Palatin Technologies Inc 10-Q for FY2024 Q2
Palatin Technologies Inc (PTN)
About this 10-Q
Palatin Technologies Inc filed this 10-Q on February 14, 2024, covering the quarter ended December 31, 2023 (FY2024 Q2).
Headline figures
Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.03M
- up 98.2% from $1.03M a year earlier
- Net loss
- $7.84M
- compared with net income of $2.71M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ___________ to __________
Commission file number:
(Exact name of registrant as specified in its charter) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date (February 13, 2024):
PALATIN TECHNOLOGIES, INC. Table of Contents |
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| Table of Contents |
Special Note Regarding Forward-Looking Statements
In this Quarterly Report on Form 10-Q (this “Quarterly Report”) references to “we,” “our,” “us,” the “Company” or “Palatin” mean Palatin Technologies, Inc. and its subsidiary.
Statements in this Quarterly Report, as well as oral statements that may be made by us or by our officers, directors, or employees acting on our behalf, that are not historical facts constitute “forward-looking statements,” which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report do not constitute guarantees of future performance. Investors are cautioned that statements that are not strictly historical facts contained in this Quarterly Report, including, without limitation, the following are forward looking statements:
| · | our significant operating losses since our inception and our need to obtain additional financing has caused management to determine there is substantial doubt regarding our ability to continue as a going concern; |
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| · | our ability to obtain additional financing on terms acceptable to us, or at all, including unavailability of funds or delays in receiving funds as a result of economic disruptions; |
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| · | our expectation that we will incur losses for the foreseeable future and may never achieve or maintain profitability; |
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| · | our business, financial condition, and results of operations may be adversely affected by increases in costs of and delays in conducting human clinical trials and the performance of our contractors and suppliers, reduction in our productivity or the productivity of our contractors and suppliers, supply chain constraints, and labor shortages; |
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| · | the ability of Cosette Pharmaceuticals, Inc. (“Cosette”), which acquired Vyleesi® (the trade name for bremelanotide) for the treatment of premenopausal women with hypoactive sexual desire disorder (“HSDD”) from us, to increase sales and make sales-based milestone payments to Palatin; |
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| · | the results of clinical trials with our late-stage products, including |
| o | PL9643, an ophthalmic peptide solution for dry eye disease (“DED”), which entered Phase 3 clinical trials in the fourth quarter of calendar year 2021, with top line results from the first Phase 3 clinical trial to be announced in the second half of February, 2024; |
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| o | PL8177, an oral peptide formulation for treatment of ulcerative colitis, which entered Phase 2 clinical trials in the third quarter of calendar year 2022; and |
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| o | a proof-of-concept melanocortin agonist clinical trial for diabetic nephropathy, which entered a Phase 2 clinical in the fourth quarter of calendar year 2022; |
| · | estimates of our expenses, future revenue and capital requirements; |
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| · | our ability to achieve profitability; |
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| · | our ability to advance product candidates into, and successfully complete, clinical trials; |
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| · | the initiation, timing, progress and results of future preclinical studies and clinical trials, and our research and development programs; |
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| · | the timing or likelihood of regulatory filings and approvals; |
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| · | our expectations regarding the clinical efficacy and utility of our melanocortin agonist product candidates for treatment of inflammatory and autoimmune related diseases and disorders, including ocular indications; |
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| · | our ability to compete with other products and technologies treating the same or similar indications as our product candidates; |
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| · | the ability of our third-party collaborators to timely carry out their duties under their agreements with us; |
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| · | the ability of our contract manufacturers to perform their manufacturing activities for us in compliance with applicable regulations; |
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| · | our ability to recognize the potential value of our licensing arrangements with third parties; |
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| · | the potential to achieve revenues from the sale of our product candidates; |
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| Table of Contents |
| · | our ability to obtain adequate reimbursement from private insurers and other healthcare payers; |
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| · | our ability to maintain product liability insurance at a reasonable cost or in sufficient amounts, if at all; |
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| · | the performance and retention of our management team, senior staff professionals, other employees, and third-party contractors and consultants; |
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| · | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology in the United States and throughout the world; |
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| · | our compliance with federal and state laws and regulations; |
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| · | the timing and costs associated with obtaining regulatory approval for our product candidates; |
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| · | the impact of fluctuations in foreign exchange rates; |
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| · | the impact of any geopolitical instability, economic uncertainty, financial markets volatility, or capital markets disruption resulting from the ongoing military conflict between Russia and Ukraine, and any resulting effects on our revenue, financial condition, or results of operations; |
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| · | the impact of legislative or regulatory healthcare reforms in the United States; |
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| · | our ability to adapt to changes in global economic conditions as well as competing products and technologies; |
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| · | our ability to timely recognize and identify any material weaknesses in our accounting controls and procedures; and |
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| · | our ability to remain listed on the NYSE American stock exchange. |
Such forward-looking statements involve risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Our future operating results are subject to risks and uncertainties and are dependent upon many factors, including, without limitation, the risks identified under the caption “Risk Factors” and elsewhere in this Quarterly Report, and any of those made in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Except as required by law, we do not intend, and undertake no obligation, to publicly update forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
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| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
PALATIN TECHNOLOGIES, INC. | ||||||||
and Subsidiary | ||||||||
Consolidated Balance Sheets | ||||||||
(unaudited) | ||||||||
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| December 31, 2023 |
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| June 30, 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Marketable securities |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets - operating leases |
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Other assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIENCY |
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Current liabilities: |
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Accounts payable |
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Accrued expenses |
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Short-term operating lease liabilities |
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Short-term finance lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Long-term operating lease liabilities |
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Long-term finance lease liabilities |
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Other long-term liabilities |
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Warrant liabilities |
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Total liabilities |
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Commitments and contingencies (Note 13) |
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Contingently redeemable warrants |
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Stockholders’ deficiency: |
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Preferred stock of $ |
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Series A Convertible: authorized |
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Common stock of $ |
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issued and outstanding |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ deficiency |
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Total liabilities and stockholders’ deficiency |
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The accompanying notes are an integral part of these consolidated financial statements.
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| Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||||||||||
and Subsidiary | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(unaudited) | ||||||||||||||||
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| Three Months Ended December 31, |
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REVENUES |
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Product revenue, net |
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OPERATING EXPENSES |
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Cost of products sold |
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Research and development |
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Selling, general and administrative |
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Gain on sale of Vyleesi |
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Gain on purchase commitment |
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Total operating expenses |
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Income (loss) from operations |
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OTHER INCOME (EXPENSE) |
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Investment income |
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Foreign currency (loss) gain |
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Interest expense |
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Offering expenses |
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Change in fair value of warrant liabilities |
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Total other income (expense), net |
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(Loss) Income before income taxes |
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Income tax benefit |
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NET (LOSS) INCOME |
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Basic and diluted net (loss) income per common share |
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Weighted average number of common shares outstanding used in computing basic and diluted net (loss) income per common share |
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The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||||||||||||||||||||||||||
and Subsidiary | ||||||||||||||||||||||||||||||||
Consolidated Statements of Changes in Stockholders’ (Deficiency) Equity | ||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
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Three Months Ended December 31, 2023 |
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| Stockholders' (Deficiency) Equity |
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| Series A Convertible Preferred Stock |
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| Common Stock |
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| Total |
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Balance September 30, 2023 |
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Stock-based compensation |
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Conversion of liability classified warrants upon warrant exercise |
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Reclassification of contingently redeemable warrants |
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Net loss |
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Balance December 31, 2023 |
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Six Months Ended December 31, 2023 |
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| Stockholders' (Deficiency) Equity |
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| Series A Convertible Preferred Stock |
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| Total |
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Balance June 30, 2023 |
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Stock-based compensation |
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Withholding taxes related to restricted stock units |
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Sale of common stock, net of costs |
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Conversion of liability classified warrants upon warrant exercise |
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Reclassification of contingently redeemable warrants |
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Net loss |
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Balance December 31, 2023 |
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The accompanying notes are an integral part of these consolidated financial statements.
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| Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
and Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Three Months Ended December 31, 2022 |
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| Redeemable Convertible Preferred Stock |
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Balance September 30, 2022 |
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Stock-based compensation |
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|
|
|
|
|
|
|
|
|
| ||||||||||
Withholding taxes related to restricted stock units |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
Redemption of convertible series B & series C preferred stock |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Sale of common stock and warrants, net of costs |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Reclassification of contingently redeemable warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | |
Net loss |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
| Balance December 31, 2022 |
| $ |
|
|
| - |
|
| $ |
|
| $ | - |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||||||
| Six Months Ended December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
|
|
| Redeemable Convertible Preferred Stock |
|
| Stockholders' Equity |
| ||||||||||||||||||||||||||||||||||||||||||||
|
| Contingently Redeemable |
|
| Series B |
|
| Series C |
|
| Escrowed |
|
| Series A Convertible Preferred Stock |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated |
|
|
|
| |||||||||||||||||||||||||
|
| Warrants |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Proceeds |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||||||||
Balance, June 30, 2022 |
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| ( | ) |
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| ( | ) |
|
| |
| |
Cumulative effect of accounting change |
|
| |
|
|
| - |
|
|
| |
|
|
| - |
|
|
| |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Withholding taxes related to restricted stock units |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
Redemption of convertible series B & series C preferred stock |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Sale of common stock and warrants, net of costs |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Reverse stock split fractional shares |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reclassification of contingently redeemable warrants |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | ||||||
Net loss |
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||||
| Balance, December 31, 2022 |
| $ |
|
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||||||
The accompanying notes are an integral part of these consolidated financial statements
| 8 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||
and Subsidiary | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
|
|
|
|
|
|
| ||
|
| Six Months Ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
|
|
used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Decrease in right-of-use asset |
|
|
|
|
|
| ||
Unrealized foreign currency transaction gain |
|
|
|
|
|
| ||
Stock-based compensation |
|
|
|
|
|
| ||
Change in fair value of liability classified warrants |
|
|
|
|
| ( | ) | |
Gain on sale of Vyleesi |
|
| ( | ) |
|
|
| |
Gain on purchase commitment |
|
|
|
|
| ( | ) | |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
| ( | ) | |
Other receivables |
|
|
|
|
| ( | ) | |
Prepaid expenses and other assets |
|
|
|
|
| ( | ) | |
Inventories |
|
| ( | ) |
|
|
| |
Accounts payable |
|
| ( | ) |
|
| ( | ) |
Accrued expenses |
|
| ( | ) |
|
| ( | ) |
Operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
Other liabilities |
|
| ( | ) |
|
|
| |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Maturity of marketable securities |
|
|
|
|
|
| ||
Proceeds from sale of Vyleesi |
|
|
|
|
|
| ||
Purchases of property and equipment |
|
| ( | ) |
|
| ( | ) |
Net cash provided by (used in) investing activities |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payment of withholding taxes related to restricted |
|
|
|
|
|
|
|
|
stock units |
|
| ( | ) |
|
| ( | ) |
Proceeds from the sale of common stock and warrants, |
|
|
|
|
|
| ||
Payment of finance lease obligations |
|
| ( | ) |
|
| ( | ) |
Proceeds from exercise of warrants |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Conversion of liability classified warrants upon warrant exercise |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements
| 9 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(1) ORGANIZATION
Nature of Business - Palatin Technologies, Inc. (“Palatin” or the “Company”) is a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin receptor system. The Company’s product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.
Melanocortin Receptor System. The melanocortin receptor system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1r through MC5r. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.
The Company’s prior commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in June 2019 for the treatment of hypoactive sexual desire disorder (“HSDD”) in premenopausal women. As disclosed in Note 5, this product was acquired by Cosette Pharmaceuticals, Inc. (“Cosette”) on December 19, 2023.
The Company’s new product development activities focus primarily on MC1r agonists, with potential to treat inflammatory and autoimmune diseases, such as dry eye disease, which is also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy, and inflammatory bowel disease. The Company believes that the MC1r agonist peptides in development have broad anti-inflammatory effects and appear to utilize mechanisms engaged by the endogenous melanocortin system in regulation of the immune system and resolution of inflammatory responses. The Company is also developing peptides that are active at more than one melanocortin receptor, and MC4r peptide and small molecule agonists with potential utility in obesity and metabolic-related disorders, including rare disease and orphan indications.
Business Risks and Liquidity – The Company has incurred operating losses and negative cash flows from operations since inception and will need additional funding to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit as of December 31, 2023 of $
As of December 31, 2023, the Company’s cash and cash equivalents were $
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. While the Company has raised funding in the past, the ability to raise funding in future periods is not considered probable, as defined under the accounting standards. As such, under the requirements of ASC 205-40, management may not consider the potential for future funding in their assessment of the Company’s ability to meet its obligations for the next year.
Based on our available cash and cash equivalents as of December 31, 2023 and $
| 10 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Concentrations – Concentrations in the Company’s assets and operations subject it to certain related risks. Financial instruments that subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents, and accounts receivable. The Company’s cash, cash equivalents, and marketable securities are primarily invested in one investment account sponsored by a large financial institution.
(2) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnote disclosures required to be presented for complete financial statements. In the opinion of management, these consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation. The results of operations for the three and six months ended December 31, 2023, may not necessarily be indicative of the results of operations expected for the full fiscal year.
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, filed with the U.S. Securities and Exchange Commission (“SEC”), which includes consolidated financial statements as of June 30, 2023 and 2022 and for the fiscal years then ended.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned inactive subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
Revision of Previously Issued Financial Statements - The Company has revised certain prior period amounts on the consolidated financial statements to correct a misstatement with respect to improperly classifying warrants as equity instead of as a warrant liability that is adjusted to the income statement each quarter to reflect changes in the fair value of the warrants, under the guidance of ASC 815-40, Contracts in Entity’s Own Equity. The Company recorded an adjustment to record a liability for the warrants of $
The Company also recorded a gain of $
The Company has assessed the impact of improperly classifying the warrants within equity rather than as a warranty liability that is adjusted through charges or credits to the income statement to reflect changes in the fair value of the warrants, and determined the impact is not material, quantitatively or qualitatively, to any prior period impacted. Accordingly, the Company will adjust prior periods as those financial statements are presented for comparative purposes in future filings.
| 11 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash, Cash Equivalents – Cash and cash equivalents include cash on hand, cash in banks, and all highly liquid investments with a purchased maturity of less than three months. Cash equivalents consisted of $
Marketable Securities - The Company’s marketable securities consist of debt securities with original maturities of greater than 90 days that are classified as available for sale securities.
Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, marketable securities, accounts receivable, accounts payable and warrants. Management believes that the carrying values of cash equivalents, accounts receivable, accounts payable and warrants are representative of their respective fair values based on the short-term nature of these instruments.
Credit Risk – Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and accounts receivable. Total cash and cash equivalent balances have exceeded balances insured by the Federal Depository Insurance Company. Currently, product revenues and related accounts receivable are generated primarily from one specialty pharmacy.
Trade Accounts Receivable - Trade accounts receivable are amounts owed to the Company by its customers for product that has been delivered. The trade accounts receivable is recorded at the invoice amount, less prompt pay and other discounts, chargebacks, and an allowance for credit losses, if any. Credit losses have not been significant to date.
Property and Equipment – Property and equipment consists of office and laboratory equipment, office furniture, and leasehold improvements and includes assets acquired under finance leases. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets, generally five years for laboratory and computer equipment, seven years for office furniture and equipment, and the lesser of the term of the lease or the useful life for leasehold improvements. Amortization of assets acquired under finance leases is included in depreciation expense. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized.
Impairment of Long-Lived Assets – The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future cash flows based on reasonable and supportable assumptions.
Leases - At lease inception, the Company determines whether an arrangement is or contains a lease. Operating leases are included in operating lease right-of-use (“ROU”) assets, short-term operating lease liabilities, and long-term operating lease liabilities in the consolidated financial statements. Finance leases are included in property and equipment for ROU assets, short-term finance lease liabilities, and long-term finance lease liabilities in the consolidated financial statements. ROU assets represent the Company’s right to use leased assets over the term of the lease. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets and lease liabilities are recognized at the commencement date. The lease liability is measured as the present value of the lease payments over the lease term. The Company uses the rate implicit in the lease if it is determinable. When the rate implicit in the lease is not determinable, the Company uses an estimate based on a hypothetical rate provided by a third party as the Company currently does not have issued debt. Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised. The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement. Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of any leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause incremental costs to the Company if the option were not exercised.
| 12 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented as an operating expense separately from interest expense on the lease liability.
The Company has elected not to recognize an ROU asset and obligation for leases with an initial term of 12 months or less. The expense associated with short-term leases is included in selling, general and administrative expenses in the statements of operations. To the extent a lease arrangement includes both lease and non-lease components, the Company has elected to account for the components as a single lease component.
Revenue Recognition – The Company recognizes product revenues in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers. The provisions of ASC Topic 606 require the following steps to determine revenue recognition: (1) Identify the contract(s) with a customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.
In accordance with ASC Topic 606, the Company recognizes product revenue when its performance obligation is satisfied by transferring control of the product to a customer. Per the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the consolidated balance sheet, net of various allowances as described in the Trade Accounts Receivable policy above.
Product revenues consist of sales of Vyleesi in the United States. The Company sold Vyleesi to specialty pharmacies at the wholesale acquisition cost and payment is currently made within approximately 30 days.
