Credit Agreement divided by the Exercise Price.
The Warrant is a freestanding financial instrument as it is legally detachable and separately exercisable from the SSVB Loan. Upon initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received to the detachable Warrant first and then the residual to the SSVB Loan. The amount allocated to the Warrant was classified as warrant liabilities (as the underlying Series B Preferred Shares are contingently redeemable (puttable) outside of the Company’s control) and the same amount was presented as a discount of the SSVB Loan component.
In subsequent periods, the discount of SSVB Loan is accreted using the effective interest method. Consequently, the Company recorded expenses amounting to $46 and $147 related to amortization of discount of the SSVB loan under interest expenses line in the consolidated statement of operations and comprehensive loss for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, no warrants have been exercised and all 146,859 remain outstanding.
The following is a schedule of changes in the number of warrants issued and outstanding from December 31, 2021 to December 31, 2023:
| SSVB Warrant | ||||
| Outstanding as of December 31, 2021 |
91,755 | |||
| Warrants issued |
71,422 | |||
| Warrants exercised |
— | |||
| Outstanding as of December 31, 2022 |
163,177 | |||
| Warrants issued |
— | |||
| Warrants exercised |
— | |||
| Warrants number adjustment |
(16,318 | ) | ||
|
|
|
|||
| Outstanding as of December 31, 2023 |
146,859 | |||
|
|
|
|||
| 8. | Convertible Redeemable Preferred shares |
Series A, A+ and A-2 Preferred Equity Interest of AnHeart HZ
On March 19, 2019, third-party investors (“Series A CRPS Shareholders”) acquired RMB6 million registered capital with preferential rights with an aggregate cash consideration of $15 million.
From August 27 to September 22, 2020, third-party investors (“Series A+ CRPS Shareholders”) acquired RMB5.39 million registered capital with preferential rights with an aggregate cash consideration of $18.87 million.
On November 5, 2020, third-party investors (“Series A-2 CRPS Shareholders”) acquired RMB1.3 million registered capital with preferential rights with an aggregate cash consideration of $5 million.
F-23
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 8. | Convertible Redeemable Preferred shares - continued |
Reorganization
In 2021, as part of the reorganization, the Company issued the following CRPS to replace the preferred equity interests at the same proportion on an as-converted basis:
| Number of CRPS of Cayman Co upon the reorganization |
Issue Price per share | |||||||
| Series A CRPS |
12,000,000 | $ | 1.250 | |||||
| Series A+ CRPS |
10,784,344 | $ | 1.750 | |||||
| Series A-2 CRPS |
2,597,402 | $ | 1.925 | |||||
|
|
|
|
|
|||||
Issuance of Series A-2 CRPS
In 2021, the Company issued 106,610 Series A-2 CRPS to a third party investor at a subscription price of USD1$1.925 per share with issuance cost of $0.07 million.
Issuance of Series B CRPS
From August 30, 2021 to September 22, 2021, the Company entered into Series B CRPS and Warrant Purchase Agreements (the “Series B Agreement”) for the issuance of 17,259,714 Series B CRPS. The Company completed its Series B closing through issuance of 15,047,294 Series B CRPS and 2,212,420 Series B CRPS, closing on September 24, 2021 and November 5, 2021, respectively. In total, 17,259,714 Series B CRPS were issued at a purchase price of $3.525 per share (the “Series B Share Price”), for cash proceeds of approximately $60.85 million, with issuance cost of $3.09 million.
In connection with the issuance of Series B CRPS, the Company and other Series A, A+ and A2 CRPS Shareholders agreed to modify certain terms related to shareholders’ rights, including the Series A, A+ and A2 CRPS Shareholders’ redemption price, the updated redemption events, redemption sequences and the definition of a Qualified IPO. The Company deemed the modification did not result in any accounting consequence as it was mainly a transfer of wealth amongst different classes of CRPS shareholders and the value transferred between CRPS shareholders and ordinary shareholders was not material. A Qualified IPO means the sale of Ordinary Shares to the public in a firm commitment underwritten public offering that results in aggregate gross proceeds to the Company of not less than least US$50,000,000 (or equivalent in foreign currency) and that results in an Equity Gain IRR of at least 8% for the Series B Preferred Shares. Equity Gain IRR is the annual rate, compounded annually, at which the net present value, on the date of calculation, of the value of the relevant series of Preferred Shares implied by the pre-money valuation of the Company, is equal to the net present value, as of the date of calculation, of the Original Issue Price of such series of Preferred Shares.
The Company has classified the CRPS as mezzanine equity as these CRPS are redeemable upon the occurrence of an event not solely within the control of the Company. The holders of the CRPS have a redemption right and liquidation preference and will not receive the same amount of consideration upon the occurrence of the conditional event as all classes of ordinary shareholders would. The Company recorded the initial carrying amount of the CRPS with its issuance price, which approximated the issuance date fair value, after the reduction of the issuance cost. The Company uses interest method to accrete the carrying value of the CRPS to their maximum redemption price as if redemption were to occur at the end of the reporting period. The change in redemption value is recorded as deemed dividend, and charged against retained earnings, or in the absence of retained earnings, against APIC. Once APIC has been exhausted, additional charges are recorded by increasing the accumulated deficit.
F-24
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 8. | Convertible Redeemable Preferred shares - continued |
The key terms of CRPS are summarized as follows:
Dividends
Preferred shares dividends will be paid in preference and in priority as followed: First, the holders of Series B CRPS shall be entitled to receive a non-cumulative cash dividend at the rate of 6% per annum of the respective Original Issue Price on each outstanding Series B CRPS, payable out of funds legally available therefor. Second, the holders of Series A-2 CRPS and Series A+ CRPS shall be entitled to receive, on a pari passu basis, non-cumulative cash dividends at the rate of 8% per annum of the respective Original Issue Price on each outstanding Series A-2 CRPS and Series A+ CRPS, payable out of funds legally available therefor. Third, the holders of Series A CRPS shall be entitled to receive a cash dividend at the rate of 8% per annum of the respective Original Issue Price on each outstanding Series A CRPS, payable out of funds legally available therefor. Any additional dividends declared shall be distributed amount all holders of Preferred Shares and Ordinary Shares in proportion to the number of Ordinary Shares that would be held by each such holder if all Preferred Shares were converted into Ordinary Shares. There have been no dividends declared by the Board through December 31, 2023. Original Issue Price of each series is the respective subscription price.
Liquidation Preference
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares then outstanding shall be entitled to be paid out of the assets of the Company available for distributions to it shareholders, and in the event of a Deemed Liquidation Event, as defined below, the holder of the Preferred Shares then outstanding shall be entitled to be paid out of the consideration payable to shareholders or out of the available proceeds an amount per share equal to the applicable original issue price plus any dividends declared but unpaid thereon. If there are insufficient assets available, assets shall be distributed in the following order:
| i. | First, to holders of Series B Preferred Shares until the full preferential amount that such shareholders are entitled to is paid; |
| ii. | Second, to holders of Series A+ and A-2 Preferred Shares until the full preferential amount that such shareholders are entitled to is paid; |
| iii. | Third, to holders of Series A Preferred Shares until the full preferential amount that such shareholders are entitled to is paid |
A Deemed Liquidation Event shall include i) a merger or consolidation of the Cayman Co. or its subsidiary; ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company; and iii) a sale, transfer or other disposal of more than 50% of the issued and outstanding Shares of the Company (on an as-converted basis).
Conversion
Each Preferred Share shall be convertible, at the option of the holder, into a number of ordinary share as determined by dividing the respective Original Issue Price by the Conversion Price, subject to customary adjustments for share splits and other like adjustments. The Conversion Price for each series of Preferred Share shall be initially equal to the respective Original Issue Price for such series of Preferred Share. This results in a 1:1 conversion, if no adjustment applies.
Voting Rights
The Preferred shares vote together with the ordinary share on an as-converted basis, and not as a separate class, except for matters as defined by the Certificate of Incorporation which require the written consent or affirmative votes of the holders of more than two thirds of the outstanding shares of the Preferred shares and at least two third of Series B Preferred shares. For any transactions that affect the priority of the Series A, A+ and A-2 or Series B Preferred shares, a majority of Series A, A+ and A-2 or Series B Preferred shares is required, respectively.
F-25
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 8. | Convertible Redeemable Preferred shares - continued |
Redemption
The holders of CRPS shall have the right to redeem if a Qualified-IPO has not been consummated by September 24, 2026. Unless prohibited by the Companies Act provisions governing distributions to shareholders, Preferred Shares shall be redeemed by the Company at a price per share (whether such share is a Series A Preferred Share, Series A+ Preferred Share, Series A-2 Preferred Share) equal to the greater of (A) the issue price plus a compound interest rate of 8% per annum for each year such redeemable equity was outstanding, calculated from the date of issuance through the date of redemption thereof (and calculated on a pro rata basis in case of a partial year plus all declared but unpaid dividends and (B) the fair market value of a Series B CRPS(the “Redemption Price”).
The redemption right is exercised in the same sequence.
The Series A, A+, A-2, and B Preferred shares consisted of the following as of both December 31, 2023 and 2022:
| Series |
Number of shares |
Original Issue Price per Share |
December 31, 2022 Carrying Amount |
Change in redemption value |
December 31, 2023 Carrying Amount |
Liquidation Preference |
||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
| Series A |
12,000,000 | 1.250 | 56,706 | 4,536 | 61,242 | 15,000 | ||||||||||||||||||
| Series A+ |
10,784,344 | 1.750 | 45,475 | 3,638 | 49,113 | 18,873 | ||||||||||||||||||
| Series A-2 |
2,704,012 | 1.925 | 11,242 | 899 | 12,141 | 5,205 | ||||||||||||||||||
| Series B |
17,259,714 | 3.525 | 67,025 | 5,362 | 72,387 | 60,850 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
42,748,070 | 180,448 | 14,435 | 194,883 | 99,928 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Series |
Number of shares |
Price per Share |
December 31, 2021 Carrying Amount |
Change in redemption value |
December 31, 2022 Carrying Amount |
Liquidation Preference |
||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
| Series A |
12,000,000 | 1.250 | 52,505 | 4,201 | 56,706 | 15,000 | ||||||||||||||||||
| Series A+ |
10,784,344 | 1.750 | 42,106 | 3,369 | 45,475 | 18,873 | ||||||||||||||||||
| Series A-2 |
2,704,012 | 1.925 | 10,409 | 833 | 11,242 | 5,205 | ||||||||||||||||||
| Series B |
17,259,714 | 3.525 | 62,060 | 4,965 | 67,025 | 60,850 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
42,748,070 | 167,080 | 13,368 | 180,448 | 99,928 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The redemption value of the redeemable shares as of September 24, 2026, which is the earliest redemption date of those redeemable shares, are listed as below, assuming the fair market value of a Series B Preferred Share is lower than the price per share calculated by reference to Series B Preferred Shares that results in an Equity Gain IRR of at least 8%:
| Redemption Value at September 24, 2026 |
||||
| US$ | ||||
| Series A CRPS |
75,585 | |||
| Series A+ CRPS |
60,616 | |||
| Series A-2 CRPS |
14,985 | |||
| Series B CRPS |
89,341 | |||
|
|
|
|||
| 240,527 | ||||
|
|
|
|||
F-26
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 9. | Share-Based Compensation |
2021 Equity Incentive Plan
In December 2021, the Company adopted, and the board of directors (the “Board” or “BOD”) and shareholders approved the Plan or the issuance of stock options, restricted stock, and restricted stock units. The purposes of the Plan are to attract, incentivize and retain Employees, Outside Directors and Consultants through the grant of Awards.
The Plan is administered by the Board, or, at its discretion, a committee of no less than two board members, (the “Committee”) and each option grant must be confirmed by an agreement referred to as the Award Agreement. The exercise prices, vesting and other restrictions are determined by the Board. The Plan authorizes up to 4,985,320 ordinary shares of the Company for the grant of Awards under the Plan. In 2022, the Company increased the Plan authorization by 1,599,120, for a total of 6,584,440 shares authorized as of December 31, 2022. In 2023, the Company increased the Plan authorization by 2,500,000, for a total of 9,084,440 shares authorized as of December 31, 2023.
For the share options granted for the asset acquisition, the option will become vested and exercisable over three years, with 25% of the option vesting on the grant date and the rest vesting on a monthly basis thereafter in three years. Except that, the vesting is based on four years’ service condition, in which 25% of these options will become vested on the first anniversary and 6.25% of these options will become vested on a quarterly basis thereafter. For all the share options granted, the expiration period is 8 years.
Stock Options
For purposes of calculating share-based compensation, the Company estimates the fair value of stock options using the Black-Scholes option-pricing model. This model incorporates various assumptions, including the expected volatility, expected term, and interest rates.
The following table summarizes stock option activity for the year ended December 31, 2023.
| Number of options |
Weighted average exercise price |
Weighted average remaining contractual life |
Weighted average grant date fair value |
Aggregate intrinsic value |
||||||||||||||||
| US$ | US$ | US$ | ||||||||||||||||||
| Balances at December 31, 2022 |
3,992,990 | 1.94 | 6.41 | 0.58 | 714 | |||||||||||||||
| Options granted |
4,157,980 | 1.19 | 7.48 | 1.39 | ||||||||||||||||
| Options exercised |
— | — | — | — | ||||||||||||||||
| Options forfeited |
(176,000 | ) | 0.98 | 5.65 | 0.90 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balances at December 31, 2023 |
7,974,970 | 1.57 | 6.15 | 1.00 | 4,136 | |||||||||||||||
| Outstanding at December 31, 2023 |
7,974,970 | 1.57 | 6.15 | 1.00 | 4,136 | |||||||||||||||
| Vested and expected to vest |
7,794,596 | 1.57 | 6.15 | 1.00 | 4,017 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Exercisable at December 31, 2023 |
3,465,630 | 1.74 | 5.47 | 0.75 | 1,157 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s ordinary share for those stock options that had exercise prices lower than the fair value of the ordinary share as of the end of the period. There were no stock options exercised during the years ended December 31, 2023 and 2022.
The weighted-average assumptions used to estimate the fair value of stock options granted were as follows:
| For the Year Ended December 31, 2023 |
||||
| Weighted average risk-free interest rate |
4.18% | |||
| Expected term to maturity |
4.94 years | |||
| Expected volatility |
63.40% | |||
| Expected dividend yield |
0.00% | |||
| Fair value of underlying ordinary shares |
$1.97 and 2.20 | |||
| Fair value of share option |
$1.32 and 1.59 | |||
F-27
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 9. | Share-Based Compensation - continued |
Stock Options – continued
The weighted-average assumptions used to estimate the fair value of stock options granted were as follows: - continued
| For the Year Ended December 31, 2022 |
||||
| Weighted average risk-free interest rate |
2.48% | |||
| Expected term to maturity |
4.89 years | |||
| Expected volatility |
61.86% | |||
| Expected dividend yield |
0.00% | |||
| Fair value of underlying ordinary shares |
$1.18 | |||
| Fair value of share option |
$0.31-1.08 | |||
The total fair value of options vested during the years ended December 31, 2023 and 2022 was $1.52 million and $1.2 million respectively.
Share-Based Compensation Expense
Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees is as follows (in thousands):
| For the Year Ended December 31, 2023 |
||||
| US$ | ||||
| Research and development |
1,406 | |||
| General and administrative |
510 | |||
|
|
|
|||
| Total share-based compensation expense |
1,916 | |||
|
|
|
|||
As of December 31, 2023, the total unrecognized share-based compensation expense related to outstanding awards was approximately $4.8 million and is expected to be recognized over a weighted-average period of 1.99 years.
| 10. | Income Taxes |
Cayman Islands
The Cayman Co is a company incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or capital gain.
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, AnBio Therapeutics (HK) Ltd., a subsidiary of the Group located in Hong Kong, is subject to a two-tiered profits tax rate regime which is applicable to any year of assessment commencing on or after April 1, 2018. The profits tax rate for the first HK$2 million of profits of corporations will be lowered to 8.25%, while profits above that amount will continue to be subject to the tax rate of 16.5%.
United States
The applicable income tax rate of United States where the Company’s subsidiaries having significant operations for the years ended December 31, 2023 and 2022 is 21%, which is a federal corporate income tax rate. State income tax rates vary depending on each state’s tax laws.
AnHeart US was incorporated in Delaware, U.S., and conducts business primarily in New York State and New York City. It is subject to U.S. federal corporate income tax at a rate of 21% for the years ended December 31, 2023 and 2022. The blended state rate, net of Federal benefit for the years ended December 31, 2023 and 2022 is 11.30% and 11.19%, respectively.
F-28
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 10. | Income Taxes - continued |
People’s Republic of China
Under the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%.
According to a policy promulgated by the PRC State Tax Bureau, effective from 2018 onwards, enterprises engaged in research and development activities are entitled to claim 175% or 200% of the research and development expenses incurred in a year as tax deductible expenses in determining their tax assessable profits for that year (“Super Deduction”).
The current and deferred portion of income tax expenses included in the consolidated statements of operations and comprehensive loss are as follows:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Current tax expense |
325 | 10 | ||||||
|
|
|
|
|
|||||
Net Loss before income tax by tax jurisdiction:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Cayman |
(919 | ) | (623 | ) | ||||
| United States |
(1,280 | ) | (17,227 | ) | ||||
| Mainland China |
(14,133 | ) | (23,598 | ) | ||||
| Hong Kong |
— | (141 | ) | |||||
|
|
|
|
|
|||||
| Loss before provision for income taxes |
(16,332 | ) | (41,589 | ) | ||||
|
|
|
|
|
|||||
A reconciliation of the Cayman statutory income tax rate to the Company’s effective income tax rate is as follows:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Statutory income tax rate |
0.0 | % | 0.0 | % | ||||
| Foreign rate differential |
23.1 | % | 23.0 | % | ||||
| R&D deduction |
30.8 | % | 8.4 | % | ||||
| Tax credits |
13.4 | % | 2.7 | % | ||||
| Nondeductible expenses |
-2.9 | % | -1.2 | % | ||||
| Return to provision |
0.3 | % | — | |||||
| Valuation allowance |
-66.7 | % | -32.9 | % | ||||
|
|
|
|
|
|||||
| Effective income tax rate |
-2.0 | % | 0.0 | % | ||||
|
|
|
|
|
|||||
Deferred tax assets and deferred tax liabilities:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Net operating loss carryforwards |
26,200 | 27,204 | ||||||
| Section 174 capitalized costs |
12,232 | 4,052 | ||||||
| Amortization and Depreciation |
8 | 7 | ||||||
| Accruals and reserves |
368 | 446 | ||||||
| Share-based compensation |
39 | 12 | ||||||
| Tax credits |
3,213 | 1,253 | ||||||
| Net deferred tax assets before valuation allowance |
42,060 | 32,974 | ||||||
| Valuation allowance |
(42,060 | ) | (32,974 | ) | ||||
|
|
|
|
|
|||||
| Net deferred tax liabilities after valuation allowance |
— | — | ||||||
|
|
|
|
|
|||||
F-29
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 10. | Income Taxes - continued |
As of December 31, 2023, the Company had US Federal net operating loss carryforwards (“NOL”) of $15.8 million that have an unlimited carryforward period. As of December 31, 2023, the Company had US state NOL carryforwards of $22.8 million that expire at various dates between 2041 and 2042.
As of December 31, 2023, the Company had $127.7 million total foreign net operating loss carryforwards primarily driven by $127.7 million in the People’s Republic of China that expire at various dates between 2024 and 2028.
As of December 31, 2023, the Company had US Federal research and development (“R&D”) tax credits of $2.7 million that expire at various dates between 2042 and 2043. As of December 31, 2023, the Company had US State R&D tax credits of $0.6 million in various states that expire at various years depending on the state tax laws.
The future realization of the tax benefits of existing temporary differences and NOL carryforwards may be limited since it ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2023 and 2022, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2023 and 2022.
Movement of valuation allowance is as follows:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Balance at beginning of the year |
32,974 | 19,731 | ||||||
| Additions |
16,931 | 13,243 | ||||||
| Reversal |
(7,845 | ) | — | |||||
|
|
|
|
|
|||||
| Balance at the end of the year |
42,060 | 32,974 | ||||||
|
|
|
|
|
|||||
The Company’s ability to realize its net operating loss carryforwards and other tax attributes may also be limited in certain jurisdictions, including under US IRC Section 382, which governs changes in corporate ownership rules. These rules have implications regarding the utilization of net operating loss carryforwards or other tax attributes to offset its future taxable income.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which we operate or do business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
The Company records liabilities for uncertain tax positions in accordance with ASC 740 and subsequently adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate to record the unrecognized tax benefits. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2023 and 2022 The Company has not recorded any uncertain tax positions in its financial statements.
As a matter of policy, the Company recognizes any interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of December 31, 2023 and 2022, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local, and foreign jurisdictions, where applicable. There are currently no pending tax examinations. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements.
F-30
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 11. | Commitments and Contingencies |
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to its vendors, lessors, CROs, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.
Legal Proceedings
The Company, from time to time, may be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the years ended December 31, 2023 and 2022 and, to the best of its knowledge, no material legal proceedings are currently pending or threatened.
| 12. | Leases |
Operating lease arrangements primarily consist of office leases expiring at various years through 2025. The leases have original lease terms of one to five years. Since the implicit rate of such leases is unknown and the Company is not reasonably certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments. As of December 31, 2023, the weighted average discount rate for operating leases was 7.66% and the weighted average remaining lease term for operating leases was 0.9 years, respectively.