The Company records product revenues net of allowances for direct and indirect fees, discounts, co-pay assistance programs, estimated chargebacks and rebates. Product sales are also subject to return rights, which have not been significant to date.
Gross product sales offset by product sales allowances for the three and six months ended December 31, 2023 and 2022 are as follows:
|
| Three Months Ended December 31, |
|
| Six Months Ended December 31, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross product sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Product sales allowances and accruals |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Net sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
For licenses of intellectual property, the Company assesses at contract inception whether the intellectual property is distinct from other performance obligations identified in the arrangement. If the licensing of intellectual property is determined to be distinct, revenue is recognized for nonrefundable, upfront license fees when the license is transferred to the customer and the customer can use and benefit from the license. If the licensing of intellectual property is determined not to be distinct, then the license is bundled with other promises in the arrangement into one performance obligation. The Company needs to determine if the bundled performance obligation is satisfied over time or at a point in time. If the Company concludes that the nonrefundable, upfront license fees will be recognized over time, the Company will need to assess the appropriate method of measuring proportional performance.
| 13 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Regulatory milestone payments are excluded from the transaction price due to the inability to estimate the probability of reversal. Revenue relating to achievement of these milestones is recognized in the period in which the milestone is achieved.
Sales-based royalty and milestone payments resulting from customer contracts solely or predominately for the license of intellectual property will only be recognized upon occurrence of the underlying sale or achievement of the sales milestone in the future and such sales-based royalties and milestone payments will be recognized in the same period earned.
The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company is the principal in the research and development activities based upon its control of such activities, which is considered part of its ordinary activities.
Development milestone payments are generally due 30 business days after the milestone is achieved. Sales milestone payments are generally due 45 business days after the calendar year in which the sales milestone is achieved. Royalty payments are generally due on a quarterly basis 20 business days after being invoiced.
Research and Development Costs – The costs of research and development activities are charged to expense as incurred, including the cost of equipment for which there is no alternative future use.
Accrued Expenses – Third parties perform a significant portion of the Company’s development activities. The Company reviews the activities performed under all contracts each quarter and accrues expenses and the amount of any reimbursement to be received from its collaborators based upon the estimated amount of work completed considering milestones achieved. Estimating the value or stage of completion of certain services requires judgment based on available information. If the Company does not identify services performed for it but not billed by the service-provider, or if it underestimates or overestimates the value of services performed as of a given date, reported expenses will be understated or overstated.
Stock-Based Compensation – The Company charges to expense the fair value of stock options and other equity awards granted to employees and nonemployees for services. Compensation costs for stock-based awards with time-based vesting are determined using the quoted market price of the Company’s common stock on the grant date or for stock options, the value determined utilizing the Black-Scholes option pricing model, and are recognized on a straight-line basis, while awards containing a market condition are valued using multifactor Monte Carlo simulations and are recognized over the derived service period. Compensation costs for awards containing a performance condition are determined using the quoted price of the Company’s common stock on the grant date or for stock options, the value determined utilizing the Black Scholes option pricing model and are recognized based on the probability of achievement of the performance condition over the service period. Forfeitures are recognized as they occur.
Income Taxes – The Company and its subsidiary file consolidated federal and separate-company state income tax returns. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. 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 or operating loss and tax credit carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company has recorded and continues to maintain a full valuation allowance against its deferred tax assets based on the history of losses incurred and lack of experience projecting future product revenue and sales-based royalty and milestone payments.
Net Loss per Common Share – Basic and diluted loss per common share (“EPS”) are calculated in accordance with the provisions of FASB ASC Topic 260, Earnings per Share.
For the three months ended December 31, 2023, and 2022, no additional common shares were added to the computation of diluted EPS because to do so would have been anti-dilutive. The potential number of common shares excluded from diluted EPS during the three months ended December 31, 2023, and 2022 was
| 14 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Included in the weighted average common shares used in computing basic and diluted net loss per common share are
Translation of foreign currencies – Transactions denominated in currencies other than the Company’s functional currency (US Dollar) are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in the consolidated statements of operations as unrealized (based on the applicable period-end exchange rate) or realized upon settlement of the transactions.
(4) NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires an entity to measure and recognize expected credit losses for certain financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This update to the standard requires immediate recognition of credit losses expected to occur over the remaining life of many financial instruments. The Company adopted ASU 2016-13 as of July 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements for the six months ended December 31, 2023.
(5) ASSET PURCHASE AGREEMENT
On December 19, 2023, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Cosette pursuant to which Cosette acquired from the Company worldwide rights to Vyleesi®.
Under the terms of the Purchase Agreement, the Company sold certain assets (the “Purchased Assets”) to Cosette, comprising the exclusive right to market and sell Vyleesi for treatment of hypoactive sexual desire disorder in women, and contracts relating manufacturing and distribution of Vyleesi. The Purchased Assets include applicable intellectual property pertaining to the marketing and sale of Vyleesi, including patents, patent applications, trademarks and copyrights. In addition, Cosette acquired records pertaining to the historical sales and distribution of Vyleesi, as well as quality control and pharmacovigilance records and other records. The Company will receive up to $
The Purchase Agreement includes customary representations, warranties and covenants, as well as standard mutual indemnities covering losses arising from any material breach of the Purchase Agreement or inaccuracy of representations and warranties.
The parties have also entered into a transition service agreement pursuant to which the Company will provide certain transition services to Cosette for a period time and the Company will be reimbursed for the costs of the transition services.
The Company is also eligible to receive regulatory approval milestones associated previous licensing of Vyleesi to Fosun for China (see Note 7) and Kwangdong for the Republic of Korea (“Korea)” (See Note 8).
(6) MANUFACTURING SUPPLY AGREEMENTS FOR VYLEESI
The Company has agreed to transfer to Cosette it’s right, title and interest in contracts and agreements to manufacture Vyleesi, including manufacturing contracts with Catalent Belgium S.A. (“Catalent”), a subsidiary of Catalent Pharma Solutions, Inc., to manufacture drug product and prefilled syringes and assemble prefilled syringes into an auto-injector device; Ypsomed AG (“Ypsomed”), to manufacture the auto-injector device (the “Ypsomed Agreement”); and Lonza Ltd. (“Lonza”), to manufacture the active pharmaceutical ingredient peptide (the “Lonza Agreement”).
In September 2020, the Company and Catalent entered into a new Vyleesi manufacturing agreement (the “Catalent Agreement”) which includes reduced minimum annual purchase requirements (see Note 13) as compared to the original Catalent agreement and modified other financial terms. The Catalent Agreement provides that Catalent will provide manufacturing and supply services to Palatin related to production of Vyleesi, including that Catalent will supply specified minimums of Palatin’s requirements for Vyleesi during the term of the Catalent Agreement through August 21, 2025, unless earlier terminated in accordance with the terms of the Catalent Agreement. The initial term of the Catalent Agreement will be automatically extended for one 24-month period unless either party notifies the other of its desire to terminate as of the end of the initial term. The Catalent Agreement also includes customary terms and conditions relating to forecasting and minimum commitments, ordering, delivery, inspection and acceptance, and termination, among other matters (see Note 13).
| 15 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The initial term of the Ypsomed Agreement is through December 31, 2025, with automatic renewal for successive one-year periods unless either party terminates the Ypsomed Agreement by ten months’ written notice prior to the expiration of the Ypsomed Agreement or any automatic renewal period. There are specified minimum purchase requirements under the Ypsomed Agreement, and under specified circumstances, termination fees may be payable upon termination of the Ypsomed Agreement by the Company (see Note 13).
The term of the Lonza Agreement was set to expire on December 31, 2022. In November 2022, Lonza and the Company amended the Lonza Agreement to extend contract peptide manufacturing services until June 30, 2024. The Company intends to seek to extend contract peptide manufacturing services with Lonza past June 30, 2024, and is also actively evaluating potential new contract manufacturers. Establishing a new contractual relationship and establishing and validating manufacturing in a manner that complies with FDA regulations is a time-consuming and costly process. The amendment reduced certain minimum purchase commitments that were previously accrued for. As a result, the Company recorded a gain on the purchase commitment of $
(7) AGREEMENT WITH FOSUN
On September 6, 2017, the Company entered into a license agreement with Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”) for exclusive rights to commercialize Vyleesi in China (the “Fosun License Agreement”). Under the terms of the Fosun License Agreement, the Company received $
(8) AGREEMENT WITH KWANGDONG
On November 21, 2017, the Company entered into a license agreement with Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for exclusive rights to commercialize Vyleesi in Korea (the “Kwangdong License Agreement”). Under the terms of the Kwangdong License Agreement, the Company received $
(9) PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
|
| December 31, |
|
| June 30, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Clinical / regulatory costs |
| $ |
|
| $ |
| ||
Insurance premiums |
|
|
|
|
|
| ||
Vyleesi contractual advances |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
(10) FAIR VALUE MEASUREMENTS
The fair value of cash equivalents is classified using a hierarchy prioritized based on inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
| 16 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The following table provides the assets carried at fair value:
|
| Carrying Value |
|
| Quoted prices in active markets (Level 1) |
|
| Other quoted/observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents - Money market funds |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
June 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - Money market funds |
| $ |
|
| $ |
|
|
|
|
|
|
| ||||
Cash equivalents - Treasury bill |
|
|
|
|
|
|
|
| - |
|
|
| - |
| ||
Marketable securities - Treasury bill |
|
|
|
|
|
|
|
| - |
|
|
| - |
| ||
Total |
| $ |
|
| $ |
|
| $ | - |
|
| $ | - |
| ||
(11) INVENTORIES
Inventories consist of raw materials and work-in-process related to Vyleesi. The following table summarizes the components of inventories:
|
| December 31, |
|
| June 30, |
| ||
|
| 2023 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Raw materials |
| $ |
|
| $ |
| ||
Finished goods |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
(12) ACCRUED EXPENSES
Accrued expenses consist of the following:
|
| December 31, |
|
| June 30, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Clinical / regulatory costs |
| $ |
|
| $ |
| ||
Other research related expenses |
|
|
|
|
|
| ||
Professional Services |
|
|
|
|
|
| ||
Personnel costs |
|
|
|
|
|
| ||
Selling expenses |
|
|
|
|
|
| ||
Other |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
(13) COMMITMENTS AND CONTINGENCIES
Inventory Purchases - The Company has certain supply agreements with manufacturers and suppliers, including the Catalent Agreement, Ypsomed Agreement, and Lonza Agreement. The Company is required to make certain payments for the manufacture and supply of Vyleesi.
The following table summarizes the contractual obligations under the New Catalent Agreement, Ypsomed Agreement, and Lonza Agreement as of December 31, 2023:
|
| Total |
|
| Current |
|
| 1 - 3 Years |
|
| 4 - 5 Years |
| ||||
Inventory purchase commitments |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 17 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
As of December 31, 2023, the Company has $
The commitment contractual obligation amounts above are denominated in Swiss Francs and Euros and have been translated using period end exchange rates. The Company may experience a negative impact on future earnings and equity solely as a result of future foreign currency exchange rate fluctuations.
Contingencies - The Company accounts for litigation losses in accordance with ASC 450-20, Loss Contingencies. In addition, the Company is subject to other contingencies, such as product liability, arising in the ordinary course of business. Loss contingency provisions are recorded for probable losses when management is able to reasonably estimate the loss. Any outcome upon settlement that deviates from the Company’s best estimate may result in additional expense or in a reduction in expense in a future accounting period. The Company records legal expenses associated with such contingencies as incurred.
The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition, or results of operations.
(14) REDEEMABLE CONVERTIBLE PREFERRED STOCK, ESCROWED PROCEEDS, AND STOCKHOLDERS’ (DEFICIENCY) EQUITY
Series B and C Redeemable Convertible Preferred Stock – On May 11, 2022, Palatin entered into a securities purchase agreement with institutional investors, and on May 12, 2022, Palatin issued and sold
Given that the fee and other costs were not refundable to the Company as of June 30, 2022, regardless of the election selected by the investors, the $
The Company called a meeting of stockholders on June 24, 2022, to seek approval of, among other things, an amendment to its certificate of incorporation authorizing a reverse stock split. Except as otherwise required by law, holders of the Series B Preferred Stock and Series C Preferred Stock were entitled to vote only on the reverse stock split and any adjournment of the meeting relating to the reverse stock split. The Company’s common stock, outstanding Series A Convertible Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock voted as a single class on an as-if converted basis. The holders of Series B Preferred Stock had votes equal to the number of shares of common stock into which the Series B Preferred Stock is convertible.
| 18 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Series A Convertible Preferred Stock – As of June 30, 2023,
Financing Transactions – On October 20, 2023, the Company entered into a securities purchase agreement (the “October 2023 Purchase Agreement”) with a certain institutional investor, to sell in a registered direct offering (the “October 2023 RD Offering”), an aggregate of (i)
The October 2023 Private Warrants will be exercisable on the six-month anniversary of issuance for a period of five and one-half years from the issuance date, at an exercise price equal to $
The October 2023 Pre-Funded Warrants have an exercise price of $
The net proceeds from the October 2023 Offering, after deducting the placement agent fees and offering expenses, were $
On October 31, 2022, the Company entered into a securities purchase agreement with a certain institutional investor to sell, in a registered direct offering (the “October 2022 RD Offering”), an aggregate of (i)
The October 2022 Common Warrants have an exercise price of $
| 19 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The proceeds from the October 2022 Offering, after deducting the placement agent fees and expenses and other estimated offering expenses, were $
The private warrants and common warrants meet the definition of a derivative instrument under ASC Subtopic 815-40 and are reported as liabilities at December 31, 2023 and June 30, 2023 since the warrants do not meet the criteria for equity classification. Therefore, we report these warrants at their fair value on our balance sheets with changes in the fair value of the warrants recorded as a non-cash charge or gain in the consolidated statements of operations.
The placement agent warrants were issued to non-employees in exchange for services related to the offering are accounting for in accordance ASC 718 which requires the fair value of the warrants to be recognized as an offering expense. The placement agent warrants contain certain contingent cash settlement features that are not probable of occurring and not within the control of Company, therefore the placement agent warrants are classified out of permanent equity.
On April 12, 2023, the Company entered into a new equity distribution agreement (the “2023 Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may, from time to time, sell shares of the Company’s common stock at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.
Proceeds raised under the 2023 Equity Distribution Agreement are as follows:
|
| Three Months Ended December 31, 2023 |
|
| Six Months Ended December 31, 2023 |
|
| Cumulative from inception |
| |||||||||||||||
|
| Shares |
|
| Proceeds |
|
| Shares |
|
| Proceeds |
|
| Shares |
|
| Proceeds |
| ||||||
Gross proceeds |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
| |||||
Fees |
|
| - |
|
|
|
|
|
| - |
|
|
| ( | ) |
|
| - |
|
|
| ( | ) | |
Expenses |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
| ( | ) | ||
Net proceeds |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
| |||||
As of December 31, 2023, the Company had outstanding warrants for shares of common stock as follows:
|
| Shares of Common |
|
| Exercise Price per |
|
| Latest Expiration | |||
Description |
| Stock |
|
| Share |
|
| Date | |||
May 2022 Warrants |
|
|
|
| $ |
|
| ||||
October 2022 Private Warrants |
|
|
|
| $ |
|
| ||||
October 2022 Placement Agent Warrants |
|
|
|
| $ |
|
| ||||
October 2023 Private Warrants |
|
|
|
| $ |
|
| ||||
October 2023 Placement Agent Warrants |
|
|
|
| $ |
|
| ||||
The fair value of the warrants was determined using the Black-Scholes option-pricing model and are classified as a Level 2 financial instrument. The key assumptions used to determine the fair value was the term of the warrants, the risk-free rate and volatility. The weighted average assumptions used in the Black-Scholes model in estimating the fair value of the warrants issued for the periods presented were as follows:
|
| December 31, 2023 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Expected term |
|
|
|
|
|
| ||
Volatility |
|
| % |
|
| % | ||
Risk-free rate |
|
| % |
|
| % | ||
Stock Options – For the three and six months ended December 31, 2023, the Company recorded stock-based compensation related to stock options of $
| 20 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
A summary of stock option activity is as follows:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding - June 30, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Granted |
|
| - |
|
|
|
|
|
|
|
|
|
|
| ||
Forfeited |
|
| - |
|
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
| ||
Expired |
|
| - |
|
|
|
|
|
|
|
|
|
|
| ||
Outstanding - December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
On December 16, 2022, Carl Spana, President and CEO of the Company, and Stephen T. Wills, CFO, COO and Executive Vice President of the Company, voluntarily contributed stock options previously issued to them to purchase
Stock options granted to the Company’s executive officers and employees generally vest over a
Included in the outstanding options in the table above are
Restricted Stock Units – For the three and six months ended December 31, 2023, the Company recorded stock-based compensation related to restricted stock units of $
A summary of restricted stock unit activity is as follows:
Outstanding at June 30, 2023 |
|
|
| |
Granted |
|
| - |
|
Forfeited |
|
| ( | ) |
Expired |
|
| ( | ) |
Vested |
|
| ( | ) |
Outstanding at December 31, 2023 |
|
|
|
Included in outstanding restricted stock units in the table above are
Time-based restricted stock units granted to the Company’s executive officers, employees, and non-employee directors generally vest over 48 months, 48 months, and 12 months, respectively.
| 21 |
| Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Included in the outstanding restricted stock units in the table above are
In connection with the vesting of restricted share units during the six months ended December 31, 2023, the Company withheld
(15) INCOME TAXES
The Company has participated in the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) sponsored by The New Jersey Economic Development Authority. The Program enables approved biotechnology companies with unused Net Operating Losses (“NOLs”) and unused research and development credits (“R&D credits”) to sell these tax benefits for at least
(16) SUBSEQUENT EVENTS
On January 24, 2024, the Company and warrant holders amended the terms of Warrants related to the October 2022 and October 2023 financings. As a result, all liability classified warrants are expected to be reclassified to additional paid-in capital upon amendment.