The components of lease expense were as follows:
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| US$ | US$ | |||||||
| Operating lease costs |
670 | 569 | ||||||
| Short term lease cost |
31 | 18 | ||||||
|
|
|
|
|
|||||
| Total lease cost |
701 | 587 | ||||||
|
|
|
|
|
|||||
| For the Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Weighted-average remaining lease term |
||||||||
| Operating leases |
0.9 years | 1.5 years | ||||||
| Weighted-average discount rate |
||||||||
| Operating leases |
7.7 | % | 7.6 | % | ||||
F-31
ANHEART THERAPEUTICS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 12. | Leases - continued |
A maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2023, reflective of the Company’s election to account for lease and non-lease components together, is as follows (in thousands):
| Year Ending December 31, |
Operating | |||
| US$ | ||||
| 2024 |
433 | |||
| 2025 |
36 | |||
| 2026 |
— | |||
| 2027 |
— | |||
| 2028 |
— | |||
| Thereafter |
— | |||
|
|
|
|||
| Total future minimum lease payments |
469 | |||
| Less: imputed interest |
(14 | ) | ||
| Present value of operating lease liability |
455 | |||
|
|
|
|||
| Less: current portion of lease liability |
420 | |||
| Non-current portion of lease liability |
35 | |||
| 13. | Employee Benefits |
Full time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiaries make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. The Company has no legal obligation for the benefits beyond the contributions made. Total amounts of such employee benefit expenses, which were expensed as incurred, were approximately $1,169 and $905 for the years ended December 31, 2023 and 2022 respectively.
| 14. | Related Party |
There were no material transactions with related parties.
| 15. | Subsequent Events |
The Company has evaluated subsequent events through March 28, 2023, which is the date when the consolidated financial statements were available to be issued.
On March 25, 2024, Nuvation Bio Inc. (NYSE: NUVB, “Nuvation Bio”) and the Company announced that the companies have entered into a definitive agreement for Nuvation Bio to acquire the Company in an all-stock transaction (the “Acquisition”). Immediately following the closing of the Acquisition, the former shareholders of the Company will own approximately 33% and the current stockholders of Nuvation Bio will own approximately 67% of Nuvation Bio on a fully diluted basis. The Acquisition has been approved by the board of directors of each company and is subject to approval by the Company’s shareholders and other customary closing conditions. The Acquisition is expected to close in the second quarter of 2024.
F-32
Exhibit 99.2
ANHEART THERAPEUTICS LTD.
(Incorporated in the Cayman Islands with limited liability)
Unaudited Condensed Consolidated Financial Statements
For the Three Months ended March 31, 2024 and 2023
INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 |
F-2 | |
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2024 and 2023 |
F-3 | |
| Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the Three Months ended March 31, 2024 and 2023 |
F-4 | |
| Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2024 and 2023 |
F-5 | |
| Notes to the Unaudited Condensed Consolidated Financial Statements |
F-6 | |
F-1
ANHEART THERAPEUTICS LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2024 AND DECEMBER 31, 2023
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| March 31, 2024 |
December 31, 2023 |
|||||||
| US$ | US$ | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
19,346 | 36,026 | ||||||
| Accounts receivable, net of allowance for credit loss of $3,336 and nil as of March 31, 2024 and December 31, 2023, respectively |
5,329 | 3,472 | ||||||
| Prepaid expenses and other current assets |
2,771 | 1,943 | ||||||
|
|
|
|
|
|||||
| Total current assets |
27,446 | 41,441 | ||||||
| Property and equipment, net |
168 | 206 | ||||||
| Operating lease right-of-use assets |
371 | 457 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
27,985 | 42,104 | ||||||
|
|
|
|
|
|||||
| LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
8,477 | 8,778 | ||||||
| Operating lease liability, current portion |
290 | 420 | ||||||
| Contract liabilities, current portion |
12,567 | 11,748 | ||||||
| Short-term borrowings |
13,620 | 11,358 | ||||||
| Accrued expenses and other current liabilities |
2,637 | 4,981 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
37,591 | 37,285 | ||||||
| Warrant liabilities |
— | 203 | ||||||
| Long-term borrowings |
120 | 326 | ||||||
| Contract liabilities, net of current portion |
10,182 | 11,160 | ||||||
| Operating lease liability, net of current portion |
39 | 35 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES |
47,932 | 49,009 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 9) |
||||||||
| Mezzanine equity: |
||||||||
| Series A convertible redeemable preferred shares, $.0001 par value; 12,000,000 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023 |
76,611 | 61,242 | ||||||
| Series A+ convertible redeemable preferred shares, $.0001 par value; 10,784,344 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023 |
68,850 | 49,113 | ||||||
| Series A-2 convertible redeemable preferred shares, $.0001 par value; 2,704,012 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023 |
17,263 | 12,141 | ||||||
| Series B convertible redeemable preferred shares, $.0001 par value; 17,406,573 and 17,259,714 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023, respectively |
111,128 | 72,387 | ||||||
|
|
|
|
|
|||||
| TOTAL MEZZANINE EQUITY |
273,852 | 194,883 | ||||||
|
|
|
|
|
|||||
| Shareholders’ deficit: |
||||||||
| Ordinary shares, $.0001 par value; 6,400,000 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023 |
1 | 1 | ||||||
| Additional paid-in capital |
— | — | ||||||
| Accumulated other comprehensive income |
896 | 853 | ||||||
| Accumulated deficit |
(294,696 | ) | (202,642 | ) | ||||
|
|
|
|
|
|||||
| TOTAL SHAREHOLDERS’ DEFICIT |
(293,799 | ) | (201,788 | ) | ||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
27,985 | 42,104 | ||||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
ANHEART THERAPEUTICS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Revenue |
5,151 | 2,247 | ||||||
| Cost of revenue |
2,332 | 2,290 | ||||||
|
|
|
|
|
|||||
| Gross profit (loss) |
2,819 | (43 | ) | |||||
|
|
|
|
|
|||||
| Operating expenses: |
||||||||
| Research and development |
10,167 | 8,496 | ||||||
| Selling, general and administrative |
7,104 | 1,954 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
17,271 | 10,450 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(14,452 | ) | (10,493 | ) | ||||
|
|
|
|
|
|||||
| Other income (expense), net: |
||||||||
| Government subsidy income |
15 | 20 | ||||||
| Foreign exchange income (loss) |
73 | (382 | ) | |||||
| Interest income |
275 | 164 | ||||||
| Interest expense |
(160 | ) | (115 | ) | ||||
| Other expenses |
(13 | ) | — | |||||
| Change in fair value of warrant liabilities |
(196 | ) | — | |||||
|
|
|
|
|
|||||
| Total other income (loss), net |
(6 | ) | (313 | ) | ||||
|
|
|
|
|
|||||
| Loss before provision for income taxes |
(14,458 | ) | (10,806 | ) | ||||
| Income tax expense |
(21 | ) | (1 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
(14,479 | ) | (10,807 | ) | ||||
| Accretion of convertible redeemable preferred shares to redemption value |
(78,052 | ) | (3,456 | ) | ||||
|
|
|
|
|
|||||
| Net loss attributable to ordinary shareholders of the Company |
(92,531 | ) | (14,263 | ) | ||||
|
|
|
|
|
|||||
| Net loss |
(14,479 | ) | (10,807 | ) | ||||
| Other comprehensive income: |
||||||||
| Exchange difference arising on translation of foreign operations |
43 | 369 | ||||||
|
|
|
|
|
|||||
| Total comprehensive loss attributable to the Company |
(14,436 | ) | (10,438 | ) | ||||
| Accretion of convertible redeemable preferred shares to redemption value |
(78,052 | ) | (3,456 | ) | ||||
|
|
|
|
|
|||||
| Total comprehensive loss attributable to ordinary shareholders of the Company |
(92,488 | ) | (13,894 | ) | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
ANHEART THERAPEUTICS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| Ordinary shares | Additional Paid-in Capital |
Accumulated other comprehensive income |
Accumulated deficit |
Total Shareholders’ Deficit |
||||||||||||||||||||
| Issued and Outstanding Shares |
Amount | |||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
| Balances at December 31, 2022 |
6,400,000 | 1 | — | 594 | (173,466 | ) | (172,871 | ) | ||||||||||||||||
| Share-based compensation |
— | — | 539 | — | — | 539 | ||||||||||||||||||
| Foreign currency translation gain |
— | — | — | 369 | — | 369 | ||||||||||||||||||
| Accretion of convertible redeemable preferred shares to redemption value |
— | — | (539 | ) | — | (2,917 | ) | (3,456 | ) | |||||||||||||||
| Net loss |
— | — | — | — | (10,807 | ) | (10,807 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances at March 31, 2023 |
6,400,000 | 1 | — | 963 | (187,190 | ) | (186,226 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances at December 31, 2023 |
6,400,000 | 1 | — | 853 | (202,642 | ) | (201,788 | ) | ||||||||||||||||
| Share-based compensation |
— | — | 596 | — | — | 596 | ||||||||||||||||||
| Exercise of stock options |
79,375 | 0 | 0 | — | — | 0 | ||||||||||||||||||
| Repurchase of ordinary shares |
(79,375 | ) | (0 | ) | (119 | ) | — | — | (119 | ) | ||||||||||||||
| Change in redemption value of convertible redeemable preferred shares |
— | — | — | 43 | — | 43 | ||||||||||||||||||
| Accretion of convertible redeemable preferred shares to redemption value |
— | — | (477 | ) | — | (77,575 | ) | (78,052 | ) | |||||||||||||||
| Net loss |
— | — | — | — | (14,479 | ) | (14,479 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances at March 31, 2024 |
6,400,000 | 1 | — | 896 | (294,696 | ) | (293,799 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
ANHEART THERAPEUTICS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Amounts in thousands of U.S. Dollar (“US$”)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net loss |
(14,479 | ) | (10,807 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
50 | 41 | ||||||
| Allowance for credit loss |
3,336 | — | ||||||
| Share-based compensation |
596 | 539 | ||||||
| Noncash lease expense |
163 | 156 | ||||||
| Change in fair value of warrant liabilities |
196 | — | ||||||
| Amortization of borrowing discount of SSVB Loan |
4 | 35 | ||||||
| Unrealized foreign currency transaction (income) loss |
(73 | ) | 382 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(5,193 | ) | (476 | ) | ||||
| Prepaid expenses and other current assets |
(828 | ) | (268 | ) | ||||
| Accounts payable |
(301 | ) | (506 | ) | ||||
| Accrued expenses and other current liabilities |
(2,461 | ) | (1,197 | ) | ||||
| Contract liabilities |
(159 | ) | 3,552 | |||||
| Operating lease liabilities |
(197 | ) | (181 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(19,346 | ) | (8,730 | ) | ||||
|
|
|
|
|
|||||
| Cash Flows from Investing Activities: |
||||||||
| Cash paid for marketable securities |
— | (13,205 | ) | |||||
| Maturities of marketable securities |
— | 10,989 | ||||||
| Purchases of property and equipment |
(13 | ) | (22 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(13 | ) | (2,238 | ) | ||||
|
|
|
|
|
|||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from borrowings |
7,035 | 1,527 | ||||||
| Payments on borrowings |
(4,969 | ) | (581 | ) | ||||
| Proceeds from exercise of warrants |
518 | — | ||||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
2,584 | 946 | ||||||
|
|
|
|
|
|||||
| Net Decrease in Cash and Cash Equivalents |
(16,775 | ) | (10,022 | ) | ||||
| Cash, cash equivalents, and restricted cash at beginning of the period |
36,026 | 30,780 | ||||||
| Effect of foreign exchange rate changes on cash |
95 | 54 | ||||||
|
|
|
|
|
|||||
| Cash, cash equivalents, and restricted cash at end of the period |
19,346 | 20,812 | ||||||
|
|
|
|
|
|||||
| Supplemental Disclosure of Cash Flow Information: |
||||||||
| Cash paid for interest |
150 | 106 | ||||||
| Cash paid for income taxes |
21 | 1 | ||||||
| Cash paid for amounts included in the measurement of operating lease liabilities |
206 | 199 | ||||||
|
Right-of-use-assets obtained in exchange for new operating lease liabilities |
74 | 202 | ||||||
| Accretion of convertible redeemable preferred shares to redemption value |
78,052 | 3,456 | ||||||
| Issue of warrants in connection with the SSVB loan (Note 6) |
— | (46 | ) | |||||
| Convertible redeemable preferred shares issued upon exercise of warrants |
399 | — | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 1. | Organization and principal activities |
Anheart Therapeutics Ltd., (“Anheart” or “Cayman Co”) and its subsidiaries (collectively referred to as “the Company”) are principally engaged in acquiring, developing, and commercializing innovative pharmaceutical products as novel precision oncology therapies. For the three months ended March 31, 2024 and 2023, its primary operations were conducted in the United States and China.
As of March 31, 2024, the Company’s principal subsidiaries are as follows:
| Name of the entities |
Date of |
Place of |
Percentage of direct or indirect economic ownership |
Principle activities | ||||||
| AnHeart Therapeutics Inc. (“AnHeart US”) |
December 11, 2017 | Delaware, USA | 100 | % | Development and commercialization of innovative medicines | |||||
| AnBio Therapeutics (HK) Ltd. (“AnHeart HK”) |
May 28, 2021 | Hong Kong, China | 100 | % | Investment holding company | |||||
| AnHeart Therapeutics (Hangzhou) Co., Ltd. (“AnHeart HZ”) |
November 27, 2018 | Hangzhou, China | 100 | % | Development and commercialization of innovative medicines | |||||
| Baoquan Biomedical Technology (Shanghai) Co. Ltd. |
February 8, 2021 | Shanghai, China | 100 | % | Development and commercialization of innovative medicines | |||||
| NanGene Biomedical Co. Ltd. (“NanGene”) |
April 15, 2022 | Nanjing, China | 100 | % | Development and commercialization of innovative medicines | |||||
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) regarding interim financial reporting. The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, the unaudited condensed consolidated financial statements should be read in conjunction with the Group’s consolidated financial statements for the years ended December 31, 2023 and 2022. Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States. The financial statements presented herein represent the consolidated financial statements of the Company. All intercompany transactions and balances have been eliminated.
Liquidity and Going Concern
The Company has been incurring losses from operations since its inception, with net loss of $14,479 and $16,657 for the three months ended March 31, 2024 and for the year ended December 31, 2023, respectively. Accumulated deficit amounted to $294,696 and $202,642 as of March 31, 2024 and December 31, 2023. Net current liabilities amounted to $ 10,145 as of March 31, 2024. Net cash used in operating activities was approximately $19,346 and $811 for the three months ended March 31, 2024 and for the year ended December 31, 2023, respectively. The Company has historically financed its operations primarily from the issuances of the Convertible Redeemable Preferred Shares (“CRPS”), proceeds from borrowings and cash received from collaboration and license agreement with customers. Management expects operating losses and negative cash flows from operations to continue for the foreseeable future.
The Company has cash and cash equivalents available on hand of $19.3 million as of March 31, 2024. In addition, on April 9, 2024, the Company has completed the transaction with a third party who has required the Company in an all-stock transaction (see Note 10). The Company together with the third party (the “combined company”) will continue to focus on executing the development strategy for pipelines. The Company believes it appropriate that the unaudited condensed consolidated financial statements are prepared on going concern basis.
F-6
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period.
Significant estimates and assumptions reflected in the unaudited condensed consolidated financial statements include but are not limited to accrued research and development expenses; valuation of share-based compensation arrangements; the fair value of CRPS; the fair value of the warrant liabilities; identifying separate accounting units and the standalone selling price of each performance obligation in the Company’s revenue arrangements; the incremental borrowing rate for determining lease liabilities and right-of-use assets; allowance for credit loss and valuation allowance for deferred tax assets.
The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it has concluded to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ materially from those estimates or assumptions.
Functional Currency and Foreign Currency Translations
The Company’s reporting currency is the USD. The functional currency of the Company’s subsidiaries incorporated in PRC is RMB. The functional currency of the Company and its subsidiaries incorporated outside the PRC is USD.
Transactions denominated in currencies other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the net loss of the statements of operations and comprehensive loss.
Assets and liabilities of the Company with functional currency other than US$ are translated into US$ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates. Income and expense items are translated at average exchange rates during the fiscal year. Translation adjustments arising from these are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Cash equivalents are reflected at fair value based on quoted market prices as further described in Note 3.
Fair Value Measurements
The Company categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| • | Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| • | Level 2—Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and |
| • | Level 3—Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. |
F-7
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Leases
The Company leases office premises in United States and China under operating leases and accounts for its leases under ASC 842. The Company determines whether an arrangement constitutes a lease and records lease liabilities and operating lease right-of-use (“ROU”) assets at the lease commencement. The lease terms of leases vary from more than one year to five years. The Company’s lease agreements do not contain any significant residual value guarantees or restricted covenants. The Company measures the operating lease liabilities at the commencement date based on the present value of remaining lease payments over the lease term, which is computed using the Company’s incremental borrowing rate, an estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the lease term. The Company measures the operating lease ROU assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing operating lease expenses based on lease payments on a straight-line basis over the lease term when the lessor makes the underlying asset available to the Company. Some of the Company’s lease contracts include options to extend the leases for an additional period which has to be agreed with the lessors based on mutual negotiation. After considering the factors that create an economic incentive, the Company does not include renewal option periods in the lease term for which it is not reasonably certain to exercise.
Operating lease expense was $170 and $172 for the three months ended March 31, 2024 and 2023, respectively. The weighted average discount rate for operating leases was 7.7%, and the weighted average remaining lease term for operating leases was 0.8 years as of March 31, 2024.
F-8
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Revenue Recognition
The Company applies ASC, Topic 606, Revenue from Contracts with Customers (ASC 606) to account for its revenue transactions.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.
Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.
Accounts receivable represent amounts invoiced and revenues recognized prior to invoicing when the Company has satisfied its performance obligation and has the unconditional right to payment. The Company maintains an allowance for doubtful accounts for estimated losses. In determining the allowance, consideration includes the probability of recoverability based on historical collection experience, aging of receivables and other economic and industry factors. Certain accounts receivable may be fully reserved when the Company becomes aware of any specific collection issues.
Credit losses
The allowance for credit losses is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation and any other forward-looking data regarding customers’ ability to pay which may be available.
Collaborative Arrangement
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The Company adopted this standard for all periods presented.
At contract inception of agreements with collaboration elements, the Company analyses the agreements to assess whether they are within the scope of ASC 808 Collaborative arrangements (“ASC 808”) to determine whether such agreements involve joint operating activities performed by parties that are both (a) active participants in the activities and (b) exposed to significant risks and rewards dependent on the commercial success of such activities.
The Company enters into collaborative arrangements for the research and development, manufacture and/or commercialization of drug products and drug candidates. The Company assesses and determines that none of the collaboration agreements entered into during the periods presented were within the scope of ASC808, as all of the agreements did not involve active participation by both parties in a joint research activity, therefore not qualify as collaborative arrangements under ASC 808.
The Company has determined that all the elements of the above collaborations are reflective of a vendor-customer relationship and therefore within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the five-step model under ASC 606 noted above. The Company recognizes revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
F-9
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Collaborative Arrangement - continued
The Company’s collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of licenses to intellectual property rights, agreements to provide research and development services and other deliverables. The collaborative arrangements do not include a right of return for any deliverable. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. In developing the stand-alone selling price for a performance obligation, the Company considers competitor pricing for a similar or identical product, market awareness of and perception of the product, expected product life and current market trends. In general, the consideration allocated to each performance obligation is recognized when the respective obligation is satisfied either by delivering a good or providing a service, limited to the consideration that is not constrained. Non-refundable payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as contract liabilities.
Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the contract, the Company recognizes revenue from the portion of the transaction price allocated to the license at a point in time, when the license is transferred to the customer and the customer is able to benefit from the license.
Research and development services: The portion of a transaction price allocated to research and development services performance obligations is deferred and recognized as revenue over time as delivery or performance of such services occurs based on the use of an input method.
Customer options: A customer’s right to choose, at its discretion, to make a payment for additional goods or services is generally considered an option. If the Company is not presently obligated to provide and does not have a right to consideration for delivering additional goods or services, the item is considered an option. The Company evaluates the customer options for material rights, such as the ability to acquire additional goods or services for free or a discount. Optional future services that reflect their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations and are accounted for as separate contracts. The optional future services do not include a material right to be accounted for as performance obligations.
Milestones payments: The Company’s collaboration agreement includes development and regulatory milestones. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.
Royalties: For sales-based royalties, including milestone payments based on the level of sales, the Company determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales-based royalty relates, the Company recognizes revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any sales-based royalty revenue resulting from the Company’s collaboration agreement.
The Company receives payments from its customers based on billing terms established in the contract. Up-front payments and fees are recorded as contract liabilities (e.g., deferred revenue) upon receipt or when due until the Company performs its obligations under the arrangement.
In the event of an early termination of a collaboration agreement, any contract liabilities would be recognized in the period in which all our obligations under the agreement have been fulfilled.