On January 29, 2024, the Company entered into a securities purchase agreement (the “January 2024 Purchase Agreement”) to sell in a registered direct offering (the “January 2024 RD Offering”), an aggregate of
The January 2024 Private Warrants are exercisable on the six-month anniversary of the issuance date for a period of four years from the issuance date, at an exercise price equal to $
The Company paid the placement agent a cash fee equal to 7.0% of the aggregate gross proceeds of the Offering and for certain expenses and legal fees in connection with the Offering. In addition, the Company also issued to the placement agent or its designees warrants (the “2024 Placement Agent Warrants”) to purchase up to
The gross proceeds from the Offering totaled $
| 22 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2023.
The following discussion and analysis contain forward-looking statements within the meaning of the federal securities laws. You are urged to carefully review our description and examples of forward-looking statements included earlier in this Quarterly Report immediately prior to Part I, under the heading “Special Note Regarding Forward-Looking Statements.” Forward-looking statements are subject to risk that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2023, as well as any of those made in our other reports filed with the SEC. You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
Critical Accounting Policies and Estimates
Our significant accounting policies, which are described in the notes to our consolidated financial statements included in this report and in our Annual Report on Form 10-K for the year ended June 30, 2023, have not changed during the three and six months ended December 31, 2023. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, warrants and stock-based compensation are the most critical.
Our Business
We are a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. Our product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.
Melanocortin Receptor System. The melanocortin receptor (“MCr”) system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1r through MC5r. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.
Our prior commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in June 2019 and was being marketed in the United States by AMAG Pharmaceuticals, Inc. (“AMAG”) for the treatment of hypoactive sexual desire disorder (“HSDD”) in premenopausal women pursuant to a license agreement between them for Vyleesi for North America, which was entered into on January 8, 2017 (the “AMAG License Agreement”). The AMAG License Agreement was terminated effective July 24, 2020, and we commenced marketing Vyleesi in North America. As disclosed in Note 5 to the Consolidated Financial Statements, effective December 19, 2023, Cosette acquired all rights to Vyleesi.
Our new product development activities focus primarily on MC1r agonists, with potential to treat inflammatory and autoimmune diseases such as dry eye disease, which is also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy, and inflammatory bowel disease. We believe that the MC1r agonist peptides in development have broad anti-inflammatory effects and appear to utilize mechanisms engaged by the endogenous melanocortin system in regulation of the immune system and resolution of inflammatory responses. We are also developing peptides that are active at more than one melanocortin receptor, and MC4r peptide and small molecule agonists with potential utility in obesity and metabolic-related disorders, including rare disease and orphan indications.
| 23 |
| Table of Contents |
Pipeline Overview
The following chart illustrates the status of our drug development programs.
| 24 |
| Table of Contents |
Our Strategy
Key elements of our business strategy include:
| · | Maintaining a team to create, develop and commercialize MCr products addressing unmet medical needs; |
|
|
|
| · | Entering into strategic alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale, and distribution of product candidates that we are developing; |
|
|
|
| · | Partially funding our product development programs with the cash flow generated from the sale of Vyleesi to Cosette and existing license agreements, as well as any future research, collaboration, or license agreements; and |
|
|
|
| · | Completing development and seeking regulatory approval of certain of our other product candidates. |
Corporate Information
We were incorporated under the laws of the State of Delaware on November 21, 1986 and commenced operations in the biopharmaceutical area in 1996. Our corporate offices are located at 4B Cedar Brook Drive, Cedar Brook Corporate Center, Cranbury, New Jersey 08512, and our telephone number is (609) 495-2200. We maintain an Internet site, where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and Section 16 of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained in it or connected to it are not incorporated into this Quarterly Report on Form 10-Q. The reference to our website is an inactive textual reference only.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov).
Results of Operations
Three and Six Months Ended December 31, 2023, Compared to the Three and Six Months Ended December 31, 2022:
Revenues – For the three and six months ended December 31, 2023, we recognized $2,034,113 and $4,140,090 in product revenue, net of allowances, respectively. For the three and six months ended December 31, 2022, we recognized $1,026,416 and 1,896,070, in product revenue, net of allowances, respectively. The increase in net revenue was the result of increased sales volume and reduced product sales allowances as a percentage of gross sales during the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022.
Cost of Products Sold – Cost of products sold was $97,637 for the three and six months ended December 31, 2023. Cost of products sold was $98,707 and $185,203 for the three and six months ended December 31, 2022, respectively. The decrease is as a result of the sale of fully reserved inventory during the three months ended September 30, 2023.
Research and Development – Research and development expenses were $5,554,200 and $10,568,830 for the three and six months ended December 31, 2023, respectively, compared to $4,367,538 and $10,394,569 for the three and six months ended December 31, 2022, respectively. The increase for the three months ended December 31, 2023, was related to the overall increase in spending on our MCr programs.
Research and development expenses related to our Vyleesi, MCr programs and other preclinical programs were $3,828,383 and $7,287,971 for the three and six months ended December 31, 2023, respectively, compared to $2,895,268 and $7,258,451 for the three and six months ended December 31, 2022, respectively. The increase was primarily related to an increase in spending on our MCr programs.
The amounts of project spending above exclude general research and development spending, which was $1,725,817 and $3,280,859 for the three and six months ended December 31, 2023, respectively compared to $1,472,270 and $3,136,118 for the three and six months ended December 31, 2022, respectively. The increase in general research and development spending for the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022, is primarily attributable to an increase in compensation related expenses.
Cumulative spending from inception to December 31, 2023, was approximately $311,900,000 on our Vyleesi program and approximately $222,000,000 on all our other programs (which include PL3994, melanocortin receptor agonists, other discovery programs and terminated programs). Due to various risk factors described in our Annual Report on Form 10-K for the year ended June 30, 2023, under “Risk Factors,” including the difficulty in currently estimating the costs and timing of future Phase 1 clinical trials and larger-scale Phase 2 and Phase 3 clinical trials for any product under development, we cannot predict with reasonable certainty when, if ever, a program will advance to the next stage of development or be successfully completed, or when, if ever, related net cash inflows will be generated.
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Selling, General and Administrative – Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $3,032,613 and $6,232,857 for the three and six months ended December 31, 2023, respectively, compared to $3,174,344 and $6,683,142 for the three and six months ended December 31, 2022, respectively. The decrease in selling, general and administrative expenses for the six months ended December 31, 2023 was primarily attributable to a decrease in selling expenses relating to Vyleesi of $802,742 and $1,912,243 for the three and six months ended December 31, 2023 respectively, compared to $1,022,687 and $2,269,254 for the three and six months ended December 31, 2022, respectively.
Gain on Sale of Vyleesi – On December 19, 2023, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Cosette pursuant to which Cosette acquired from the Company worldwide rights to Vyleesi. As a result of the transaction, the Company recorded a gain of $7,823,482 on the sale of Vyleesi for the three and six months ended December 31, 2023. The gain represents the upfront purchase price of $9,500,000 less the cost of net assets transferred to the purchaser.
Other Income (Expense) - For the three and six month ended December 31, 2023, Other income (expense) was ($9,017,179) and ($8,114,281), respectively. For the three and six months ended December 31, 2022, Other Income (expense) was $3,619,298 and $4,116,561, respectively. The decrease in other income (expense) for the three and six months ended December 31, 2023 compared to the three and six months ended December 31, 2022 was driven primarily by a decrease in the change in fair values of the warrant liability.
Income Tax Benefit – Income tax benefit for the three and six months ended December 31, 2022 was $4,674,999 as a result of the Company’s sale of NOLs and R&D credits.
Liquidity and Capital Resources
Since inception, we have generally incurred net operating losses, primarily related to spending on our research and development programs. We have financed our net operating losses primarily through debt and equity financings and amounts received under collaborative and license agreements.
Our product candidates are at various stages of development and will require significant further research, development, and testing and some may never be successfully developed or commercialized. We may experience uncertainties, delays, difficulties, and expenses commonly experienced by early-stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:
| · | the development and testing of products in animals and humans; |
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| · | product approval or clearance; |
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| · | regulatory compliance; |
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| · | good manufacturing practices (“GMP”) compliance; |
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| · | intellectual property rights; |
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| · | product introduction; |
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| · | marketing, sales, and competition; and |
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| · | obtaining sufficient capital. |
Failure to enter into or successfully perform under collaboration agreements and obtain timely regulatory approval for our product candidates and indications would impact our ability to generate revenues and could make it more difficult to attract investment capital for funding our operations. Any of these possibilities could materially and adversely affect our operations and require us to curtail or cease certain programs.
During the six months ended December 31, 2023, net cash used in operating activities was $16,382,079 compared to $18,257,265 for the six months ended December 31, 2022. The decrease in cash used in operations for the six months ended December 31, 2023, compared to the six months ended December 31, 2022, was primarily related to a decrease in the fair value of liability classified warrants offset by the gain on sale of Vyleesi and working capital changes.
During the six months ended December 31, 2023, net cash provided by investing activities was $12,455,275 compared to cash used in investing activities of $264,656 for the six months ended December 31, 2022. The increase was primarily related to proceeds from the sale of Vyleesi and the maturity of marketable securities.
During the six months ended December 31, 2023, net cash provided by financing activities was $5,422,474 which consisted of proceeds from the sale of common stock of $5,531,266 and proceeds from the exercise of warrants of $103 offset by $56,401 for payment of withholding taxes related to restricted stock units and $52,494 for payment of finance lease obligations. During the six months ended December 31, 2022, net cash provided by financing activities was $9,765,606, which consisted of proceeds from the sale of common stock of $9,961,462, offset by $146,062 for payment of withholding taxes related to restricted stock units and $49,794 for payment of finance lease obligations.
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We have incurred cumulative negative cash flows from operations since our inception, and have expended substantial funds to complete our planned product development efforts. Continued operations are dependent upon our ability to complete equity or debt financing activities and to enter into additional licensing or collaboration arrangements. As of December 31, 2023, our cash and cash equivalents were $9,485,252, and our current liabilities were $11,199,403.
Our obligations include aggregate lease obligations of $463,630 for the year ending December 31, 2024, and $357,744 for the years ending September 30, 2025, 2026 and 2027, and aggregate inventory purchase commitments of $4,634,750 which include $3,528,050 in current liabilities as of December 31, 2023, and $1,106,700 included in other long-term liabilities.
We intend to utilize existing capital resources for general corporate purposes and working capital requirements, including preclinical and clinical development of our MC1r and MC4r programs, and development of other portfolio products.
Based on our available cash and cash equivalents as of December 31, 2023 and $9,224,056 received in February 2024, the Company has concluded that substantial doubt exists about our ability to continue as a going concern for one year from the date our consolidated financial statements are issued. We are evaluating strategies to obtain additional funding for future operations which include but are not limited to obtaining equity financing, issuing debt, or reducing planned expenses. A failure to raise additional funding or to effectively implement cost reductions could harm our business, results of operations, and future prospects. If we are not able to secure adequate additional funding in future periods, we would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. We may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its commercialization efforts or pursue a strategic transaction. If we are unable to raise capital when needed or enter into a strategic transaction, then we may be required to cease operations, which could cause our stockholders to lose all or part of their investment. Based on our current operating and development plans, we expect that our existing cash and cash equivalents as of the date of this filing will be sufficient to enable the Company to fund its operations into the second half of the calendar year 2024.
We will need additional funding to complete required clinical trials for our product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA. However, current economic conditions may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2024 and beyond.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required to be provided by smaller reporting companies.
Item 4. Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to a material weakness in our controls over the accounting for complex financial instruments. Our controls to evaluate the accounting for complex financial instruments, such as warrants, did not operate effectively to appropriately apply the provisions of U.S. GAAP. Notwithstanding this material weakness, Company management concluded that the consolidated financial statements included in the Form 10-K, present fairly, in all material respects, our financial position as of June 30, 2023 and June 30, 2022, and our results of operations and cash flows for each of the years then ended. Accordingly, the Company will adjust prior periods as those financial statements are presented for comparative purposes in future filings. We are improving these processes to ensure that the nuances of such significant or unusual transactions are effectively evaluated in the context of the appropriate accounting standards. There were no other changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We may be involved, from time to time, in various claims and legal proceedings arising in the ordinary course of our business. We are not currently a party to any claim or legal proceeding.
Item 1A. Risk Factors.
This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs, and our management’s assumptions. These statements are not guarantees of future performance, and they involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties facing our business.
Risks Related to Our Financial Results and Need for Financing
Our management has determined that there is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
Our management has determined that there is substantial doubt about our ability to continue as a going concern because of our need to raise significant additional financing to complete clinical trials and development of our product candidates. Because we have not yet generated sufficient revenues from our operations, our ability to continue as a going concern is currently heavily dependent upon our ability to obtain additional financing to sustain our operations. Such financing may take the form of the issuance of common or preferred stock or debt securities or may involve bank financing. Our independent registered public accounting firm has issued their report, which includes an explanatory paragraph for going concern uncertainty on our consolidated financial statements as of and for the year ended June 30, 2023. The existence of a “going concern” conclusion may hinder our ability to obtain additional financing in the future. While we have completed additional financings in October 2023 and January 2024, we have no commitments to obtain any additional financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.
We have a history of substantial net losses, including a net loss of $24.0. million for the year ended June 30, 2023. We expect to incur substantial net losses over the next few years, and we may never achieve or maintain profitability.
As of June 30, 2023, we had an accumulated deficit of $412.0 million. We had $24.0 million in net loss for the year ended June 30, 2023, compared to $36.2 million in net loss for the year ended June 30, 2022. We may not achieve or sustain profitability in future years, depending on numerous factors, including whether and when we enter into license agreements for any of our products under development, regulatory actions by the FDA and other regulatory bodies, the performance of our licensees, and market acceptance of our products.
We expect to incur significant expenses as we continue our development of MC1r and MCr products. These expenses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity, total assets and working capital.
Until we commenced selling Vyleesi in July 2020 upon termination of our license agreement with AMAG, we had not had any product available for commercial sale since 2005 and we have not received any revenues from the sale of our product candidates. On December 19, 2023 our Vyleesi product was acquired by Cosette Pharmaceuticals, Inc. (“Cosette”). For the foreseeable future, we will have to fund our operations and capital expenditures from license, royalty and contract revenue under license agreements, milestone payments by Cosette based on its sales of Vyleesi, existing cash balances and outside sources of financing, which may not be available on acceptable terms, if at all. We will not have product revenue from our products in development unless and until we receive approval from the FDA or other equivalent regulatory authorities outside the United States. We have devoted substantially all of our efforts to research and development, including preclinical and clinical trials. Because of the numerous risks associated with developing drugs, we are unable to predict the extent of future losses, whether or when any of our product candidates will become commercially available, or when we will become profitable, if at all.
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We will need additional funding, including funding to complete clinical trials for our product candidates, which may not be available on acceptable terms, if at all.
We intend to focus future efforts on our MC1r product candidates, primarily for ocular indications. As of December 31, 2023, we had cash, cash equivalents and marketable securities of $9.5 million, with current liabilities of $11.2 million. Based on our available cash, cash equivalents and marketable securities, we have concluded that substantial doubt exists about our ability to continue as a going concern for one year from the date our consolidated financial statements are issued and we are seeking additional funding to complete development activities and required clinical trials for our MC1r product candidates and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA.
We may raise additional funds through public or private equity or debt financings, collaborative arrangements on our product candidates, or other sources. However, such financing arrangements may not be available on acceptable terms, or at all. To obtain additional funding, we may need to enter into arrangements that require us to develop only certain of our product candidates or relinquish rights to certain technologies, product candidates and/or potential markets.
If we are unable to raise sufficient additional funds when needed, we may be required to curtail operations significantly, cease clinical trials and decrease staffing levels. We may seek to license, sell or otherwise dispose of our product candidates, technologies and contractual rights on the best possible terms available. Even if we are able to license, sell or otherwise dispose of our product candidates, technologies and contractual rights, it is likely to be on unfavorable terms and for less value than if we had the financial resources to develop or otherwise advance our product candidates, technologies and contractual rights ourselves.
Our future capital requirements depend on many factors, including:
| · | the expense and timing of obtaining regulatory approvals for our product candidates; |
| · | the number and characteristics of any product candidates we develop or acquire; |
| · | the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical and clinical trials; |
| · | the cost of commercialization activities if any product candidates are approved for sale, including marketing, sales and distribution costs; |
| · | the cost of manufacturing any product candidates and any products we successfully commercialize; |
| · | our ability to establish and maintain strategic collaborations, licensing or other arrangements and the terms and timing of such arrangements; |
| · | the degree and rate of market acceptance of any approved products; |
| · | the emergence, approval, availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing products or treatments; |
| · | any product liability or other lawsuits related to our products; |
| · | the expenses needed to attract and retain skilled personnel; |
| · | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and |
| · | the timing, receipt and amount of sales of, or royalties on, future approved products, if any. |
We have a limited operating history upon which to base an investment decision.