For a complete discussion of accounting for revenue, see Note 5, “Collaboration and License Agreements.”
F-10
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Costs to Fulfill a Contract with a Customer
The compensation paid to obtain contracts were immaterial, therefore, the Company has not capitalized any costs for the three months ended March 31, 2024 and 2023.
The Company is required to capitalize costs incurred to fulfill customer contracts. These costs are required to be amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates, compared to previously being expensed as incurred. Elements of the costs primarily include (i) payroll and other related costs of personnel related directly to the contract activities; (ii) costs related to pre-clinical testing and clinical trials such as payments to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), investigators, and clinical trial sites that conduct the contract activities; (iv) costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses; and (v) other research and development costs.
Research and Development Expenses
Elements of research and development expenses primarily include (i) payroll and other related costs of personnel engaged in research and development activities; (ii) in-licensed patent costs of exclusive development rights of products granted to the Company; (iii) costs related to pre-clinical testing of the Company’s technologies under development and clinical trials such as payments to CROs and CMOs, investigators, and clinical trial sites that conduct our clinical studies; (iv) costs to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility-related expenses; and (v) other research and development expenses. Research and development expenses are charged to expense as incurred and have no alternative future uses.
The Company has acquired rights to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new product compound, as well as pre-commercial milestone payments, are immediately expensed as acquired in-process research and development (“IPR&D”) in the period in which they are incurred, provided that the new product compound did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, and the product candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Milestone payments made to third parties subsequent to regulatory approval which meet the capitalization criteria would be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product. If the conditions enabling capitalization of development costs as an asset have not yet been met, all development expenditures are recognized in profit or loss when incurred.
CRPS
The Company has classified its CRPS as temporary equity in the accompanying unaudited condensed consolidated balance sheets due to terms that allow for redemption of the shares upon the occurrence of a contingent event that is not solely within the Company’s control. The Company recorded the initial carrying amount of the CRPS with its issuance price, which approximated the issuance date fair value, after the reduction of the issuance cost. The Company uses interest method to accrete the carrying value of the preferred shares to their maximum redemption price as if redemption were to occur at the end of the reporting period. The change in redemption value is recorded as deemed dividend, and charged against retained earnings, or in the absence of retained earnings, against additional paid-in capital (“APIC”). Once APIC has been exhausted, additional charges are recorded by increasing the accumulated deficit.
F-11
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Share-Based Compensation
The Company accounts for all share-based awards granted to employees and non-employees as share-based compensation expenses at fair value. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair value of the Company’s ordinary shares on the date of grant, the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the shares. As the Company is a privately held company, there is no historical data from which to base a calculation of expected volatility. The Company relies upon other information such as the historical, expected, or implied volatility of similar companies whose shares or option prices are publicly available. The annual risk-free rate will be determined by using the nominal treasury constant maturity rate published on the Federal Reserve website as of the date of grant. The Company will select a rate (or blend of rates) with an appropriate term based on the expected term. The Company has not paid, and does not anticipate paying, cash dividends on its ordinary share therefore, the expected dividend yield is assumed to be zero.
The Company classifies its share-based awards as equity and measures its awards at their grant date fair value and recognizes the compensation expense during which the employee is required to perform service in exchange for the award for employees and non-employees. The Company elects to recognize forfeitures when they occur.
Share-based compensation is classified in the Company’s statements of operations and comprehensive loss based on the function to which the related services are provided. Any consideration paid by employees on exercising stock options and the corresponding portion previously credited to APIC are credited to share capital.
See Note 8 for a summary of the share-based award activity under the Company’s share-based compensation plan.
Income Taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis, and operating losses and tax credits carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assets will not be realized.
The Company records liabilities related to uncertain tax positions when, despite the Company’s belief that the Company’s tax return positions are supportable, the Company believes that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense. The Company did not recognize any uncertain tax positions.
F-12
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 2. | Summary of Significant Accounting Policies - continued |
Concentration of risks
Concentration of credit risk
Assets that potentially subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, account receivables and other receivables. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. All of the Company’s cash and cash equivalents and marketable securities are held with financial institutions that Company management believes to be high credit quality. Prepaid expenses and other current assets mainly consists of deposits of rent, and prepaid expenses, which can be applied for deduction of future payments for expenses. The Company has no significant concentrations of credit risk with respect to its prepaid expenses and other current assets.
Concentration of customers and suppliers
Substantially all revenues were derived from customers located in China, Japan and Korea. For the three months ended March 31, 2024, the revenues derived from customers located in China, Japan and Korea were $5.13 million, $22, and nil, respectively. For the three months ended March 31, 2023, the revenues derived from customers located in China and Korea were $1.77 million and $477, respectively.
Below customers represent more than 10% of the Company’s net revenue for the three months ended March 31, 2024 and 2023.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Customer B |
99.57 | % | 78.77 | % | ||||
| Customer C |
— | 21.23 | % | |||||
Below customers represent more than 10% of the Company’s balances of accounts receivable as of March 31, 2024 and December 31, 2023.
| As of March 31, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| Customer B |
100.00 | % | — | |||||
| Customer C |
— | 100.00 | % | |||||
Below suppliers represent more than 10% of the Company’s total purchases for the three months ended March 31, 2024 and 2023.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Supplier A |
24.62 | % | 10.42 | % | ||||
| Supplier B |
* | * | ||||||
| Supplier C |
* | 13.92 | % | |||||
| * | represents the percentage less than 10%. |
F-13
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 3. | Fair Value Measurements |
The following tables present information about the Company’s assets and liabilities that are regularly measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2.
There are no financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024. Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 are summarized as follows:
| Fair value measurements as of December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||
| Liabilities |
||||||||||||||||
| Warrant liabilities |
— | — | 203 | 203 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
— | — | 203 | 203 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Company utilized the Black-Scholes model to estimate the fair value of warrant liabilities at each reporting date. The application of the Black-Scholes model utilizes significant unobservable inputs and assumptions, including volatility. The Company measured expected volatility based on several inputs, including considering a peer group of publicly traded companies. As a result of the unobservable inputs used, the fair value measurement of these warrants reflected a Level 3 measurement within the fair value measurement hierarchy.
The following table summarizes the activity for the Company’s Level 3 liabilities measured at fair value on a recurring basis:
| US$ | ||||
| Balance as of December 31, 2022 |
278 | |||
| Number adjustment of warrants |
(46 | ) | ||
| Changes in fair value |
(28 | ) | ||
| Foreign exchange difference |
(1 | ) | ||
|
|
|
|||
| Balance as of December 31, 2023 |
203 | |||
|
|
|
|||
| Changes in fair value |
196 | |||
| Exercise of warrants (see Notes 6 and 7) |
(399 | ) | ||
|
|
|
|||
| Balance as of March 31, 2024 |
— | |||
|
|
|
|||
As of March 31, 2024 and December 31, 2023, the Company’s financial assets and liabilities not measured at fair value included cash and cash equivalents, accounts receivable, other receivables included in prepaid expenses and other current assets, accounts payable, and short-term borrowings, of which the carrying value approximate fair value because of the short-term nature of these instruments. The carrying value of long-term borrowings approximates the fair value. In calculating the fair value of long-term borrowings, interest rate assumptions reflect current credit worthiness and market conditions available for borrowings with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.
F-14
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 4. | Accrued Expenses and other current liabilities |
Accrued expenses and other current liabilities consisted of the following:
| As of March 31, |
As of December 31, |
|||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Accrued payroll |
1,147 | 3,612 | ||||||
| Tax payable |
409 | 446 | ||||||
| Other accrued expenses |
1,081 | 923 | ||||||
|
|
|
|
|
|||||
| Total accrued expenses and other current liabilities |
2,637 | 4,981 | ||||||
|
|
|
|
|
|||||
| 5. | Collaboration and License Agreements |
The Company enters into collaborative arrangements for the research and development, and commercialization of drug products and drug candidates. To date, these collaborative arrangements have included out-licenses of and options to out-license in-licensed compound to other parties, in-licenses of compound from other parties. These arrangements may include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments, cost reimbursement arrangements and royalty payments.
In-Licensing Arrangements with Daiichi Sankyo Company Ltd. (“DS”)
The Company has in-licensed the rights to develop, manufacture and, if approved, commercialize multiple development stage drug candidates globally or in specific territories. These arrangements typically include non-refundable upfront payments, contingent obligations for potential development, regulatory and commercial performance milestone payments and royalty payments. All upfront and development milestones were expensed in research and development expense as incurred. No upfront payment was obligated to be paid and expensed for the three months ended March 31, 2024 and 2023.
Out-Licensing Arrangements
The Company’s revenue related to its out-licensing collaborative agreements consist of upfront license fees and research and development services revenue from its collaboration agreements with NewG Lab Co., Ltd. (“NewG Lab”), Innovent Biologics Co. Ltd. (“Innovent”) and Nippon Kayaku Co., Ltd. (“NK”) for AB-106.
The following table summarizes total revenue recognized for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Revenue |
||||||||
| License revenue |
873 | — | ||||||
| Research and development service revenue |
4,278 | 2,247 | ||||||
|
|
|
|
|
|||||
| Total |
5,151 | 2,247 | ||||||
|
|
|
|
|
|||||
The Company’s performance obligations are satisfied either over time or at a point in time. The disaggregated revenues by revenue streams and timing of transfer of services were as follows:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| License revenue |
||||||||
| Point in time |
873 | — | ||||||
| Research and development service revenue |
||||||||
| Over time |
4,278 | 2,247 | ||||||
|
|
|
|
|
|||||
| 5,151 | 2,247 | |||||||
|
|
|
|
|
|||||
F-15
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 5. | Collaboration and License Agreements - continued |
Out-Licensing Arrangements – continued
Exclusive License Agreement with NewG Lab
In July 2020, the Company entered into an agreement with NewG Lab. under which the Company will grant a sub-licensable, royalty-bearing, exclusive right and license (the “Exclusive Sublicense”) to NewG Lab to develop and commercialize AB-106 in Korea (the “ NewG Lab Territory”), with NewG Lab responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development and for commercialization upon regulatory approvals. The Company also granted NewG Lab the option to obtain the same aforementioned rights to AB-106 in Malaysia (the “NewG Lab Option”).
The Company determined that the license and the R&D services are distinct from each other and represent a single performance obligation respectively at the outset of the agreement. The Company concluded that, at the inception of the agreement, the NewG Lab Option did not constitute a material right as it does not represent a discount to the fair value of the exclusive license that NewG Lab would not have received without entering into the agreement and is therefore not considered a distinct performance obligation.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed and recognized the entire amount of the transaction price allocated to the license as license fee revenue of $0.8 million during the year ended December 31, 2020. The revenue related to the R&D services will be recognized over the period as such service occurs. The Company recognized R&D service revenue of nil and $0.4 million during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the accounts receivable of NewG Lab was nil and $3.5 million, respectively. As part of our regular periodic assessments of credit loss exposure, we recognized $3.3 million of credit loss expense during the three months ended March 31, 2024 due to NewG Lab. There was no development milestone reached or received during the three months ended March 31, 2024 and 2023.
Collaboration and License Agreement with Innovent
In May 2021, the Company entered into an agreement with Innovent, granting Innovent a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in the People’s Republic of China and Taiwan (the “Innovent Territory”). The Company is responsible for funding ongoing clinical trials of AB-106, regulatory submissions after development with Innovent responsible for commercialization upon regulatory approvals. The Company also granted Innovent the option to obtain a license to commercialize AB-329 once the Company provides proof of concept behind the compound in a region in the Innovent Territory (the “Innovent Option”).
The Company determined that the license represents a single performance obligation. The R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to Innovent. The Company concluded that, at the inception of the agreement, the Innovent Option did not constitute a material right as it does not represent a discount to the fair value of the exclusive license that Innovent would not have received without entering into the agreement and is therefore not considered a distinct performance obligation.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed and recognized $0.9 million and nil upon satisfaction of milestones during the three months ended March 31, 2024 and 2023, respectively. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as R&D services revenue are performed using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $4.3 million and $1.8 million during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the accounts receivable of Innovent was $5.3 million and nil.
F-16
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 5. | Collaboration and License Agreements - continued |
Out-Licensing Arrangements – continued
Collaboration and License Agreement with NK
In October 2023, the Company entered into an agreement with NK, granting NK a sub-licensable, royalty-bearing, exclusive right and license to commercialize AB-106 in Japan (the “NK Territory”). The Company is responsible for funding ongoing clinical trials of AB-106 in the NK Territory, with NK responsible for funding regulatory submissions in the NK Territory. The Company also granted NK a sub-licensable, royalty-bearing, exclusive right and license to research, develop and commercialize any new indications of AB-106 in the NK Territory (“NK New Indication Right”).
The Company determined that the license represents a single performance obligation. The R&D services represent a material promise and were determined to be a separate performance obligation at the outset of the agreement as the promise is distinct and has standalone value to NK. The Company concluded that, at the inception of the agreement, the NK New Indication Right did not constitute a material right.
The Company satisfied the license performance obligation at a point in time when the license was delivered and the transfer of know-how completed and recognized the entire amount of the transaction price allocated to the license as license revenue of $33.9 million in late 2023. The portion of the transaction price allocated to the R&D services was deferred and is being recognized as R&D services revenue are performed using an input method. Estimated costs to complete are reassessed on a periodic basis and any updates to the revenue earned are recognized on a prospective basis. The Company recognized R&D service revenue of $22 and nil for the three months ended March 31, 2024 and 2023.
Contract assets and contract liabilities
When the Company satisfies its performance obligations by providing services to a customer before the customer pays consideration and before payment is due, the Company recognizes its rights to consideration as a contract asset.
The Company didn’t recognize any contract assets as of March 31, 2024 and December 31, 2023.
When a customer pays consideration before the Company provide services, the Company records its obligation as a contract liability. The Company expects to recognize all of this balance as revenue over the future 4 years.
The contract liabilities of the Company as of March 31, 2024 and December 31, 2023 are listed in the table below.
| As of March 31, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Research and development service revenue |
22,749 | 22,908 | ||||||
The balance of contract liabilities as of March 31, 2024 represents the transaction price allocated to the remaining performance obligations. The contract liability of $12,567 is expected to be recognized within one year and the rest in the following three years.
The balance of contract liabilities as of December 31, 2023 represents the transaction price allocated to the remaining performance obligations. The contract liability of $11,748 is expected to be recognized within one year and the rest in the following three years.
The compensation paid to obtain the contracts were immaterial, therefore, the Company has not capitalized any costs to obtain for the three months ended March 31, 2024 and 2023.
The costs incurred to fulfill customer contracts was capitalized and amortized to cost of revenue on a systemic basis that is consistent with the transfer to the customer of R&D services to which the asset relates. For the three months ended March 31, 2024 and 2023, $2,332 and $2,290 costs incurred to fulfill customer contracts were capitalized and expensed in the same period. There were no balances of the asset as of March 31, 2024 and December 31, 2023.
F-17
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Borrowings |
In 2020, the Company entered into loan agreements with Bank of Hangzhou to obtain short-term borrowings to supplement its working capital. As of March 31, 2024 and December 31, 2023, the outstanding balance net of repayments was $5.7 million and $5.7 million, respectively. For the three months ended March 31, 2024 and 2023, the Company had drawn down nil, $0.1 million and repaid nil and nil. The fixed interest rate of these borrowings was 4.05% to 4.10% per annum.
In 2022, the Company entered into loan agreements with China Merchants Bank to obtained short-term borrowings to supplement its working capital. As of March 31, 2024 and December 31, 2023, the outstanding balance was $2.8 million and nil, respectively. For the three months ended March 31, 2024 and 2023, the Company had drawn down $2.8 million, nil and repaid nil and nil. The fixed interest rate of these borrowings was 3.90% per annum.
In 2023, the Company entered into loan agreements with China Zheshang Bank to obtain short-term borrowings to supplement its working capital. As of March 31, 2024 and December 31, 2023, the outstanding balance was nil and $1.4 million, respectively. For the three months ended March 31, 2024 and 2023, the Company had drawn down nil and $1.4 million and repaid $1.4 million and nil. The fixed interest rate of these borrowings was 4.50% per annum.
On April 21, 2021, the Company entered into a Loan and Security Agreement (“2021 SSVB Agreement”) with Shanghai Pudong Development Bank in Silicon Valley (“SSVB”) for up to $8.0 million or equivalent in optional currency RMB term loans. As of March 31, 2024 and December 31, 2023, the outstanding balance was $0.1 million and $0.4 million, respectively. For the three months ended March 31, 2024 and 2023, the Company had drawn down nil and nil and repaid $0.3 million and $0.6 million. The weighted average interest rate of borrowings drawn under this agreement was 6% for the three months ended March 31, 2024 and 2023.
On April 4, 2023, the Company entered into a Loan and Security Agreement (“2023 SSVB Agreement”) with SSVB for up to 40.0 million RMB or equivalent in optional currency USD term loans (“SSVB Loan”). The SSVB Loan consists of a short-term working capital loan of 20 million RMB and a long-term loan of 20 million RMB, which matures on April 4, 2024 and April 4, 2025 respectively, at which time all outstanding balances are due. Draws on the line of credit for the short-term loans are payable on the maturity date of SSVB Loan. Draws on the line of credit for the long-term loans are payable in equal instalments monthly over the shorter of 24 months or from the date the draw took place till the SSVB loan matures. Outstanding balances will bear interest at a fixed rate of 4.25%. As of March 31, 2024 and December 31, 2023, the outstanding line of credit balance net of repayments was $5.1 million and $4.2 million. For the three months ended March 31, 2024, the Company had drawn down $4.2 million and repaid $3.3 million.
In connection with the 2021 SSVB Agreement, the Company issued to a related party of SSVB a warrant to purchase over a period of 5-years from the issuance date of the Warrant certain numbers of Series B Preferred Share at an exercise price of $3.5250 (“Exercise Price”). The numbers of Series B Preferred Share that the Warrant can be exercised for will be 10% of the total amount withdrawn under the Credit Agreement divided by the Exercise Price.
The Warrant is a freestanding financial instrument as it is legally detachable and separately exercisable from the SSVB Loan. Upon initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received to the detachable Warrant first and then the residual to the SSVB Loan. The amount allocated to the Warrant was classified as warrant liabilities (as the underlying Series B Preferred Shares are contingently redeemable (puttable) outside of the Company’s control) and the same amount was presented as a discount of the SSVB Loan component.
In subsequent periods, the discount of SSVB Loan is accreted using the effective interest method. Consequently, the Company recorded expenses amounting to $4 and $35 related to amortization of discount of the SSVB loan under interest expenses line in the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, respectively.
On March 25, 2024, all the warrants were exercised at the fair value of $399 for the issuance of 146,859 Series B preferred shares and the Company received another $518 of proceeds based on the exercise price of $3.5250 per Series B preferred share.
F-18
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 6. | Borrowings - continued |
The following is a schedule of changes in the number of warrants issued and outstanding:
| SSVB Warrant |
||||
| Outstanding as of December 31, 2022 |
163,177 | |||
| Warrants issued |
— | |||
| Warrants exercised |
— | |||
| Warrants number adjustment |
(16,318 | ) | ||
|
|
|
|||
| Outstanding as of December 31, 2023 |
146,859 | |||
|
|
|
|||
| Warrants issued |
— | |||
| Warrants exercised |
(146,859 | ) | ||
|
|
|
|||
| Outstanding as of March 31, 2024 |
— | |||
|
|
|
|||
| 7. | CRPS |
The Company has classified the CRPS as mezzanine equity as these CRPS are redeemable upon the occurrence of an event not solely within the control of the Company.
On March 25, 2024, 146,859 Series B CRPS were issued upon the exercise of warrants (see Note 6).
The movement of the numbers and carrying amount of Series A, A+, A-2, and B Preferred shares were shown as follow for the three months ended March 31, 2024 and 2023:
| Series |
Number of shares as of December 31, 2023 |
Issuance of CRPS |
Number of shares as of March 31, 2024 |
Original Issue Price per Share |
December 31, 2023 Carrying Amount |
Issuance of CRPS |
Change in redemption value |
March 31, 2024 Carrying Amount |
Liquidation Preference |
|||||||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | US$ | |||||||||||||||||||||||||||||||
| Series A |
12,000,000 | — | 12,000,000 | 1.250 | 61,242 | — | 15,369 | 76,611 | 15,000 | |||||||||||||||||||||||||||
| Series A+ |
10,784,344 | — | 10,784,344 | 1.750 | 49,113 | — | 19,737 | 68,850 | 18,873 | |||||||||||||||||||||||||||
| Series A-2 |
2,704,012 | — | 2,704,012 | 1.925 | 12,141 | — | 5,122 | 17,263 | 5,205 | |||||||||||||||||||||||||||
| Series B |
17,259,714 | 146,859 | 17,406,573 | 3.525 | 72,387 | 917 | 37,824 | 111,128 | 61,767 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total |
42,748,070 | 146,859 | 42,894,929 | 194,883 | 917 | 78,052 | 273,852 | 100,845 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Series |
Number of shares as of December 31, 2022 and March 31, 2023 |
Original Issue Price per Share |
December 31, 2022 Carrying Amount |
Change in redemption value |
March 31, 2023 Carrying Amount |
Liquidation Preference |
||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | ||||||||||||||||||||
| Series A |
12,000,000 | 1.250 | 56,706 | 1,086 | 57,792 | 15,000 | ||||||||||||||||||
| Series A+ |
10,784,344 | 1.750 | 45,475 | 871 | 46,346 | 18,873 | ||||||||||||||||||
| Series A-2 |
2,704,012 | 1.925 | 11,242 | 215 | 11,457 | 5,205 | ||||||||||||||||||
| Series B |
17,259,714 | 3.525 | 67,025 | 1,284 | 68,309 | 60,850 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
42,748,070 | 180,448 | 3,456 | 183,904 | 99,928 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The redemption value of the redeemable shares as of September 24, 2026, which is the earliest redemption date of those redeemable shares, are listed as below, assuming the fair market value of a Series B Preferred Share is lower than the price per share calculated by reference to Series B Preferred Shares that results in an Equity Gain IRR of at least 8%:
| Redemption Value at September 24, 2026 |
||||
| US$ | ||||
| Series A CRPS |
75,585 | |||
| Series A+ CRPS |
60,616 | |||
| Series A-2 CRPS |
14,985 | |||
| Series B CRPS |
89,969 | |||
|
|
|
|||
| 241,155 | ||||
|
|
|
|||
F-19
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 8. | Share-Based Compensation |
2021 Equity Incentive Plan
In December 2021, the Company adopted, and the board of directors (the “Board” or “BOD”) and shareholders approved the Plan or the issuance of stock options, restricted stock, and restricted stock units. The purposes of the Plan are to attract, incentivize and retain Employees, Outside Directors and Consultants through the grant of Awards.