Our operations are primarily focused on acquiring, developing and securing our proprietary technology, conducting preclinical and clinical studies and formulating and manufacturing, through contract manufacturers, our principal product candidates on a small-scale basis. These operations provide a limited basis for stockholders to assess our ability to commercialize our product candidates.
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While we completed Phase 3 clinical trials on Vyleesi for hypoactive sexual desire disorder (“HSDD”) in premenopausal women, together with AMAG filed an NDA on Vyleesi for HSDD with the FDA, and received approval on Vyleesi from the FDA, we have not yet demonstrated our ability to perform the functions necessary for the successful commercialization of any of our current product candidates. The successful commercialization of our product candidates will require us to perform a variety of functions, including:
| · | continuing to conduct preclinical development and clinical trials; |
| · | participating in regulatory approval processes; |
| · | formulating and manufacturing products, or having third parties formulate and manufacture products; |
| · | post-approval monitoring and surveillance of our products; |
| · | conducting sales and marketing activities, either alone or with a partner; and |
| · | obtaining additional capital. |
If we are unable to obtain regulatory approval of any of our product candidates, to successfully commercialize any products for which we receive regulatory approval or to obtain additional capital, we may not be able to recover our investment in our development efforts.
The clinical and commercial success of our product candidates will depend on a number of factors, including the following:
| · | the ability to raise additional capital on acceptable terms, or at all; |
| · | timely completion of our clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors; |
| · | whether we are required by the FDA or similar foreign regulatory agencies to conduct additional clinical trials beyond those planned to support the approval and commercialization of our product candidates or any future product candidates; |
| · | acceptance of our proposed indications and primary endpoint assessments relating to the proposed indications of our product candidates by the FDA and similar foreign regulatory authorities; |
| · | our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities, the safety and efficacy of our product candidates or any future product candidates; |
| · | the prevalence, duration and severity of potential side effects experienced with our product candidates or future approved products, if any; |
| · | the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; |
| · | achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to our product candidates or any future product candidates or approved products, if any; |
| · | the ability of third parties with whom we contract to manufacture clinical trial and commercial supplies of our product candidates or any future product candidates, remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with the FDA’s current GMP regulations; |
| · | a continued acceptable safety profile and efficacy during clinical development and following approval of our product candidates or any future product candidates; |
| · | our ability to successfully commercialize our product candidates or any future product candidates in the United States and internationally, if approved for marketing, sale and distribution in such countries and territories, whether alone or in collaboration with others; |
| · | acceptance by physicians and patients of the benefits, safety and efficacy of our product candidates or any future product candidates, if approved, including relative to alternative and competing treatments; |
| · | our and our partners’ ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates; |
| · | our and our partners’ ability to avoid third-party patent interference or intellectual property infringement claims; and |
| · | our ability to develop, in-license or acquire additional product candidates or commercial-stage products that we believe can be successfully developed and commercialized. |
If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to obtain regulatory approvals or commercialize our product candidates. Even if regulatory approvals are obtained, we may never be able to successfully commercialize any of our product candidates. Accordingly, we cannot assure our investors that we will be able to generate sufficient revenue through the sale of our product candidates or any future product candidates to continue our business.
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Raising additional capital may cause dilution to existing stockholders, restrict our operations, or require us to relinquish rights.
We will seek the additional capital necessary to fund our operations through public or private equity offerings, collaboration agreements, debt financings, licensing arrangements or combinations of the foregoing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interests will be diluted, and the terms may include liquidation or other preferences that adversely affect their rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through collaborations and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.
Risks Related to Our Business, Strategy, and Industry
Our ability to finance our company and generate revenue will be impacted by our preclinical and clinical results with our future product candidates.
Our near-term prospects, including our ability to finance our Company and generate revenue, will be impacted by preclinical and clinical results with our future product candidates. The clinical and commercial success of our product candidates will depend on a number of factors, including the following:
| · | timely completion of, or need to conduct additional clinical trials and studies, for our product candidates, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the accurate and satisfactory performance of third-party contractors; |
| · | the ability to demonstrate to the satisfaction of the FDA the safety and efficacy of future product candidates through clinical trials; |
| · | whether we or our licensees are required by the FDA or other similar foreign regulatory agencies to conduct additional clinical trials to support future product candidates; |
| · | the prevalence and severity of adverse events experienced with any future product candidates or approved products; |
| · | the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; |
| · | our ability to raise additional capital on acceptable terms to achieve our goals; |
| · | achieving and maintaining compliance with all regulatory requirements applicable to any future product candidates or approved products; |
| · | the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments; |
| · | the effectiveness of our own or our future potential strategic collaborators’ marketing, sales and distribution strategy and operations; |
| · | the ability to manufacture clinical trial supplies of any future product candidates and to develop, validate and maintain a commercially viable manufacturing process that is compliant with current GMP; |
| · | our ability to successfully commercialize any future product candidates, if approved for marketing and sale, whether alone or in collaboration with others; |
| · | our ability to enforce our intellectual property rights in and to any future product candidates; |
| · | our ability to avoid third-party patent interference or intellectual property infringement claims; |
| · | acceptance of any future product candidates, if approved, as safe and effective by patients and the medical community; and |
| · | a continued acceptable safety profile and efficacy of any future product candidates following approval. |
If we fail to satisfy any one of these prerequisites to our commercial success, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates. In addition to preventing us from executing our current business plan, any delays in our clinical trials, or inability to successfully commercialize our products could impair our reputation in the industry and the investment community and could hinder our ability to fulfill our existing contractual commitments. As a result, our share price would likely decline significantly, and we would have difficulty raising necessary capital for future projects.
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The commercial success of Vyleesi for HSDD is a component of our corporate strategy, but Cosette, which acquired Vyleesi from us, may never successfully commercialize Vyleesi for HSDD or obtain approvals in countries other than the United States.
Under our sales agreement with Cosette, we can receive up to $159 million in contingent, sales-based milestone payments. We have no control over the sales strategy that Cosette employs, and cannot predict whether Cosette will meet sales milestones, ranging from annual net sales of $15 million to $200 million. We cannot predict whether Cosette will be able successfully manufacture Vyleesi for worldwide markets or will be successful in educating physicians and patients about the benefits, administration and use of Vyleesi for HSDD.
Both we and Cosette rely on contract manufacturers to make products, there is uncertainty regarding the contract manufacturer of prefilled autoinjectors that may adversely affect our revenue or results of operation.
A facility of Catalent, Inc. located in Brussels, Belgium performs drug formulation and fills autoinjectors for the Vyleesi product and may be used by us to fill other products we are developing for autoinjector administration. On February 5, 2024, Catalent announced that it was being acquired by Novo Holdings, with the closing anticipated towards the end of calendar year 2024. It was also announced that shortly after the closing Novo Holdings intends to sell the Catalent fill-finish site in Brussels, Belgium to Novo Nordisk. This may have an adverse impact on the ability of Cosette to manufacture the Vyleesi product, which in turn can adversely affect sales-base milestone payments. In addition, we planned to use the Catalent facility to manufacture bremelanotide autoinjector devices for use in other applications, and may not be able to find alternative manufacturers at an acceptable cost or at all.
The ongoing military conflict between Russia and Ukraine could cause geopolitical instability, economic uncertainty, financial markets volatility and capital markets disruption, which may adversely affect our revenue, financial condition, or results of operations.
The current military conflict between Russia and Ukraine may disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions that have already been initiated or may in the future be initiated by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) can adversely affect our business, our contract research organizations, and other third parties with which we conduct business. Resulting volatility, disruption, or deterioration in the credit and financial markets may further make any necessary debt or equity financing more difficult and more costly. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers, or other partners may be adversely impacted by deteriorating economic conditions, which could directly affect our ability to attain our operating goals and to accurately forecast and plan our future business activities.
Our product candidates, including PL9643 for dry eye disease and PL8177 for the treatment of ulcerative colitis, are still in the early stages of development and remain subject to clinical testing and regulatory approval. If we are unable to successfully develop and test our product candidates, we will not be successful.
Our product candidates, including PL9643 for dry eye disease and PL8177 for the treatment of ulcerative colitis, are at various stages of research and development, will require regulatory approval, and may never be successfully developed or commercialized. Our product candidates will require significant further research, development and testing before we can seek regulatory approval to market and sell them. We must demonstrate that our product candidates are safe and effective for use in patients in order to receive regulatory approval for commercial sale. Preclinical studies in animals, using various doses and formulations, must be performed before we can begin human clinical trials. Even if we obtain favorable results in the preclinical studies, the results in humans may be different. Numerous small-scale human clinical trials may be necessary to obtain initial data on a product candidate’s safety and efficacy in humans before advancing to large scale human clinical trials. We face the risk that the results of our trials in later phases of clinical trials may be inconsistent with those obtained in earlier phases. Adverse or inconclusive results could delay the progress of our development programs and may prevent us from filing for regulatory approval of our product candidates. Additional factors that could inhibit the successful development of our product candidates include:
| · | lack of effectiveness of any product candidate during clinical trials or the failure of our product candidates to meet specified endpoints; |
| · | failure to design appropriate clinical trial protocols; |
| · | uncertainty regarding proper dosing; |
| · | for injectable products, inability to develop or obtain a supplier for a suitable autoinjector device that meets the FDA’s medical device requirements; |
| · | insufficient data to support regulatory approval; |
| · | inability or unwillingness of medical investigators to follow our clinical protocols; |
| · | inability to add a sufficient number of clinical trial sites; or |
| · | the availability of sufficient capital to sustain operations and clinical trials. |
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You should evaluate us in light of these uncertainties, difficulties and expenses commonly experienced by early stage biopharmaceutical companies, as well as unanticipated problems and additional costs relating to:
| · | product approval or clearance; |
| · | regulatory compliance; |
| · | good manufacturing practices; |
| · | intellectual property rights; |
| · | product introduction; and |
| · | marketing and competition. |
If clinical trials for our product candidates are prolonged or delayed, we may be unable to commercialize our product candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenue from potential product sales.
We may be unable to commercialize our product candidates on a timely basis due to unexpected delays in our human clinical trials. Potential delaying events include:
| · | discovery of serious or unexpected toxicities or side effects experienced by study participants or other safety issues; |
| · | slower than expected rates of subject recruitment and enrollment rates in clinical trials resulting from numerous factors, including the prevalence of other companies’ clinical trials for their product candidates for the same indication, or clinical trials for indications for which patients do not as commonly seek treatment; |
| · | difficulty in retaining subjects who have initiated a clinical trial but may withdraw at any time due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason; |
| · | difficulty in obtaining IRB approval for studies to be conducted at each site; |
| · | delays in manufacturing or obtaining, or inability to manufacture or obtain, sufficient quantities of materials for use in clinical trials; |
| · | inadequacy of or changes in our manufacturing process or the product formulation or method of delivery; |
| · | changes in applicable laws, regulations and regulatory policies; |
| · | delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective contract research organizations (“CROs”), clinical trial sites and other third-party contractors; |
| · | failure of our CROs or other third-party contractors to comply with contractual and regulatory requirements or to perform their services in a timely or acceptable manner; |
| · | failure by us, our employees, our CROs or their employees or any partner with which we may collaborate or their employees to comply with applicable FDA or other regulatory requirements relating to the conduct of clinical trials or the handling, storage, security and recordkeeping for drug, medical device and biologic products; |
| · | delays in the scheduling and performance by the FDA of required inspections of us, our CROs, our suppliers, or our clinical trial sites, and violations of law or regulations discovered in the course of FDA inspections; |
| · | scheduling conflicts with participating clinicians and clinical institutions; or |
| · | difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data. |
Any of these events or other delaying events, individually or in the aggregate, could delay the commercialization of our product candidates and have a material adverse effect on our business, results of operations and financial condition.
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We may not be able to secure and maintain relationships with research institutions and other organizations to conduct our clinical trials.
We rely on research institutions and other organizations to conduct our clinical trials, and we therefore have limited control over the timing and cost of clinical trials and our ability to recruit subjects. If we are unable to reach agreements with suitable research institutions or organizations on acceptable terms, or if any such agreement is terminated, we may be unable to quickly replace the research institution or organization with another qualified institution or organization on acceptable terms. We may not be able to secure and maintain suitable research institutions or organizations to conduct our clinical trials.
Even if our product candidates receive regulatory approval, they may never achieve market acceptance, in which case our business, financial condition and results of operation will be materially adversely affected.
Regulatory approval for the marketing and sale of any of our product candidates does not assure the product’s commercial success. Any approved product will compete with other products manufactured and marketed by major pharmaceutical and other biotechnology companies. If any of our product candidates are approved by the FDA and do not achieve adequate market acceptance, our business, financial condition, and results of operations will be materially adversely affected. The degree of market acceptance of any such product will depend on a number of factors, including:
| · | perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of any such product; |
| · | cost-effectiveness relative to competing products and technologies; |
| · | availability of reimbursement for our products from third-party payers such as health insurers, HMOs and government programs such as Medicare and Medicaid; and |
| · | advantages over alternative treatment methods. |
Even if our product candidates receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setbacks in obtaining such approval would impair our ability to develop foreign markets for our product candidates and may have a material adverse effect on our results of operations and financial condition.
If side effects emerge that can be linked any of our product candidates (either while they are in development or after they are approved and on the market), we may be required to perform lengthy additional clinical trials, change the labeling of any such products, or withdraw such products from the market, any of which would hinder or preclude our ability to generate revenues.
If we identify side effects or other problems occur in future clinical trials, we may be required to terminate or delay clinical development of the product candidate. Furthermore, even if any of our product candidates receive marketing approval, as greater numbers of patients use a drug following its approval, if the incidence of side effects increases or if other problems are observed after approval that were not seen or anticipated during pre-approval clinical trials, or if the incidence of side effects increase or other problems are observed with any of our product candidates, a number of potentially significant negative consequences could result, including:
| · | regulatory authorities may withdraw their approval of the product; |
| · | we may be required to reformulate such products or change the way the product is manufactured; |
| · | we may become the target of lawsuits, including class action suits; and |
| · | our reputation in the marketplace may suffer resulting in a significant drop in the sales of such products. |
Any of these events could substantially increase the costs and expenses of developing, commercializing, and marketing any such product candidates or could harm or prevent sales of any approved products.
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We may not be able to keep up with the rapid technological change in the biotechnology and pharmaceutical industries, which could make any future approved products obsolete and reduce our revenue.
Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change. Our future will depend in large part on our ability to maintain a competitive position with respect to these technologies. Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach and proprietary technologies. In addition, any future products that we develop, including our clinical product candidates, may become obsolete before we recover expenses incurred in developing those products, which may require that we raise additional funds to continue our operations.
Competing products and technologies may make our proposed products noncompetitive.
There are a number of products approved for use in treating inflammatory diseases and indications, and other products are being developed, including products in clinical trials. The dry eye disease and ocular inflammatory disease markets are highly competitive, with a number of marketed products and products reported to be in late-stage clinical trials. Similarly, the inflammatory bowel disease and ulcerative colitis markets are highly competitive, with a number of marketed products and products reported to be in late-stage clinical trials.
In general, the biopharmaceutical industry is highly competitive. We are likely to encounter significant competition with respect to our, MC1r product candidates and MCr product candidates. Most of our competitors have substantially greater financial and technological resources than we do. Many of them also have significantly greater experience in research and development, marketing, distribution, and sales than we do. Accordingly, our competitors may succeed in developing, marketing, distributing, and selling products and underlying technologies more rapidly than we can. These competitive products or technologies may be more effective and useful or less costly than our MC1r product candidates and MCr product candidates. In addition, academic institutions, hospitals, governmental agencies, and other public and private research organizations are also conducting research and may develop competing products or technologies on their own or through strategic alliances or collaborative arrangements.
We rely on third parties over whom we have no control to conduct preclinical studies, clinical trials and other research for our product candidates and their failure to timely perform their obligations could significantly harm our product development.
We have limited research and development staff. We rely on third parties and independent contractors, such as researchers at CROs and universities, in certain areas that are particularly relevant to our research and product development plans. We engage such researchers to conduct our preclinical studies, clinical trials and associated tests. These outside contractors are not our employees and may terminate their engagements with us at any time. In addition, we have limited control over the resources that these contractors devote to our programs, and they may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. There is also competition for these relationships, and we may not be able to maintain our relationships with our contractors on acceptable terms. If our third-party contractors do not carry out their duties under their agreements with us, fail to meet expected deadlines or fail to comply with appropriate standards for preclinical or clinical research, our ability to develop our product candidates and obtain regulatory approval on a timely basis, if at all, may be materially adversely affected.
Production and supply of our product candidates depend on contract manufacturers over whom we have no control, with the risk that we may not have adequate supplies of our product candidates or products.
We do not have the facilities to manufacture our early-stage potential products such as PL8177, PL9643, PL9654 and other melanocortin receptor agonist compounds for use in preclinical studies and clinical trials. Contract manufacturers must perform these manufacturing activities in a manner that complies with FDA regulations. Our ability to control third-party compliance with FDA requirements is limited to contractual remedies and rights of inspection. The manufacturers of our potential products and their manufacturing facilities will be subject to continual review and periodic inspections by the FDA and other authorities where applicable, and must comply with ongoing regulatory requirements, including FDA regulations concerning GMP. Failure of third-party manufacturers to comply with GMP, medical device QSR, or other FDA requirements may result in enforcement action by the FDA. Failure to conduct their activities in compliance with FDA regulations could delay our development programs or negatively impact our ability to receive FDA approval of our potential products. Establishing relationships with new suppliers, who must be FDA-approved, is a time-consuming and costly process.
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If we are unable to establish sales and marketing capabilities within our organization or enter into and maintain agreements with third parties to market and sell our product candidates, we may be unable to generate product revenue.
We have limited experience in sales, marketing, and distribution of pharmaceutical products. If any of our products candidates are approved by the FDA or other regulatory authorities, we must enter into agreements with third parties to market these product candidates or develop marketing, distribution and selling capacity and expertise, which will be costly and time consuming, or enter into agreements with other companies to provide these capabilities. We may not be able to enter into suitable agreements on acceptable terms, if at all. Engaging a third party to perform these services could delay the commercialization of any of our product candidates, if approved for commercial sale. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and our business would suffer. In addition, if we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues are likely to be lower than if we could market and sell any products that we develop ourselves.
We may need to hire additional employees in order to commercialize our product candidates in the future. Any inability to manage future growth could harm our ability to commercialize our product candidates, increase our costs and adversely impact our ability to compete effectively.
To commercialize our product candidates, we will need to hire or contract with experienced sales and marketing personnel to sell and market those product candidates that we decide to commercialize, and we will need to expand the number of our managerial, operational, financial and other employees to support commercialization. Competition exists for qualified personnel in the biopharmaceutical field.
Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
Our ability to achieve revenues from the sale of our products will depend, in part, on our ability to obtain adequate reimbursement from private insurers and other healthcare payers.
Our ability to successfully commercialize our products in development, will depend, in significant part, on the extent to which we or our marketing partners can obtain reimbursement for our products and also reimbursement at appropriate levels for the cost of our products. Obtaining reimbursement from governmental payers, insurance companies, HMOs and other third-party payers of healthcare costs is a time-consuming and expensive process.
Even if we receive regulatory approval for our products in Europe, we may not be able to secure adequate pricing and reimbursement in Europe for us or any strategic partner to achieve profitability.
Even if one or more of our products are approved in Europe, we may be unable to obtain appropriate pricing and reimbursement for such products. In most European markets, demand levels for healthcare in general and for pharmaceuticals in particular are principally regulated by national governments. Therefore, pricing and reimbursement for our products will have to be negotiated on a “Member State by Member State” basis according to national rules, as there does not exist a centralized European process. As each Member State has its own national rules governing pricing control and reimbursement policy for pharmaceuticals, there are likely to be uncertainties attaching to the review process, and the level of reimbursement that national governments are prepared to accept. In the current economic environment, governments and private payers or insurers are increasingly looking to contain healthcare costs, including costs on drug therapies. If we are unable to obtain adequate pricing and reimbursement for our products in Europe, we or a potential strategic partner or collaborator may not be able to cover the costs necessary to manufacture, market and sell the product, limiting or preventing our ability to achieve profitability.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.
The testing and marketing of medical products entails an inherent risk of product liability. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products or cease clinical trials. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with corporate collaborators. We currently carry $10.0 million liability insurance in the aggregate as to certain product liability and commercialization risks and certain clinical trial risks. We, or any corporate collaborators, may not in the future be able to obtain insurance at a reasonable cost or in sufficient amounts, if at all. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
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Our internal computer systems, or those of our third-party contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.
In the ordinary course of our business, we collect, store and transmit confidential information. Despite the implementation of security measures, our internal computer systems and those of our third-party contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. We rely on industry accepted measures and technology to secure confidential and proprietary information maintained on our computer systems. However, these measures and technology may not adequately prevent security breaches. While we do not believe that we have experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a loss of clinical trial data for our product candidates that could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Cyberattacks are increasing in their frequency, sophistication, and intensity. Cyberattacks could include the deployment of harmful malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Significant disruptions of our information technology systems or security breaches could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information and personal information), and could result in financial, legal, business, and reputational harm to us. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology, intellectual property, research and development or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We may in the future employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
As we begin commercializing any of our products in the United States, our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
| · | the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from soliciting, receiving, offering or providing remuneration, directly or indirectly, in return for or to induce either the referral of an individual for, or the purchase order or recommendation of, any item or services for which payment may be made under a federal health care program such as the Medicare and Medicaid programs; |
| · | federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; |
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| · | HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters; |
| · | HIPAA, as amended by the Health Information Technology and Clinical Health Act, and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information; |
| · | The federal physician sunshine requirements under the Affordable Care Act, which require manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; and |
| · | state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state 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 state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. |
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, 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 False Claims Act.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We are highly dependent on our management team, senior staff professionals and third-party contractors and consultants, and the loss of their services could materially adversely affect our business.
We rely on our relatively small management team and staff as well as various contractors and consultants to provide critical services. Our ability to execute our PL8177, PL9643 and our other preclinical programs for MC1r and MC4r peptide or small molecule drug candidates depends on our continued retention and motivation of our management and senior staff professionals, including executive officers and senior members of product development and management, including commercialization, who possess significant technical expertise and experience and oversee our development and commercialization programs. If we lose the services of existing key personnel, our development programs could be adversely affected if suitable replacement personnel are not recruited quickly. Our success also depends on our ability to develop and maintain relationships with contractors, consultants, and scientific advisors.
There is competition for qualified personnel, contractors, and consultants in the pharmaceutical industry, which makes it difficult to attract and retain the qualified personnel, contractors and consultants necessary for the development and growth of our business. Our failure to attract and retain such personnel, contractors and consultants could have a material adverse effect on our business, results of operations and financial condition.
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Risks Related to Government Regulation
Both before and after marketing approval, our product candidates are subject to ongoing regulatory requirements and, if we fail to comply with these continuing requirements, we could be subject to a variety of sanctions and the sale of any approved commercial products could be suspended.
Both before and after regulatory approval to market a particular product candidate, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising and promotion and record keeping related to the product candidates are subject to extensive regulatory requirements. If we fail to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:
| · | restrictions on the products or manufacturing process; |
| · | warning letters; |
| · | civil or criminal penalties; |
| · | fines; |
| · | injunctions; |
| · | imposition of a Corporate Integrity Agreement requiring heightened monitoring of our compliance functions, overseen by outside monitors, and enhanced reporting requirements to, and oversight by, the FDA and other government agencies; |
| · | product seizures or detentions and related publicity requirements; |
| · | suspension or withdrawal of regulatory approvals; |
| · | regulators or IRBs may not authorize us or any potential future collaborators to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
| · | total or partial suspension of production; and |
| · | refusal to approve pending applications for marketing approval of new product candidates. |
Changes in the regulatory approval policy during the development period, changes in or the enactment of additional regulations or statutes, or changes in the regulatory review for each submitted product application may cause delays in the approval or rejection of an application. Even if the FDA approves a product candidate, the approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product, and may impose ongoing requirements for post-approval studies, including additional research and development and clinical trials. The approval may also impose REMS on a product if the FDA believes there is a reason to monitor the safety of the drug in the marketplace. REMS may include requirements for additional training for health care professionals, safety communication efforts and limits on channels of distribution, among other things. The sponsor would be required to evaluate and monitor the various REMS activities and adjust them if need be. The FDA also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval.
Furthermore, the approval procedure and the time required to obtain approval varies among countries and can involve additional testing beyond that required by the FDA. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies.
In addition, varying interpretations of the data obtained for preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate. Even if we submit an application to the FDA for marketing approval of a product candidate, it may not result in marketing approval from the FDA.
We do not expect to receive regulatory approval for the commercial sale of any of our product candidates that are in development in the near future, if at all. The inability to obtain FDA approval or approval from comparable authorities in other countries for our product candidates would prevent us or any potential future collaborators from commercializing these product candidates in the United States or other countries.
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The regulatory approval process is lengthy, expensive and uncertain, and may prevent us from obtaining the approvals that we require.
Government authorities in the United States and other countries extensively regulate the advertising, labeling, storage, record-keeping, safety, efficacy, research, development, testing, manufacture, promotion, marketing, and distribution of drug products. Drugs are subject to rigorous regulation in the United States by the FDA and similar regulatory bodies in other countries. The steps ordinarily required by the FDA before a new drug may be marketed in the United States include:
| · | completion of non-clinical tests including preclinical laboratory and formulation studies and animal testing and toxicology; |
| · | submission to the FDA of an IND application, which must become effective before clinical trials may begin, and which may be placed on “clinical hold” by the FDA, meaning the trial may not commence, or must be suspended or terminated prior to completion; |
| · | performance of adequate and well-controlled Phase 1, 2 and 3 human clinical trials to establish the safety and efficacy of the drug for each proposed indication, and potentially post-approval or Phase 4 studies to further define the drug’s efficacy and safety, generally or in specific patient populations; |
| · | submission to the FDA of an NDA that must be accompanied by a substantial “user fee” payment; |
| · | FDA review and approval of the NDA before any commercial marketing or sale; and |
| · | compliance with post-approval commitments and requirements. |
Satisfaction of FDA pre-market approval requirements for new drugs typically takes a number of years and the actual time required for approval may vary substantially based upon the type, complexity and novelty of the product or disease to be treated by the drug. The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA. The NDA also must contain extensive manufacturing information, demonstrating compliance with applicable GMP requirements. Once the submission has been accepted for filing, the FDA generally has twelve months to review the application and respond to the applicant. Such response may be an approval or may be a “complete response letter” outlining additional data or steps that must be completed prior to further FDA review of the NDA. The review process is often significantly extended by FDA requests for additional information or clarification. Success in early-stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical trials is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, but the FDA is not bound by the recommendation of the advisory committee. The FDA may deny or delay approval of applications that do not meet applicable regulatory criteria or if the FDA determines that the clinical data do not adequately establish the safety and efficacy of the drug. Therefore, our proposed products could take a significantly longer time than we expect or may never gain approval. If regulatory approval is delayed or never obtained, our business, financial condition and results of operations would be materially adversely affected.
Some of our products or product candidates may be used in combination with a drug delivery device, such as an injector or other delivery system. Medical products containing a combination of new drugs, biological products or medical devices are regulated as “combination products” in the United States. A combination product generally is defined as a product comprised of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. In order to facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. The determination whether a product is a combination product or two separate products is made by the FDA on a case-by-case basis. Our product candidates intended for use with such devices, or expanded indications that we may seek for our products used with such devices, may not be approved or may be substantially delayed in receiving approval if the devices do not gain and/or maintain their own regulatory approvals or clearances. Where approval of the drug product and device is sought under a single application, the increased complexity of the review process may delay approval. In addition, because these drug delivery devices are provided by single source unaffiliated third-party companies, we are dependent on the sustained cooperation and effort of those third-party companies both to supply the devices, maintain their own regulatory compliance, and, in some cases, to conduct the studies required for approval or other regulatory clearance of the devices. We are also dependent on those third-party companies continuing to maintain such approvals or clearances once they have been received. Failure of third-party companies to supply the devices, to successfully complete studies on the devices in a timely manner, or to obtain or maintain required approvals or clearances of the devices, and maintain compliance with all regulatory requirements, could result in increased development costs, delays in or failure to obtain regulatory approval and delays in product candidates reaching the market or in gaining approval or clearance for expanded labels for new indications.
Upon approval, a product candidate may be marketed only in those dosage forms and for those indications approved by the FDA. Once approved, the FDA may withdraw the product approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require postmarketing studies, referred to as Phase 4 studies, to monitor the approved products in a specific subset of patients or a larger number of patients than were required for product approval and may limit further marketing of the product based on the results of these post-market studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to seek injunctions, levy fines and civil penalties, criminal prosecution, withdraw approvals and seize products or request recalls.
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If regulatory approval of any of our product candidates is granted, it will be limited to certain disease states or conditions, patient populations, duration, or frequency of use, and will be subject to other conditions as set forth in the FDA-approved labeling. Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restriction through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.
Outside the United States, our ability to market our product candidates will also depend on receiving marketing authorizations from the appropriate regulatory authorities. The foreign regulatory approval process generally includes all of the risks associated with FDA approval described above. The requirements governing the conduct of clinical trials and marketing authorization vary widely from country to country. At present, foreign marketing authorizations are applied for at a national level, although within the European Community (“EC”), registration procedures are available to companies wishing to market a product to more than one EC member state. If the regulatory authority is satisfied that adequate evidence of safety, quality and efficiency has been presented, a marketing authorization will be granted. If we do not obtain, or experience difficulties in obtaining, such marketing authorizations, our business, financial condition and results of operations may be materially adversely affected.
Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of any future product candidates and to produce, market and distribute our products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced in Congress, and court decisions are issued, that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future product candidates. We cannot determine what effect changes in regulations, statutes, court decisions, legal interpretation or policies, when and if promulgated, enacted, issued or adopted may have on our business in the future. Such changes could, among other things:
| · | require changes to manufacturing methods; |
| · | require recall, replacement or discontinuance of one or more of our products; |
| · | require additional recordkeeping; |
| · | limit or restrict our ability to engage in certain types of marketing or promotional activities; |
| · | alter or eliminate the scope or terms of any currently available regulatory exclusivities; and |
| · | restrict or eliminate our ability to settle any patent litigation we may bring against potential generic competitors. |
Each of these would likely entail substantial time and cost and could materially harm our business and our financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for any future products would harm our business, financial condition, and results of operations.
Changes in healthcare policy could adversely affect our business.
Our industry is highly regulated, and changes in law may adversely impact our business, operations, or financial results. In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (the “PPACA”) is a sweeping measure intended to, among other things, expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. Several provisions of the law have affected us and increased certain of our costs. Since its enactment, there have been executive, judicial, and congressional challenges to certain aspects of the PPACA. In addition, other legislative changes have been adopted since the PPACA was enacted. Some of these changes have resulted in additional reductions in Medicare and other healthcare funding.
We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future in the U.S. or abroad, may result in more rigorous coverage criteria and an additional downward pressure on the reimbursement our customers may receive for our products. Recently there has been heightened governmental scrutiny in countries worldwide over the manner in which manufacturers set prices for their marketed products.
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In the U.S., there have been several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drug products. For example, at the federal level, during the former Trump administration there were multiple executive orders issued, initiatives implemented and calls for legislation from Congress to reduce drug prices, increase competition and reduce out of pocket costs of drugs for patients. The likelihood of implementation of any of the former Trump administration healthcare reform initiatives is uncertain, particularly in light of the Biden administration. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payers. In addition, individual states in the U.S. have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Moreover, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
Legally mandated price controls on payment amounts by governmental and private third-party payers or other restrictions could harm our business, results of operations, financial condition, and prospects. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.
For more information regarding government healthcare reform, see “U.S. Governmental Regulation of Pharmaceutical Products” in Part I, Item 1 of this Annual Report.
Risks Related to Our Intellectual Property
If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish.
Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes, and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. We cannot predict:
| · | the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents; |
| · | if and when patents will be issued; |
| · | whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; and |
| · | whether we will need to initiate litigation or administrative proceedings, which may be costly whether we win or lose. |
If our products, methods, processes, and other technologies infringe the proprietary rights of other parties we could incur substantial costs and we may have to:
| · | obtain licenses, which may not be available on commercially reasonable terms, if at all; |
| · | redesign our products or processes to avoid infringement; |
| · | stop using the subject matter claimed in the patents held by others; |
| · | pay damages; or |
| · | defend litigation or administrative proceedings, which may be costly whether we win or lose, and which could result in a substantial diversion of our management resources. |
We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive and time consuming.
Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patent claims do not cover its technology or that the factors necessary to grant an injunction against an infringer are not satisfied.
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An adverse determination of any litigation or other proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
Interference, derivation, or other proceedings brought at the USPTO may be necessary to determine the priority or patentability of inventions with respect to our patent applications or those of our licensors or collaborators. Litigation or USPTO proceedings brought by us may fail or may be invoked against us by third parties. Even if we are successful, domestic, or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or collaborators, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other proceedings, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or proceedings. In addition, during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.
If we infringe or are alleged to infringe intellectual property rights of third parties, our business could be harmed.
Our research, development and commercialization activities may infringe or otherwise violate or be claimed to infringe or otherwise violate patents owned or controlled by other parties. There may also be patent applications that have been filed but not published that, when issued as patents, could be asserted against us. These third parties could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.
As a result of patent infringement claims, or to avoid potential claims, we may choose or be required to seek licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms, if at all.
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical industry. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference, derivation or post-grant proceedings declared or granted by the USPTO and similar proceedings in foreign countries, regarding intellectual property rights with respect to our current or future products. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, or results of operations.
Our patent applications and the enforcement or defense of our issued patents may be impacted by the application of or changes in U.S. and foreign standards.
The standards that the USPTO and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. Consequently, our pending patent applications may not be allowed and, if allowed, may not contain the type and extent of patent claims that will be adequate to conduct our business as planned. Additionally, any issued patents we currently own or obtain in the future may have a shorter patent term than expected or may not contain claims that will permit us to stop competitors from using our technology or similar technology or from copying our product candidates. Similarly, the standards that courts use to interpret patents are not always applied predictably or uniformly and may evolve, particularly as new technologies develop. In addition, changes to patent laws in the United States or other countries may be applied retroactively to affect the validation enforceability, or term of our patent. For example, the U.S. Supreme Court has recently modified some legal standards applied by the USPTO in examination of U.S. patent applications, which may decrease the likelihood that we will be able to obtain patents and may increase the likelihood of challenges to patents we obtain or license. In addition, changes to the U.S. patent system have come into force under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, which was signed into law in September 2011. The Leahy-Smith Act included significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also affect patent litigation. Under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position.