The Plan is administered by the Board, or, at its discretion, a committee of no less than two board members, (the “Committee”) and each option grant must be confirmed by an agreement referred to as the Award Agreement. The exercise prices, vesting and other restrictions are determined by the Board. The Plan authorizes up to 4,985,320 ordinary shares of the Company for the grant of Awards under the Plan. In 2022, the Company increased the Plan authorization by 1,599,120, for a total of 6,584,440 shares authorized as of December 31, 2022. In 2023, the Company increased the Plan authorization by 2,500,000, for a total of 9,084,440 shares authorized since then.
For the share options granted for the asset acquisition, the option will become vested and exercisable over three years, with 25% of the option vesting on the grant date and the rest vesting on a monthly basis thereafter in three years. Except that, the vesting is based on four years’ service condition, in which 25% of these options will become vested on the first anniversary and 6.25% of these options will become vested on a quarterly basis thereafter. For all the share options granted, the expiration period is 8 years.
For the restricted share units granted, the restricted share units will become vested and exercisable over four years. Two different vesting terms are distinguished based on new hire and promotion. For new hire, 25% of these restricted share units will become vested on the first anniversary and the remaining units being vested in equal monthly installments. For promotion, the restricted share units will become vested on a monthly basis in four years.
Stock Options
For purposes of calculating share-based compensation, the Company estimates the fair value of stock options using the Black-Scholes option-pricing model. This model incorporates various assumptions, including the expected volatility, expected term, and interest rates.
The following table summarizes stock option activity for the three months ended March 31, 2024.
| Number of options |
Weighted average exercise price |
Weighted average remaining contractual life |
Weighted average grant date fair value |
Aggregate intrinsic value |
||||||||||||||||
| US$ | US$ | US$ | ||||||||||||||||||
| Balances at December 31, 2023 |
7,974,970 | 1.57 | 6.15 | 1.00 | 4,136 | |||||||||||||||
| Options granted |
105,000 | 1.25 | 7.89 | 3.25 | ||||||||||||||||
| Options exercised |
(79,375 | ) | 0.94 | — | 1.49 | |||||||||||||||
| Options forfeited |
(170,625 | ) | 1.18 | 5.62 | 1.28 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balances at March 31, 2024 |
7,829,970 | 1.57 | 5.66 | 1.01 | 18,225 | |||||||||||||||
| Outstanding at March 31, 2024 |
7,829,970 | 1.57 | 5.66 | 1.01 | 18,225 | |||||||||||||||
| Vested and expected to vest |
7,666,543 | 1.57 | 5.66 | 1.01 | 17,809 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Exercisable at March 31, 2024 |
4,096,267 | 1.71 | 5.20 | 0.81 | 8,998 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s ordinary share for those stock options that had exercise prices lower than the fair value of the ordinary share as of the end of the period. There were 79,375 stock options exercised and repurchased by the Company during the three months ended March 31, 2024, The repurchased price of the exercised stock options was $0.1 million, which was not paid recorded in accrued expenses and other current liabilities as of March 31, 2024. The repurchases of ordinary shares are accounted for under the cost method whereby the entire cost of the acquired share was recorded as reductions of ordinary shares and APIC as the repurchase price was less the fair value of ordinary shares as of the repurchase date.
F-20
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 8. | Share-Based Compensation - continued |
Stock Options – continued
The weighted-average assumptions used to estimate the fair value of stock options granted were as follows:
| For the Three Months Ended March 31, 2024 |
||||
| Weighted average risk-free interest rate |
4.17 | % | ||
| Expected term to maturity |
5.08 years | |||
| Expected volatility |
74.32 | % | ||
| Expected dividend yield |
0.00 | % | ||
| Fair value of underlying ordinary shares |
$ | 3.91 | ||
| Fair value of share option |
$ | 3.25 | ||
The total fair value of options vested during the three months ended March 31, 2024 was $0.9 million.
Restricted Stock Units
The following table summarizes stock option activity for the three months ended March 31, 2024.
| Number of restricted share units |
Weighted average exercise price |
|||||||
| US$ | ||||||||
| Balances at December 31, 2023 |
— | — | ||||||
| Restricted share units granted |
55,000 | 3.91 | ||||||
|
|
|
|
|
|||||
| Balances at March 31, 2024 |
55,000 | 3.91 | ||||||
|
|
|
|
|
|||||
| Vested and expected to vest |
51,700 | 3.91 | ||||||
|
|
|
|
|
|||||
Share-Based Compensation Expense
Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees is as follows (in thousands):
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| US$ | US$ | |||||||
| Research and development |
348 | 383 | ||||||
| General and administrative |
248 | 156 | ||||||
|
|
|
|
|
|||||
| Total share-based compensation expense |
596 | 539 | ||||||
|
|
|
|
|
|||||
As of March 31, 2024, the total unrecognized share-based compensation expense related to outstanding awards was approximately $4.65 million and is expected to be recognized over a weighted-average period of 1.53 years.
F-21
ANHEART THERAPEUTICS LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Amounts in thousands of U.S. Dollar (“US$”), except share and per share data)
| 9. | Commitments and Contingencies |
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to its vendors, lessors, CROs, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.
Legal Proceedings
The Company, from time to time, may be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three months ended March 31, 2024 and 2023 and, to the best of its knowledge, no material legal proceedings are currently pending or threatened.
| 10. | Subsequent Events |
The Company has evaluated subsequent events through June 20, 2024, which is the date when the unaudited condensed consolidated financial statements were available to be issued.
On March 25, 2024, Nuvation Bio Inc. (NYSE: NUVB, “Nuvation Bio”) and the Company announced that the companies have entered into a definitive agreement for Nuvation Bio to acquire the Company in an all-stock transaction (the “Transaction”). Immediately following the closing of the Transaction, the former shareholders of the Company will own approximately 33% and the current stockholders of Nuvation Bio will own approximately 67% of Nuvation Bio on a fully diluted basis. The Transaction was completed on April 9, 2024. After the Transaction, the Company ceased to exist and was merged by a wholly owned subsidiary of Nuvation Bio.
F-22
| • | the number of shares of Class A Common Stock subject to each Assumed Option was determined by multiplying (A) the number of Ordinary Shares of AnHeart that are subject to such AnHeart Option immediately prior to the First Effective Time, by (B) the Equity Award Exchange Ratio of 1.7551 and rounding down to the nearest whole number of shares; |
| • | the per-share exercise price for Class A Common Stock issuable upon exercise of each Assumed Option was determined by dividing (A) the per-share exercise price of each AnHeart Option, as in effect immediately prior to the First Effective Time, by (B) 1.7551 and rounding up to the nearest whole cent; and |
| • | the number of shares of Class A Common Stock subject to each Assumed RSU was determined by multiplying (A) the number of Ordinary Shares of AnHeart that are subject to such AnHeart RSU immediately prior to the First Effective Time, by (B) 1.7551 and rounding down to the nearest whole number of shares. |
| • | Acquisition of AnHeart by Nuvation Bio as further described herein; |
| • | Issuance of Nuvation Bio Class A Common Stock, Convertible Preferred Stock, and Consideration Warrants for shares of Class A Common Stock pursuant to the Acquisition; |
| • | Stock-based compensation recognized as a result of Assumed Share-based Awards (defined below) issued to AnHeart personnel in conjunction with the acquisition; |
| • | The pro forma effects of certain assumptions and adjustments described in “Notes to the Unaudited Pro Forma Condensed Combined Financial Information” below. |
| • | The accompanying notes to the unaudited pro forma condensed combined financial information; |
| • | The audited consolidated financial statements of Nuvation Bio as of and for the year ended December 31, 2023, and the related notes, in Nuvation Bio’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2023; |
| • | The unaudited condensed consolidated financial statements of Nuvation Bio as of and for the three months ended March 31, 2024, and the related notes, included in Nuvation Bio’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024; |
| • | The audited consolidated financial statements of AnHeart as of and for the years ended December 31, 2023, and 2022, and the related notes, included in Exhibit 99.1 to this Form 8-K/A; and |
| • | The unaudited consolidated financial statements of AnHeart as of and for the three months ended March 31, 2024, and 2023, and the related notes, included in Exhibit 99.2 to this Form 8-K/A. |
Nuvation Bio, Inc. Historical |
AnHeart Therapeutics, LTD Historical |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
Assets |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
Accounts receivable |
||||||||||||||||
Prepaid expenses and other current assets |
( |
)(A) | ||||||||||||||
Marketable securities |
||||||||||||||||
Interest receivable on marketable securities |
||||||||||||||||
Total current assets |
$ | $ | $ | ( |
) | $ | ||||||||||
Property and equipment, net |
||||||||||||||||
Lease security deposit |
||||||||||||||||
Operating lease right-of-use |
( |
)(B) | ||||||||||||||
Other non-current assets |
||||||||||||||||
Intangible assets |
(C) | |||||||||||||||
Total assets |
$ | $ | $ | ( |
) | $ | ||||||||||
Liabilities and stockholders’ equity |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable |
$ | $ | $ | |||||||||||||
Current operating lease liabilities |
( |
)(B) | ||||||||||||||
Lines of credit, current portion |
||||||||||||||||
Contract liabilities, current portion |
||||||||||||||||
Accrued expenses |
(D) | |||||||||||||||
Total current liabilities |
$ | $ | $ | $ | ||||||||||||
Warrant liability |
$ | $ | $ | (E) | $ | |||||||||||
Lines of credit, net of current portion |
||||||||||||||||
Contract liabilities, net of current portion |
||||||||||||||||
Operating lease liabilities, net of current portion |
( |
)(B) | ||||||||||||||
Total liabilities |
$ | $ | $ | $ | ||||||||||||
Temporary equity: |
||||||||||||||||
Legacy AnHeart preferred stock |
$ | ( |