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While we cannot predict with certainty the impact the Leahy-Smith Act or any potential future changes to the U.S. or foreign patent systems will have on the operation of our business, the Leahy-Smith Act and such future changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, results of operations, financial condition and cash flows and future prospects.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States and in some cases may even force us to grant a compulsory license to competitors or other third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
In addition, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in domestic and foreign intellectual property laws.
If we are unable to keep our trade secrets confidential, our technologies and other proprietary information may be used by others to compete against us.
In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on trade secret laws and agreements with our employees and other persons who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for our proprietary technologies and processes in the event of unauthorized use or disclosure of such information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, our competitors may independently develop substantially equivalent technologies and processes or gain access to our trade secrets or technology, either of which could materially or adversely affect our competitive position.
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Risks Related to the Ownership of Our Common Stock
Our stock price is volatile and may fluctuate in a way that is disproportionate to our operating performance and we expect it to remain volatile, which could limit investors’ ability to sell stock at a profit.
The volatile price of our stock makes it difficult for investors to predict the value of their investment, to sell shares at a profit at any given time or to plan purchases and sales in advance. A variety of factors may affect the market price of our common stock. These include, but are not limited to:
| · | publicity regarding actual or potential clinical results relating to products under development by our competitors or us; |
| · | delay or failure in initiating, completing or analyzing preclinical or clinical trials or unsatisfactory designs or results of these trials; |
| · | interim decisions by regulatory agencies, including the FDA, as to clinical trial designs, acceptable safety profiles and the benefit/risk ratio of products under development; |
| · | achievement or rejection of regulatory approvals by our competitors or by us; |
| · | announcements of technological innovations or new commercial products by our competitors or by us; |
| · | developments concerning proprietary rights, including patents; |
| · | developments concerning our collaborations; |
| · | regulatory developments in the United States and foreign countries; |
| · | economic or other crises and other external factors; |
| · | period-to-period fluctuations in our revenue and other results of operations; |
| · | changes in the structure of healthcare payment systems or other actions that affect the effective reimbursement rates for treatment regimens containing our products; |
| · | changes in financial estimates and recommendations by securities analysts following our business or our industry; |
| · | sales of our common stock, or the perception that such sales could occur; and |
| · | the other factors described in this “Risk Factors” section. |
We will not be able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. If our revenues, if any, in any particular period do not meet expectations, we may not be able to adjust our expenditures in that period, which could cause our operating results to suffer further. If our operating results in any future period fall below the expectations of securities analysts or investors, our stock price may fall by a significant amount.
For the 12-month period ended June 30, 2023, the price of our stock has been volatile, ranging from a high of $8.60 per share to a low of $1.82 per share. In addition, the stock market in general, and the market for biotechnology companies in particular, has experienced extreme price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.
As a public company in the United States, we are subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). We can provide no assurance that we will, at all times, in the future be able to report that our internal controls over financial reporting are effective.
Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of Sarbanes-Oxley. Section 404 requires management to establish and maintain a system of internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Failure on our part to have effective internal financial and accounting controls would cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financial condition, and could cause the trading price of our common stock to fall dramatically.
If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.
As a smaller company, it may be difficult for us to attract or retain the interest of equity research analysts. A lack of research coverage may adversely affect the liquidity of and market price of our common stock. We do not have any control of the equity research analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of us, or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.
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Holders of our Series A Preferred Stock may have interests different from our common stockholders.
We are permitted under our certificate of incorporation to issue up to 10,000,000 shares of preferred stock. We can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common stockholders. As of February 12, 2024, there are 4,030 shares of Series A Preferred Stock outstanding. Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, and such conversion could dilute the value of our common stock to current stockholders and could adversely affect the market price of our common stock. The conversion price decreases if we sell common stock (or equivalents) for a price per share less than the conversion price or less than the market price of the common stock and is also subject to adjustment upon the occurrence of a merger, reorganization, consolidation, reclassification, stock dividend or stock split which results in an increase or decrease in the number of shares of common stock outstanding. Upon (i) liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, (ii) sale or other disposition of all or substantially all of the assets of the Company, or (iii) any consolidation, merger, combination, reorganization or other transaction in which the Company is not the surviving entity or in which the shares of common stock constituting in excess of 50% of the voting power of the Company are exchanged for or changed into other stock or securities, cash and/or any other property, after payment or provision for payment of the debts and other liabilities of the Company, the holders of Series A Preferred Stock will be entitled to receive, pro rata and in preference to the holders of any other capital stock, an amount per share equal to $100 plus accrued but unpaid dividends, if any
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gains.
We do not anticipate paying any cash dividends in the foreseeable future and intend to retain future earnings, if any, for the development and expansion of our business. Our outstanding Series A Preferred Stock, consisting of 4,030 shares on February 12, 2024, provides that we may not pay a dividend or make any distribution to holders of any class of stock unless we first pay a special dividend or distribution of $100 per share to the holders of the Series A Preferred Stock. In addition, the terms of existing or future agreements may limit our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.
Anti-takeover provisions of Delaware law and our charter documents may make potential acquisitions more difficult and could result in the entrenchment of management.
We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our charter documents may make a change in control or efforts to remove management more difficult. Also, under Delaware law, our board of directors may adopt additional anti-takeover measures. Under Section 203 of the Delaware General Corporation Law, a corporation may not engage in a business combination with an “interested stockholder” for a period of three years after the date of the transaction in which the person first becomes an “interested stockholder,” unless the business combination is approved in a prescribed manner.
We are authorized to issue up to 300,000,000 shares of common stock. To the extent that we sell or otherwise issue authorized but currently unissued shares, this could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.
Our charter authorizes us to issue up to 10,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If we exercise this right, it could be more difficult for a third party to acquire a majority of our outstanding voting stock.
In addition, our equity incentive plans generally permit us to accelerate the vesting of options and other stock rights granted under these plans in the event of a change of control. If we accelerate the vesting of options or other stock rights, this action could make an acquisition more costly.
The application of these provisions could have the effect of delaying or preventing a change of control, which could adversely affect the market price of our common stock.
We are a smaller reporting company and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
We are currently a “smaller reporting company” as defined in the Exchange Act. Smaller reporting companies are able to provide simplified executive compensation disclosures in their filings and have certain other decreased disclosure obligations in their SEC filings. We cannot predict whether investors will find our common stock less attractive because of our reliance on the smaller reporting company exemption. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
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As of February 12, 2024, there were 8,800,031 shares of common stock underlying outstanding convertible preferred stock, options, restricted stock units and warrants. Stockholders may experience dilution from the conversion of preferred stock, exercise of outstanding options and warrants and vesting and delivery of restricted stock units.
As of February 12, 2024, holders of our outstanding dilutive securities had the right to acquire the following amounts of underlying common stock:
| · | 5,333 shares issuable on the conversion of our immediately convertible Series A Preferred Stock, subject to adjustment, for no further consideration; |
| · | 1,550,600 shares issuable upon the exercise of stock options at a weighted-average exercise price of $8.27 per share; |
| · | 589,147 shares issuable under restricted stock units which vested or will vest on dates between June 16, 2024 and June 20, 2027, subject to the fulfillment of service or performance conditions; |
| · | 279,700 shares of common stock which have vested under restricted stock unit agreements, but are subject to provisions to delay delivery; |
| · | 66,666 shares issuable upon the exercise of warrants at an exercise price of $12.50 per share, issued in conjunction with the Series B and Series C Preferred Stock, all of which are currently exercisable and expire on May 11, 2026; |
| · | 1,818,182 shares of common stock issuable upon exercise of common warrants with an exercise price of $5.83 per share issued in conjunction with an offering in November 2022; |
| · | up to 90,909 shares of common stock issuable upon exercise of placement agent warrants with an exercise price of $6.875 per share issued to the placement agent or its designees as compensation in connection with an offering in November 2022; |
| · | 2,358,491 shares of common stock issuable upon exercise of common warrants with an exercise price of $2.12 per share issued in conjunction with an offering in October 2023; |
| · | up to 117,925 shares of common stock issuable upon exercise of placement agent warrants with an exercise price of $2.65 per share issued to the placement agent or its designees as compensation in connection with an offering in October 2023; |
| · | 1,831,503 shares of common stock issuable upon exercise of common warrants with an exercise price of $5.46 per share issued in conjunction with an offering in January 2024; |
| · | up to 91,575 shares of common stock issuable upon exercise of placement agent warrants with an exercise price of $6.825 per share issued to the placement agent or its designees as compensation in connection with an offering in January 2024; and |
| · | 425,447 shares of common stock available for future issuance under our 2011 Stock Incentive Plan. |
If the holders convert, exercise, or receive these securities, or similar dilutive securities we may issue in the future, stockholders may experience dilution in the net book value of their common stock. In addition, the sale or availability for sale of the underlying shares in the marketplace could depress our stock price. We have registered or agreed to register for resale substantially all of the underlying shares listed above. Holders of registered underlying shares could resell the shares immediately upon issuance, which could result in significant downward pressure on our stock price.
We are currently not in compliance with the continued listing standards of the NYSE American. Our failure to resume compliance with the continued listing standards or make continued progress toward compliance consistent with a plan of compliance that we submitted to NYSE Regulation may result in the delisting of our common stock.
Palatin received a notice from the staff of NYSE American LLC (the “Exchange”) that Palatin was not in compliance with the Exchange’s continued listing standards under Section 1003(a)(i) and (ii) of the NYSE American Company Guide. Section 1003(a)(i) requires a listed company to have stockholders’ equity $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years, and Section 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years. Palatin is now subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide. Palatin had until November 9, 2023, to submit a plan (the “Plan”) of actions it has taken or will take to regain compliance with the continued listing standards by April 10, 2025.
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Palatin has timely delivered a Plan to the Exchange. The Exchange has accepted the Plan, and Palatin will be able to continue its listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until it has regained compliance.
There can be no assurance that Palatin will be able to meet milestones set forth in the Plan between now and April 10, 2025.
Our failure to meet the continued listing requirements of the NYSE American could result in a de-listing of our common stock.
Even if we regain compliance with the Exchange’s listing requirements, we cannot give assurance that we will continue to satisfy the continued listing requirements of the Exchange, such as the corporate governance requirements or the minimum closing bid price requirement. The Exchange may take steps to de-list our common stock even if we regain compliance. If the Exchange delists our securities for trading on its exchange, we could face significant material adverse consequences, including:
| · | a limited availability of market quotations for our securities; |
| · | reduced liquidity with respect to our securities; |
| · | a determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock; |
| · | a limited amount of news and analyst coverage for our Company; and |
| · | a decreased ability to issue additional securities or obtain additional financing in the future. |
Such a de-listing would likely have a negative effect on the price of our common stock and would impair our investors’ ability to sell or purchase our common stock when investors wish to do so. In the event of a de-listing, we may take actions to restore our compliance with the Exchange’s listing requirements, but we cannot provide assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Exchange’s minimum bid price requirement or prevent future non-compliance with the Exchange’s listing requirements.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Our common shares are considered to be covered securities because they are listed on the Exchange. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on the Exchange, our common stock would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibits filed or furnished with this report:
Exhibit Number |
| Description |
| Filed Herewith |
| Form |
| Filing Date |
| SEC File No. |
|
|
|
| 8-K |
| September 17, 2021 |
| 001-15543 | ||
| Restated Certificate of Incorporation of Palatin Technologies, Inc., as amended. |
|
|
| 10-K |
| September 27, 2013 |
| 001-15543 | |
|
|
|
| 8-K |
| August 31, 2022 |
| 001-15543 | ||
| Certificate of Decrease of Series A Convertible Preferred Stock. |
|
|
| 10-Q |
| May 16, 2022 |
| 001-15543 | |
|
|
|
| 8-K |
| February 1, 2024 |
| 001-15543 | ||
|
|
|
| 8-K |
| February 1, 2024 |
| 001-15543 | ||
|
| X |
|
|
|
|
|
| ||
|
| X |
|
|
|
|
|
| ||
|
|
|
| 8-K |
| October 24, 2023 |
| 001-15543 | ||
|
| X |
|
|
|
|
|
| ||
|
|
|
| 8-K |
| February 1, 2024 |
| 001-15543 | ||
|
| X |
|
|
|
|
|
| ||
|
| X |
|
|
|
|
|
| ||
|
| * |
|
|
|
|
|
| ||
|
| * |
|
|
|
|
|
| ||
101.INS |
| Inline XBRL Taxonomy Extension Instance Document (the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
| X |
|
|
|
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
| X |
|
|
|
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| X |
|
|
|
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| X |
|
|
|
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document. |
| X |
|
|
|
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| X |
|
|
|
|
|
|
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
| |||||
*In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certification furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
** Portions of the exhibit are omitted pursuant to Regulation S-K Item 601(b)(10). Palatin agrees to furnish to the U.S. Securities and Exchange Commission a copy of the omitted exhibit upon request. The confidential portions of this exhibit were omitted by means of marking such portions with asterisks because (1) such terms are both not material and are the type that the registrant treats as private or confidential, or (2) disclosure of such information would constitute a clearly unwarranted invasion of personal privacy
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| Palatin Technologies, Inc. |
|
|
| (Registrant) |
|
| |||
| |||
|
| /s/ Carl Spana |
|
Date: February 14, 2024 |
| Carl Spana, Ph.D. President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
| /s/ Stephen T. Wills |
|
Date: February 14, 2024 |
| Stephen T. Wills, CPA, MST Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer) |
|
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EXHIBIT 4.3
AMENDMENT
TO THE
PALATIN TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANTS
This Amendment (this “Amendment”), dated as of January 24, 2024 (the “Effective Date”), is made and entered into by and between the Palatin Technologies, Inc., a Delaware corporation (the “Company”), and __________________ (the “Designee”) and relates to (i) the common stock purchase warrant to purchase up to ____ shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at an exercise price of $6.875 per share, issued by the Company issued by the Company to the Designee on November 2, 2022 (the “November 2022 Warrants”) and (ii) the Common Stock purchase warrant to purchase up to 1,179 shares of the Company’s Common Stock, at an exercise price of $2.65 per share, issued by the Company to the Designee on October 24, 2023 (the “October 2023 Warrants,” and collectively, with the November 2022 Warrants, the “Warrants”).
WHEREAS, the Designee is, and as of the effective date of this Amendment will be, the holder of the Warrants; and
WHEREAS, the Designee and the Company have agreed to amend and restate Section 3(d) of the Warrants pursuant to the provisions of Section 5(l) of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used and not defined in this Amendment have the respective meanings ascribed to them in the respective Warrants.
2. Fundamental Transaction Amendment. Section 3(d) of each of the November 2022 Warrants and the October 2023 Warrants is hereby deleted and replaced in its entirety with the following:
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“Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company or any Subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of greater than 50% of the voting power of the outstanding common and preferred stock of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires greater than 50% of the voting power of the outstanding common and preferred stock of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that if the Fundamental Transaction is not within the Company's control, including not approved by the Company's Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the volatility for the remaining exercised period as obtained from the HVT function on Bloomberg (determined utilizing a 252-day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction, (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five (5) Trading Days of the Holder’s election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant and the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein.”
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3. Effective Date. Unless otherwise stated herein, this Amendment is effective as of the Effective Date.
4. Miscellaneous.
a. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that state, without reference to conflict of laws principles thereof.
b. Counterparts. This Amendment may be executed and delivered (including by electronic transmission) in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed (including by the affixing of signatures electronically) and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
c. Continuation of the Warrants. Except as expressly modified by this Amendment, the Warrants shall continue to be and remain in full force and effect in accordance with their respective terms. Any future reference to the Warrants shall be deemed to be a reference to the Warrants as modified by this Amendment.
(signature pages follow)
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written.
PALATIN TECHNOLOGIES, INC.
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EXHIBIT 4.4
AMENDMENT
TO THE
PALATIN TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANTS
This Amendment (this “Amendment”), dated as of January 24, 2024 (the “Effective Date”), is made and entered into by and between the Palatin Technologies, Inc., a Delaware corporation (the “Company”), and _______________ (the “Investor”) and relates to (i) the common stock purchase warrant to purchase up to ___________ shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at an exercise price of $5.83 per share, issued by the Company issued by the Company to the Investor on November 2, 2022 (the “November 2022 Warrants”) and (ii) the Common Stock purchase warrant to purchase up to ___________ shares of the Company’s Common Stock, at an exercise price of $2.12 per share, issued by the Company to the Investor on October 24, 2023 (the “October 2023 Warrants,” and collectively, with the November 2022 Warrants, the “Warrants”).
WHEREAS, the Investor is, and as of the effective date of this Amendment will be, the holder of the Warrants; and
WHEREAS, the Investor and the Company have agreed to amend and restate Section 3(d) of the Warrants pursuant to the provisions of Section 5(l) of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used and not defined in this Amendment have the respective meanings ascribed to them in the respective Warrants.
2. Fundamental Transaction Amendment. Section 3(d) of each of the November 2022 Warrants and the October 2023 Warrants is hereby deleted and replaced in its entirety with the following:
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“Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company or any Subsidiary, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of greater than 50% of the voting power of the outstanding common and preferred stock of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires greater than 50% of the voting power of the outstanding common and preferred stock of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that if the Fundamental Transaction is not within the Company's control, including not approved by the Company's Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the volatility for the remaining exercised period as obtained from the HVT function on Bloomberg (determined utilizing a 252-day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction, (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five (5) Trading Days of the Holder’s election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant and the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein.”
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3. Effective Date. Unless otherwise stated herein, this Amendment is effective as of the Effective Date.
4. Miscellaneous.
a. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that state, without reference to conflict of laws principles thereof.
b. Counterparts. This Amendment may be executed and delivered (including by electronic transmission) in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed (including by the affixing of signatures electronically) and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
c. Continuation of the Warrants. Except as expressly modified by this Amendment, the Warrants shall continue to be and remain in full force and effect in accordance with their respective terms. Any future reference to the Warrants shall be deemed to be a reference to the Warrants as modified by this Amendment.
(signature pages follow)
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written.
PALATIN TECHNOLOGIES, INC.
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INVESTOR
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EXHIBIT 10.2
SPECIFIC TERMS IN THIS EXHIBIT HAVEBEEN REDACTED BECAUSE (1) SUCH
TERMS ARE BOTH NOT MATERIAL AND ARE THE TYPE THAT THE
REGISTRANT TREATS AS PRIVATEOR CONFIDENTIAL; OR (2) DISCLOSURE OF
SUCH INFORMATION WOULD CONSTITUTEA CLEARLY UNWARRANTED
INVASION OF PERSONAL PRIVACY. THESE REDACTED TERMS HAVE BEEN
MARKED IN THIS EXHIBIT WITH TWO ASTERISKS [**].
ASSET PURCHASE AGREEMENT
between
COSETTE PHARMACEUTICALS, INC.
and
PALATIN TECHNOLOGIES, INC.
Dated as of December 19, 2023
TABLE OF CONTENTS
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| ARTICLE 1 PURCHASE AND SALE OF THE ACQUIRED ASSETS |
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| Section 1.01. | Purchase and Sale. |
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| Section 1.02. | Audit Rights; Reporting |
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| Section 1.03. | Commercialization Covenants. |
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| Section 1.04. | Transfer of Assets. |
| 4 |
| Section 1.05. | Assumed Liabilities. |
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| Section 1.06. | Risk of Loss |
| 9 |
| Section 1.07. | Post-Closing Consents of Third Parties. |
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| Section 1.08. | Refunds and Remittances. |
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| Section 1.09. | Product Returns; Chargebacks. |
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| ARTICLE 2 CLOSING; TRANSFER OF TRANSFERRED INVENTORY |
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| Section 2.01. | Closing. |
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| Section 2.02. | Withholding |
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| ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER |
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| Section 3.01. | Authority |
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| Section 3.02. | No Conflicts; Consents. |
| 13 |
| Section 3.03. | Taxes |
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| Section 3.04. | Valid Title; Sufficiency of the Assets. |
| 14 |
| Section 3.05. | Financial Information. |
| 14 |
| Section 3.06. | Intellectual Property |
| 15 |
| Section 3.07. | Contracts |
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| Section 3.08. | Transferred Product Registrations |
| 17 |
| Section 3.09. | Litigation |
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| Section 3.10. | Compliance with Applicable Laws; Regulatory Matters. |
| 18 |
| Section 3.11. | Absence of Changes or Events |
| 21 |
| Section 3.12. | Transferred Inventory. |
| 21 |
| Section 3.13. | Product |
| 22 |
| Section 3.14. | Brokers |
| 22 |
| Section 3.15. | No Channel Stuffing |
| 22 |
| Section 3.16. | Suppliers, Customers and Payers |
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| Section 3.17. | Insurance |
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| Section 3.18. | Non-Reliance |
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| ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER |
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| Section 4.01. | Authority |
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| Section 4.02. | No Conflicts; Consents. |
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| Section 4.03. | Actions and Proceedings |
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| Section 4.04. | Availability of Funds |
| 24 |
| Section 4.05. | Brokers |
| 24 |
| Section 4.06. | No Implied Representations |
| 24 |
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TABLE OF CONTENTS
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| ARTICLE 5 COVENANTS OF SELLER |
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| Section 5.01. | Non-Competition. |
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| Section 5.02. | Purchaser Right of First Offer and Right of First Refusal. |
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| Section 5.03. | Non-Disparagement |
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| Section 5.04. | Confidentiality |
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| Section 5.05. | Insurance |
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| ARTICLE 6 MUTUAL COVENANTS |
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| Section 6.01. | Cooperation; Further Assurances. |
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| Section 6.02. | Publicity |
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| Section 6.03. | Bulk Transfer Laws |
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| Section 6.04. | Tax Matters. |
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| Section 6.05. | Recordation and Transfer |
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| Section 6.06. | Regulatory Responsibilities |
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| ARTICLE 7 INDEMNIFICATION |
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| Section 7.01. | Survival. |
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| Section 7.02. | Indemnification by Seller |
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| Section 7.03. | Indemnification by Purchaser |
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| Section 7.04. | Limitations on Liability; Cooperation. |
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| Section 7.05. | Losses Net of Insurance, Etc |
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| Section 7.06. | Procedures Relating to Indemnification for Third Party Claims. |
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| Section 7.07. | Procedures Related to Indemnification for Other Claims |
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| Section 7.08. | Right to Satisfy Indemnification Claims by Reducing Contingent Payments. |
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| Section 7.09. | Tax Treatment of Payments |
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| Section 7.10. | Exclusive Remedy |
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| ARTICLE 8 MISCELLANEOUS |
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| Section 8.01. | Assignment |
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| Section 8.02. | No Third-Party Beneficiaries |
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| Section 8.03. | Expenses |
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| Section 8.04. | Amendments; Waivers |
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| Section 8.05. | Notices |
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| Section 8.06. | Interpretation; Exhibits, Seller Disclosure Schedule and Other Schedules; Certain Definitions |
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| Section 8.07. | Counterparts |
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| Section 8.08. | Entire Agreement |
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| Section 8.09. | Severability |
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| Section 8.10. | Consent to Jurisdiction |
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| Section 8.11. | Waiver of Jury Trial |
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| Section 8.12. | GOVERNING LAW |
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| Section 8.13. | Specific Performance |
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EXHIBITS
| Exhibit A | Form of IP Assignment Agreement |
| Exhibit B | Form of Transition Services Agreement |
| Exhibit C | Specified FDA Studies Detail |
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of December 19, 2023 by and between COSETTE PHARMACEUTICALS, INC., a Delaware corporation headquartered at 200 Crossing Blvd, Bridgewater, NJ 08807 (“Purchaser”), and PALATIN TECHNOLOGIES, INC., a Delaware corporation headquartered at 4B Cedar Brook Drive, Cranbury, New Jersey, 08512 (“Seller”).
WHEREAS, Seller and certain of its Affiliates are engaged in the sale of bremelanotide under the trademark Vyleesi® (the “Product”), and in connection therewith, operate the Product Business; and
WHEREAS, Seller desires to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser desires to purchase and accept from Seller, the Acquired Assets (as defined below) and the Assumed Liabilities (as defined below), all upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, intending to be legally bound and in consideration of the mutual provisions set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE ACQUIRED ASSETS
Section 1.01. Purchase and Sale.
(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller all the right, title and interest of Seller in, to and under the Acquired Assets, free and clear of any Liens, for (i) a purchase price equal to [**] (the “Closing Payment”), and (ii) the assumption by Purchaser of the Assumed Liabilities. The purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities are referred to in this Agreement collectively as the “Acquisition”.
(b) At the Closing, Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller the Finished Goods Inventory for a purchase price equal to [**] (the “Inventory Payment” and, together with the Closing Payment, in the aggregate, the “Purchase Price”).
(c) On the one-year anniversary of the Closing Date, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Deferred Purchase Price Payment”). The Deferred Purchase Price Payment shall be payable only one-time, [**] prior to the one (1) year anniversary of the Closing Date. The Deferred Purchase Price Payment will, when paid, constitute an upward adjustment to the Purchase Price by the amount of the Deferred Purchase Price Payment.
(d) Following the Closing, subject to Section 7.08, Purchaser will pay, or cause to be paid, to Seller additional contingent payments, if payable, upon satisfaction of, and subject to, the terms and conditions set forth in this Section 1.01(d) (collectively, the “Contingent Payments”). Any Contingent Payment will, when paid, constitute an upward adjustment to the Purchase Price by the amount of such Contingent Payment.
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(i) Within thirty (30) days after the achievement of the First Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “First Net Sales Milestone Payment”). The First Net Sales Milestone Payment shall be payable one time only and shall be payable only if the First Net Sales Milestone is achieved prior to December 31, 2038 (the “Milestone Termination Date”).
(ii) Within thirty (30) days after the achievement of the Second Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Second Net Sales Milestone Payment”). The Second Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Second Net Sales Milestone is achieved prior to the Milestone Termination Date.
(iii) Within thirty (30) days after the achievement of the Third Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Third Net Sales Milestone Payment”). The Third Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Third Net Sales Milestone is achieved prior to the Milestone Termination Date.
(iv) Within thirty (30) days after the achievement of the Fourth Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Fourth Net Sales Milestone Payment”). The Fourth Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Fourth Net Sales Milestone is achieved prior to the Milestone Termination Date.
(v) Within thirty (30) days after the achievement of the Fifth Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Fifth Net Sales Milestone Payment”). The Fifth Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Fifth Net Sales Milestone is achieved prior to the Milestone Termination Date.
(vi) Within thirty (30) days after the achievement of the Sixth Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller [**] (the “Sixth Net Sales Milestone Payment”). The Sixth Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Sixth Net Sales Milestone is achieved prior to the Milestone Termination Date.
(vii) Within thirty (30) days after the achievement of the Seventh Net Sales Milestone, Purchaser shall pay, or cause to be paid, to Seller $[**] (the “Seventh Net Sales Milestone Payment”). The Seventh Net Sales Milestone Payment shall be payable one time only and shall be payable only if the Seventh Net Sales Milestone is achieved prior to the Milestone Termination Date.
(e) For clarity, the total aggregate Contingent Payment payable hereunder is one hundred and fifty-nine million dollars ($159,000,000).
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(f) Seller hereby acknowledges and agrees that (i) there is no assurance that Seller will receive any Contingent Payment, (ii) neither Purchaser nor its Affiliates promised or projected any amounts to be received by Seller in respect of any Contingent Payment, and Seller has not relied on any statements or information provided by or on behalf of Purchaser or its Affiliates with respect thereto and (iii) neither Purchaser nor any of its Affiliates owe any fiduciary duty to Seller or its Affiliates. The right of Seller to receive any amounts with respect to Contingent Payments shall not be evidenced by a certificate or other instrument and does not represent any right other than the right to receive the Contingent Payments pursuant to this Agreement.
(g) All payments to be made by Purchaser under this Section 1.01 shall be made in U.S. dollars and shall be paid by wire transfer in immediately available funds to an account designated in writing by Seller.
(h) Notwithstanding any provision herein to the contrary, if the aggregate costs incurred by Purchaser to complete the Specified FDA Studies from [**], as Purchaser’s sole and exclusive remedy with respect to this Section 1.01(h), Purchaser shall be entitled to [**].
Section 1.02. Audit Rights; Reporting. Purchaser shall (i) keep accurate records pertaining to the Net Sales of the Product in sufficient detail [**] to permit Seller to confirm if any of the Contingent Payments have become due and payable hereunder and (ii) provide Seller, in writing (email being sufficient), its calculation of Net Sales of the Product, along with reasonable supporting documentation, within thirty (30) days of the end of each calendar year, beginning with the calendar year ending [**]. At any time from and after [**], Seller, at its sole cost and expense, shall have the right to cause a third party independent, certified public accountant to audit such records to confirm Annual Net Sales during any calendar year. Such audits may be conducted during normal business hours upon reasonable prior written notice to Purchaser, but no more than frequently than one (1) time every three (3) years. No accounting period of Purchaser shall be subject to audit more than one time by Seller. Seller shall bear the full cost of such audit unless such audit discloses that a Contingent Payment was required to be made, in which case Purchaser shall bear the reasonable cost of such audit. Seller acknowledges and agrees that Purchaser may, upon the advice of counsel, withhold commercially sensitive information or data subject to privilege from the records used to conduct audits pursuant to this Section 1.02 unless the third party independent, certified public accountant executes a customary confidentiality agreement to receive access to such commercially sensitive information or data.
Section 1.03. Commercialization Covenants.
(a) From the Closing through [**], Purchaser shall, directly or through one or more Affiliates or licensees, use Commercially Reasonable Efforts to Commercialize the Product in the United States.
(b) If (i) Seller and Purchaser mutually agree that Purchaser has ceased using Commercially Reasonable Efforts to Commercialize the Product in the United States as required pursuant to Section 1.03(a) or (ii) a court of competent jurisdiction identified in Section 8.10 has determined, in a final and nonappealable decision, that Purchaser has ceased using Commercially Reasonable Efforts to Commercialize the Product in the United States as required pursuant to Section 1.03(a), Seller and Purchaser shall engage in good faith negotiations with respect to potential cures, including a repurchase of the Acquired Assets (and any other assets, including Product information and contracts, in either case, developed from and after the Closing which are used primarily in the Product Business conducted by Purchaser after the Closing) on terms mutually agreeable to Purchaser and Seller.
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(c) Purchaser shall not take any action whose sole or primary purpose is to cause the [**] not to be paid. Purchaser shall not take any action within [**]; provided that Purchaser shall be entitled to exercise its [**].
Section 1.04. Transfer of Assets.
(a) The term “Acquired Assets” means all of Seller’s right, title and interest in, to and under the following assets, properties and rights, wherever located and whether now existing or hereafter acquired prior to the Closing Date, other than the Excluded Assets:
(i) the following (collectively, “Transferred Intellectual Property”):
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| (A) | the Trademarks relating to the Product identified in Section 1.04(a)(i)(A) of the Seller Disclosure Schedule, together with all extensions and renewals thereof (the “Transferred Trademarks”); |
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| (B) | the Patents relating to the Product identified in Section 1.04(a)(i)(B) of the Seller Disclosure Schedule (the “Transferred Patents”); |
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| (C) | the complete file histories for the Transferred Trademarks and the Transferred Patents and all files relating to such Trademarks and Patents, in each case, that are held or maintained on Seller’s behalf by Seller’s outside patent counsel, including all contents of such files, in each case in electronic form; |
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| (D) | all Copyrights and copyrighted materials (whether or not registered) owned by Seller that are primarily used or primarily held for use in the Manufacture or Exploitation of the Product or used in the Product Business; |
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| (E) | all Product Know-How; |
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| (F) | each of the websites set forth in Section 1.04(a)(i)(F) of the Seller Disclosure Schedule and all content on such websites and all other website content primarily related to the Manufacture or Exploitation of the Product or used in the Product Business; |
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| (G) | all final labeling, product packaging, inserts, advertising, marketing, product brochures, sales and promotional materials (including video or audio recordings, television, radio and print content and materials), point of sale materials, all consumer and end-user information, all final materials used for medical education activities and medical informational services in use or intended for use by the Product Business sales force for healthcare providers and pharmacists, all final training materials for the Product Business sales force and all healthcare provider, payor and consumer market research materials primarily used in the Product Business (the “Marketing Materials”); and |
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| (H) | all goodwill appurtenant to, or associated with any of the above items, including claims, causes of action, rights of recovery and rights of set-off of any kind (including the right to sue and recover for past infringements or misappropriations) against any person. |
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(ii) all Finished Inventory;
(iii) all raw materials (including all bulk API for the Product), work-in-progress, bulk API to be used in the Manufacture of the Product and other inventories (including items in transit, on consignment or in the possession of any third party) on the Closing Date that primarily relate to the Product (collectively, the “Transferred Inventory”), other than the Excluded Inventory;
(iv) the contracts, licenses and agreements (“Contracts”) set forth in Section 1.04(a)(iv) of the Seller Disclosure Schedule (collectively, the “Transferred Contracts”);
(v) the Product Registrations relating to the Product identified in Section 1.04(a)(v) of the Seller Disclosure Schedule (the “Transferred Product Registrations”);
(vi) all Regulatory Documentation (the “Transferred Regulatory Documentation”);
(vii) all rights, claims, causes of action and credits, including all guarantees, warranties, indemnities and similar rights (“Other Rights”), in favor of Seller, to the extent relating to any Acquired Asset or to any Assumed Liability (the “Transferred Other Rights”);
(viii) any equipment owned by the Seller, wherever located, that was purchased for use primarily in the Product Business;
(ix) all Product Records of Seller that relate to the Product (the “Transferred Records”).