)(F) | $ | ||||||||||||
Convertible Preferred Stock |
(G) | |||||||||||||||
Permanent equity: |
||||||||||||||||
Class A and Class B common stock and additional paid in capital |
(H) | |||||||||||||||
Legacy AnHeart common stock |
( |
)(F) | ||||||||||||||
Accumulated deficit |
( |
) | ( |
) | ( |
)(I) | ( |
) | ||||||||
Accumulated other comprehensive loss |
( |
) | ( |
)(F) | ( |
) | ||||||||||
Total stockholders’ equity (deficit) |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||
Total liabilities, temporary equity and stockholders’ equity (deficit) |
$ | $ | $ | ( |
) | $ | ||||||||||
Nuvation Bio, Inc. Historical |
AnHeart Therapeutics, LTD Historical |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
| Revenue |
$ | $ | ||||||||||||||
| Cost of revenue |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating expenses |
||||||||||||||||
| Acquired in-process research and development |
||||||||||||||||
| Research and development |
( |
)(AA) | ||||||||||||||
| General and administrative |
(BB) | |||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other income (expense): |
||||||||||||||||
| Interest income |
||||||||||||||||
| Other loss, net |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
$ | $ | ( |
) | $ | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes |
( |
) | ( |
) | ||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Net loss per share, basic and diluted |
$ | ( |
) | $ | ( |
) | ||||||||||
| |
|
|
|
|||||||||||||
| Weighted-average number of shares used to compute net loss per share, basic and diluted |
(CC) | |||||||||||||||
| |
|
|
|
|
|
|||||||||||
Nuvation Bio, Inc. Historical |
AnHeart Therapeutics, LTD Historical |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
Revenue |
||||||||||||||||
Cost of revenue |
||||||||||||||||
Gross profit |
$ | $ | $ | $ | ||||||||||||
Operating expenses |
||||||||||||||||
Acquired in-process research and development |
(DD) | |||||||||||||||
Research and development |
(EE) | |||||||||||||||
General and administrative |
(FF) | |||||||||||||||
Total operating expenses |
$ | $ | $ | $ | ||||||||||||
Loss from operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Other income (expense): |
||||||||||||||||
Interest income |
||||||||||||||||
Other (loss) income, net |
( |
) | ( |
) | ||||||||||||
Total other income (expense) |
$ | $ | $ | $ | ||||||||||||
Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Provision for income taxes |
( |
) | ( |
) | ||||||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Net loss per share, basic and diluted |
$ | ( |
) | $ | ( |
) | ||||||||||
Weighted-average number of shares used to compute net loss per share, basic and diluted |
(GG) | |||||||||||||||
Preferred stock consideration |
$ | |||
Common stock consideration |
||||
Assumed share-based awards |
||||
Warrant consideration |
||||
Estimated direct transaction costs |
||||
Total consideration |
$ | |||
| • | Preferred stock consideration (the “Preferred Stock Consideration”): pre-Acquisition equityholders of AnHeart and the closing stock price of Nuvation Bio common stock on the Nasdaq Global Market on April 9, 2024, which was $Non-Voting Preferred Stock being convertible into |
| • | Common stock consideration (the “Common Stock Consideration”): pre-Acquisition equityholders of AnHeart and the closing stock price of Nuvation Bio common stock on the Nasdaq Global Market on April 9, 2024, which was $ |
| • | Assumed share-based awards (the “Assumed Share-based Awards”): pre-combination service period as a component of estimated merger consideration, and the remainder of the estimated fair value will be accounted as post-combination expense by Nuvation Bio, subject to the grantees meeting the applicable vesting conditions. The unaudited pro forma condensed combined financial information reflects the post-combination expense as stock-based compensation expense over the remaining vesting term in the period subsequent to the merger. |
| • | Estimated direct transaction costs: Represents the estimated transaction costs, primarily legal and advisory services, incurred by Nuvation Bio through the closing of the Acquisition. Nuvation Bio had incurred approximately $ |
| • | Warrant consideration (the “Warrant Consideration”): Issuance of Consideration Warrants for to approximate the public warrant trading price as of closing of the acquisition , yielding a fair value of approximately $ |
| Assets acquired |
||||
| In-process research and development |
$ | |||
| Cash and cash equivalents |
||||
| Accounts receivable |
||||
| Assembled workforce |
||||
| Prepaid expenses and other current assets |
||||
| Property and equipment, net |
||||
| |
|
|||
| Total assets acquired |
$ | |||
| |
|
|||
| Liabilities assumed |
||||
| Lines of credit, current |
||||
| Contract liabilities, current |
||||
| Contract liabilities, net of current portion |
||||
| Accounts payable |
||||
| Accrued expenses |
||||
| Lines of credit, net of current portion |
||||
| |
|
|||
| Total liabilities assumed |
$ | |||
| |
|
|||
| Net Assets Acquired |
$ | |||
| |
|
| (A) | Reclassification of previously deferred acquisition costs which are included in the measurement of the total cost of acquisition pursuant to guidance in ASC 805-50. |
| (B) | Elimination of historical right-of-use |
| (C) | To reflect relative fair value allocation to the acquired intangible assets. Because the IPR&D asset does not have a future alternative use, the consideration allocated to the IPR&D of $ one-time adjustment in accumulated deficit in Note 3(I). As such, the adjustment of $ |
| (D) | The adjustment to accrued expenses consists of the following: |
| To record Nuvation Bio’s acquisition-related expenses incurred subsequent to March 31, 2024 |
$ | |||
| To record one-time transaction bonus (i) |
||||
| |
|
|||
| Total adjustment |
$ | |||
| |
|
| (i) | Prior to the Acquisition, AnHeart had entered into a certain employment agreement which provided for a one-time bonus payment upon consummation of certain transactions, and the bonus became payable upon closing of the Acquisition. Because the employment agreement was entered into before the negotiations for the Acquisition began, the bonus was determined to be primarily for the benefit of pre-closing AnHeart and would not be recognized as post-combination expense by Nuvation Bio. Accordingly, the bonus is reflected as an increase in liabilities assumed, but excluded from the unaudited pro forma condensed combined statement of operations. |
| (E) | To record the fair value of Warrant Consideration. |
| (F) | Elimination of AnHeart’s historical equity balances. |
| (G) | To record the fair value of Convertible Preferred Stock issued as consideration. |
| (H) | The adjustment to Class A and Class B common stock consists of the following: |
| To record the fair value of Class A Common Stock issued as part of merger consideration |
$ | |||
| To record the portion of Assumed Options and RSUs issued to AnHeart award holders attributable to pre-combination service and recognized as part of the purchase consideration |
||||
| To record share-based compensation for accelerated awards accounted for as post-combination expense |
||||
| |
|
|||
| Total adjustment |
$ | |||
| |
|
| (I) | The adjustment to accumulated deficit consists of the following: |
| Elimination of AnHeart’s historical accumulated deficit |
$ | |||
| Expensing of IPR&D asset due to no alternative future use |
( |
) | ||
| To record share-based compensation for accelerated awards accounted for as post-combination expense |
( |
) | ||
| |
|
|||
| Total adjustment |
$ | ( |
) | |
| |
|
| (AA) | The adjustment to research and development expense consists of the following: |
| Elimination of historical stock-based compensation expense for AnHeart pre-combination awards |
$ | ( |
) | |
| To record incremental salary expense |
||||
| To record stock-based compensation expense for the Nuvation Bio Assumed Options and RSUs attributable to post-combination services |
||||
| |
|
|||
| Total adjustment |
$ | ( |
) | |
| |
|
| (BB) | The adjustment to general and administrative expense consists of the following: |
| Amortization expense for the acquired intangible assets |
$ | |||
| Elimination of historical stock-based compensation expense for AnHeart pre-combination awards |
( |
) | ||
| To record incremental salary expense |
||||
| To record stock-based compensation expense for the Nuvation Bio Assumed Options and RSUs attributable to post-combination services |
||||
| |
|
|||
| Total adjustment |
$ | |||
| |
|
| (CC) | As part of the Acquisition, the Company issued to AnHeart securityholders approximately |
| (DD) | As part of the Acquisition the Company expensed the full amount of the acquired in-process research and development asset. |
| (EE) | The adjustment to research and development expense consists of the following: |
| Elimination of historical stock-based compensation expense for AnHeart pre-combination awards |
$ | ( |
) | |
| To record incremental salary expense |
||||
| To record stock-based compensation expense for the Nuvation Bio Assumed Options and RSUs attributable to post-combination services |
||||
| |
|
|||
| Total adjustment |
$ | |||
| |
|
| (FF) | The adjustment to general and administrative expense consists of the following: |
| Amortization expense for the acquired intangible assets |
$ | |||
| Elimination of historical stock-based compensation expense for AnHeart pre-combination awards |
( |
) | ||
| To record incremental salary expense |
||||
| To record stock-based compensation expense for the Nuvation Bio Assumed Options and RSUs attributable to post-combination services |
||||
| |
|
|||
| Total adjustment |
$ | |||
| |
|
| (GG) | As part of the Acquisition, the Company issued to AnHeart securityholders approximately |
Three Months Ended March 31, 2024 |
Year Ended December 31, 2023 |
|||||||
| Pro forma net loss |
$ | ( |
) | $ | ( |
) | ||
| Weighted-average number of shares outstanding used to compute pro forma net loss per share, basic and diluted |
||||||||
| |
|
|
|
|||||
| Pro forma net loss per share, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
| Weighted-average number of shares outstanding used to compute pro forma net loss per share, basic and diluted |
||||||||
| Nuvation Bio historical weighted-average shares outstanding |
||||||||
| Shares issued in connection with the Acquisition |
||||||||
| |
|
|
|
|||||
| Total weighted-average shares outstanding used to compute pro forma net loss, basic and diluted |
||||||||
| |
|
|
|
|||||
| Convertible Preferred Stock |
||||
| Restricted stock units |
||||
| Options |
||||
| Warrants (2) |
||||
| |
|
|||
| Total |
||||
| |
|
| (1) | Includes |
| (2) | Includes |
| Convertible Preferred Stock |
||||
| Restricted stock units |
||||
| Options (1) |
||||
| Warrants (2) |
||||
| |
|
|||
| Total |
||||
| |
|
| (1) | Includes |
| (2) | Includes |