(b) The term “Excluded Assets” means:
(i) the right to receive the Shanghai Fosun Development Milestone Payment and the right to receive the Kwangdong Development Milestone Payment; provided that Purchaser shall have no obligation to make any such payments to Seller until Purchaser has actually received the Shanghai Fosun Development Milestone Payment or the Kwangdong Development Milestone Payment;
(ii) the inventory and other raw materials and assets set forth on Section 1.04(b)(ii) of the Seller Disclosure Schedule, that will be used by Seller to manufacture the Product for its own internal development subject to the terms of Article 5 (the “Excluded Inventory”);
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(iii) all cash and cash equivalents of Seller;
(iv) all Accounts Receivable of Seller for any Product sold prior to the Closing Date;
(v) any and all Tax records that relate to Taxes that constitute Excluded Tax Liabilities, all personnel records, and any and all financial books and records, including all books of account, ledgers, general, financial and accounting records, files, invoices, billing records and distribution lists (whether or not relating to the Product), in each case other than the Transferred Records (collectively, the “Excluded Records”);
(vi) all rights, claims, causes of action and credits of Seller or any of its Affiliates to the extent relating to any Excluded Asset or any Excluded Liability, including any such items arising under insurance policies and all guarantees, warranties, indemnities and similar rights in favor of Seller or any of its Affiliates in respect of any other Excluded Asset or any Excluded Liability;
(vii) any Tax attribute (including any loss, loss carryforward, credit, credit carryforward, prepaid Tax or refund, and any claim for or right to receive any of the foregoing) of Seller or any of its Affiliates for any Pre-Closing Tax Period or otherwise relating to any Excluded Tax Liability;
(viii) all insurance policies and insurance contracts insuring the Product or the Acquired Assets, together with any claim, action or other right Seller or any of its Affiliates might have for insurance coverage under any past and present policies and insurance contracts insuring the Product or the Acquired Assets, in each case including any proceeds received from any such policy or contract prior to, on or after the Closing Date;
(ix) all rights of Seller and its Affiliates under this Agreement and the Other Transaction Documents;
(x) all Contracts other than the Transferred Contracts (the “Excluded Contracts”); and
(xi) all other properties, assets, goodwill and rights of Seller that are not included, or intended to be included, in the definition of Acquired Assets.
Section 1.05. Assumed Liabilities.
(a) On the terms and subject to the conditions set forth herein, at the Closing, Purchaser shall assume, and shall discharge or perform when due, the following Liabilities (the “Assumed Liabilities”), but only to the extent arising from and after the Closing:
(i) all Liabilities with respect to the Specified FDA Studies;
(ii) all Liabilities of Seller under the Transferred Contracts arising from and after the Closing; provided that Purchaser shall not assume any Liabilities attributable to any failure by Seller to comply under the terms of the Transferred Contracts prior to Closing;
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(iii) all rebates, chargebacks, returns, customer claims and similar obligations in respect of any Product, solely with respect to Product sold or Commercialized by Purchaser or any of its Affiliates (including by Seller or any of its Affiliates on behalf of Purchaser pursuant to the Transition Services Agreement, except to the extent provided in the Transition Services Agreement) after the Closing;
(iv) all Liabilities in respect of any Actions arising out of or relating to the Manufacture or Exploitation of the Product after the Closing;
(v) all Liabilities arising from the ownership, operation, maintenance, possession, control, sale, lease, disposition, exploitation or use of the Acquired Assets occurring after the Closing;
(vi) all Liabilities for warranty claims and product liability or similar claims, including all Actions relating to any such Liabilities, in each case solely with respect to or arising from Product sold by Purchaser or any of its Affiliates after the Closing;
(vii) all Liabilities arising out of or relating to the return of, or refund, adjustment, allowance or exchange in respect of, the Product, solely with respect to Product sold by Purchaser or any of its Affiliates (including by Seller or any of its Affiliates on behalf of Purchaser pursuant to the Transition Services Agreement) after the Closing;
(viii) all Liabilities for Taxes arising out of or relating to or in respect of the Product, the Product Business or any Acquired Asset, other than any Excluded Tax Liabilities;
(ix) Purchaser’s liability for fifty percent (50%) of the Transfer Taxes pursuant to Section 6.04(e); and
(x) all other Liabilities arising out of or relating to the Acquired Assets, the Product Business or the Manufacture or Exploitation of the Product arising after the Closing.
(b) Notwithstanding any other provision of this Agreement, except for the Assumed Liabilities, Purchaser shall not assume, and shall have no liability for, any Liabilities of Seller, any of its Affiliates, or any of their respective predecessors in interest, in each case to the extent arising out of or relating to the Acquired Assets, the Product Business or the Manufacture or Exploitation of the Product prior to the Closing (“Excluded Liabilities”). Without intending to limit the generality or effect of the foregoing, Excluded Liabilities shall include the following Liabilities of Seller, its Affiliates and their respective predecessors in interest:
(i) Other than Purchaser’s obligations to bear its portion of the Transfer Taxes pursuant to Section 6.04(e), all Liabilities arising in connection with, or relating to, (x) accrued but unpaid Taxes of or with respect to Seller, including any and all Taxes of any person (other than Seller) imposed on or payable by Seller or any of its predecessors in interest pursuant to any Law (including Treasury Regulations Section 1.1502-6 or any similar provision of any state, local or non-U.S. Law) as a transferee or successor, under any Contract or otherwise, and (y) Taxes that relate to the Acquired Assets, the Assumed Liabilities or the Product, in each case, for any Pre-Closing Tax Period, including any Taxes related to sales (“Excluded Tax Liability”);
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(ii) all Accounts Payable, accrued expenses and other current liabilities relating to the Product or the Product Business;
(iii) all rebates, chargebacks, returns, customer claims and other similar obligations, solely with respect to any Product sold by Seller prior to the Closing;
(iv) all Liabilities arising out of, or relating or with respect to, the Acquired Assets, the Product Business or the Product arising prior to the Closing and any branded prescription drug fees under Section 9008 of the Affordable Care Act set forth the Branded Prescription Drug Fee Program or any other applicable Law with respect to Product sold prior to the Closing;
(v) all Liabilities arising out of, or relating or with respect to, the Excluded Assets;
(vi) all Liabilities in respect of any pending Actions and any Actions initiated after the Closing arising out of or relating to the Acquired Assets, the Product Business or the Manufacture or Exploitation of the Product prior to the Closing, including all Liabilities for warranty claims and product liability or similar claims, including all Actions relating to any such Liabilities, arising out of or relating to the Product, in each case solely with respect to or arising from Product which was Manufactured or Exploited by Seller or any of its Affiliates prior to the Closing, including the Actions set forth on Section 3.09 of the Seller Disclosure Schedule;
(vii) any and all Liabilities attributable to or arising from the conduct of Seller or any of Seller’s Affiliates (including the operation of the Product Business) prior to the Closing (regardless of when any claim is asserted);
(viii) all Liabilities arising out of or relating to any indebtedness of Seller or any of its Affiliates;
(ix) all Liabilities in respect of abandoned or unclaimed property reportable under any state or local unclaimed property, escheat or similar Law where the dormancy period elapsed prior to the Closing Date;
(x) all Liabilities (i) under or relating to any employee benefit plan, contract, program, fund, or arrangement and any trust, escrow, or similar agreement related thereto, whether or not funded, in respect of any present or former employees, directors, managers, officers, shareholders, consultants, or independent contractors of Seller or its Affiliates or with respect to which Seller or any of its Affiliates has made or is required to make payments, transfers, or contributions, or any management, employment, severance, change in control, non-compete, confidentiality, offer letter, retention, incentive or similar Contract, or (ii) relating to any current or former employee, director, manager, officer, shareholder, consultant or independent contractor of Seller or its Affiliates;
(xi) any Liabilities under the Excluded Contracts; and
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(xii) any Liabilities of Seller (i) arising by reason of any violation (or violation alleged in writing) of any Law, or (ii) arising by reason of any breach (or breach alleged in writing) by Seller of any Contract or Injunction.
Section 1.06. Risk of Loss. Until the Closing, any loss or damage to the Acquired Assets from fire, casualty or any other occurrence shall be the sole responsibility of Seller. At the Closing, title to the Acquired Assets shall be transferred to Purchaser and Purchaser shall thereafter bear all risk of loss associated with the Acquired Assets and be solely responsible for procuring adequate insurance to protect the Acquired Assets against any such loss; provided that Purchaser’s responsibility is not contingent on Purchaser’s ability to procure adequate insurance.
Section 1.07. Post-Closing Consents of Third Parties.
(a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not, nor shall any Other Transaction Document, constitute an agreement to assign, transfer, grant or otherwise provide (or to obtain a replacement for), directly or indirectly, any asset (including any Transferred Contract or Transferred Product Registration), claim or right, or any benefit arising under or resulting from such asset, claim or right, if an attempted direct or indirect assignment, transfer, grant or other provision thereof, without the consent of a third party, would (i) constitute a breach or other contravention of the rights of such third party, (ii) constitute a breach of applicable Law or any requirement of or restriction by any Governmental Entity or (iii) be ineffective with respect to any party to an agreement concerning such asset, claim or right or would in any way adversely affect the rights of Seller or, upon assignment, transfer, grant or other provision, Purchaser under such asset, claim or right. If any direct or indirect transfer, assignment, grant or other provision by Seller to, or any direct or indirect assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset, claim or right (including any Transferred Contract or Transferred Product Registration) requires the consent of a third party, then such transfer, assignment, grant or other provision or assumption shall be made subject to such consent being obtained (including, with respect to Seller, in connection with this Agreement or any Other Transaction Document). If any Transferred Product Registration necessary for the Manufacture or Exploitation of the Product under applicable Law, or any consent or waiver referred to in this Section 1.07(a), is not in Purchaser’s possession at the Closing, the Closing shall nonetheless take place, it being stated, for the avoidance of doubt, that the applicable Transferred Product Registrations will not be transferred prior to the Closing Date. Following the Closing, Seller and Purchaser shall, and Seller shall cause its Affiliates to, use commercially reasonable efforts, and shall cooperate with each other, to obtain any such required consent, authorization, approval or waiver; provided, however, that no party shall be required to make any payments, incur any Liability or offer or grant any accommodation (financial or otherwise) to any third party to obtain any such consent, authorization, approval or waiver, other than the incurrence of incidental expenses relating to obtaining any such consent, authorization, approval or waiver. Once such consent, authorization, approval or waiver is obtained, Seller shall, at Seller’s sole expense, sell, assign, transfer, convey and deliver to Purchaser the relevant Acquired Asset to which such consent, authorization, approval or waiver relates for no additional consideration.
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(b) With respect to any consent or waiver referred to in Section 1.07(a) that is not obtained prior to the Closing, for a period of time that ends on the earlier of (i) twenty four (24) month anniversary of the Closing Date and (ii) the date of the expiration of the then-current term of the applicable Acquired Asset (including any Transferred Product Registration or Transferred Contract), then, with respect to such applicable Acquired Asset, Seller and Purchaser shall, and Seller shall cause its Affiliates to, cooperate in any lawful and reasonable arrangement reasonably proposed by Purchaser under which Purchaser shall obtain substantially similar economic and, to the extent permitted under applicable Law, operational equivalent of the transfer of such Acquired Asset or related claim, right or benefit with respect to which the consent or waiver has not been obtained in accordance with this Agreement. Such reasonable arrangement may include (A) the subcontracting, sublicensing or subleasing to Purchaser of any and all rights of Seller against the other party to a third-party agreement arising out of a breach or cancellation thereof by the other party, and (B) the enforcement by Seller of such rights. To the extent permitted under applicable Law, Seller shall hold in trust for and pay to Purchaser promptly upon receipt thereof, such Acquired Asset and all income, proceeds and other monies received by Seller or any of its Affiliates to the extent related to such Acquired Asset (net of any associated Liabilities) in connection with the arrangements under this Section 1.07.
Section 1.08. Refunds and Remittances.
(a) Received by Seller or its Affiliates. After the Closing, if Seller or any of its Affiliates receives (i) any refund or other amount which (x) is an Acquired Asset or (y) is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, or (ii) any refund or other amount which is related to claims or other matters for which Purchaser is responsible hereunder, and which amount is not an Excluded Asset, or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, Seller promptly, and in no event later than ten (10) business days after becoming aware of the receipt of such amount by Seller, shall remit, or shall cause to be remitted, such amount to Purchaser at the address set forth in Section 8.05(a).
(b) Received by Purchaser or Its Affiliates. After the Closing, if Purchaser or any of its Affiliates receives (i) any refund or other amount which (x) is in respect of any Product sold by Seller prior to Closing, (y) is an Excluded Asset or (z) is otherwise properly due and owing to Seller in accordance with the terms of this Agreement, or (ii) any refund or other amount which is related to claims or other matters for which Seller is responsible hereunder, and which amount is not an Acquired Asset, or is otherwise properly due and owing to Seller in accordance with the terms of this Agreement, Purchaser promptly, and in no event later than ten (10) business days after becoming aware of the receipt of such amount by Purchaser, shall remit, or shall cause to be remitted, such amount to Seller at the address set forth in Section 8.05(b).
(c) In the case of any inconsistency between this Section 1.08 and the terms of the Transition Services Agreement with respect to the subject matter of this Section, the terms of the Transition Services Agreement shall govern.
Section 1.09. Product Returns; Chargebacks.
(a) All returned Product that was sold by Seller prior to the Closing Date shall be the responsibility of Seller. If Purchaser incurs any liability in connection with the return of any such Product, Seller will reimburse the amounts paid by Purchaser in connection with such returns. Seller shall be responsible for processing all rebates, chargebacks, returns, customer claims and similar obligations in respect of any Product sold by Seller prior to Closing and shall bear 100% of the cost of any such rebates, chargebacks, returns, customer claims and similar obligations.
(b) All returned Product that was sold by Purchaser after the Closing Date (or by Seller pursuant to the Transition Services Agreement) shall be the responsibility of Purchaser. If Seller incurs any liability in connection with the return of any such Product, Purchaser will reimburse the amounts paid by Seller in connection with such returns. Purchaser shall be responsible for processing all rebates, chargebacks, returns, customer claims and similar obligations in respect of any Product sold by Purchaser after the Closing and shall bear 100% of the cost of any such rebates, chargebacks, returns, customer claims and similar obligations.
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ARTICLE 2
CLOSING; TRANSFER OF TRANSFERRED INVENTORY
Section 2.01. Closing.
(a) The closing of the Acquisition (the “Closing”) shall be held remotely via the electronic exchange of documents and signatures, on the date hereof, or at such other date and time agreed in writing by the parties hereto. The date on which the Closing shall occur is hereinafter referred to as the “Closing Date”. The Closing shall be deemed to be effective as of 11:59:59 p.m. Eastern Time on the Closing Date.
(b) At the Closing, Purchaser shall deliver (or cause to be delivered) to Seller:
(i) by wire transfer to a bank account or accounts of Seller, immediately available funds in an amount equal to the Closing Payment and the Inventory Payment;
(ii) an executed Assumption Agreement and, subject to Section 1.07, such other executed instruments of assumption and such other executed instruments and documents as Seller may reasonably request to effect or evidence the purchase of the Acquired Assets and the assumption of the Assumed Liabilities (each in a form that is consistent with the terms and conditions of this Agreement and reasonably satisfactory to Purchaser and Seller, and otherwise customary in the jurisdiction or jurisdictions applicable to such sale, assignment, transfer or conveyance) (the “Additional Transfer Documents”);
(iii) an executed counterpart of the IP Assignment Agreement; and
(iv) an executed counterpart of the Transition Services Agreement.
(c) At the Closing, Seller shall deliver (or cause to be delivered) to Purchaser:
(i) the Bill of Sale and, subject to Section 1.07, the Additional Transfer Documents, in each case, executed by Seller;
(ii) an executed counterpart of the IP Assignment Agreement;
(iii) an executed counterpart of the Transition Services Agreement;
(iv) a thumb drive or other format acceptable to Purchaser in its sole discretion containing all files uploaded to the Data Room, without password protection, without watermark, and in an easily-accessible format (e.g., .docx, .pdf, .xlsx); and
(v) a duly executed IRS Form W-9 of Seller and a duly executed certificate of Seller reasonably acceptable to Purchaser and in accordance with the requirements of Treasury Regulations Section 1.1445-2(b)(2) that Seller is not a “foreign person” within the meaning of Section 1445 of the Code.
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Section 2.02. Withholding. Notwithstanding anything to the contrary herein, each party hereto shall be entitled to deduct and withhold from amounts otherwise payable to any person hereunder such amounts as it is required to deduct and withhold with respect to the making of such payment under any Tax law. Any amounts so withheld with respect to payments made by Purchaser to any person pursuant to this Section 2.02 shall be treated for all purposes of this Agreement as having been paid to such person. In the event that any party is required to withhold any Tax hereunder, such party shall provide the other party reasonable advance notice of such requirement to withhold and give the other party a reasonable opportunity to provide any form or certificate to reduce or eliminate such withholding. Within a reasonable amount of time after making such withholding deduction, the withholding party shall furnish the other party with copies of any tax certificate or other documentation evidencing such withholding.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Seller Disclosure Schedule attached hereto (the “Seller Disclosure Schedule”), Seller hereby represents and warrants to Purchaser as of the date hereof (unless the representation and warranty is as of a specified date, in which case it shall be as of such specified date) as follows:
Section 3.01. Authority. Seller is a legal entity, duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite power and authority to own the Acquired Assets, and to carry on the Product Business as now being conducted. Seller is duly qualified to do business and is in good standing (to the extent such concept is applicable) as a foreign legal entity in each jurisdiction in which the nature of the Acquired Assets or the Product Business, including the ownership or leasing of the Acquired Assets makes such qualification necessary, except where the failure to hold such qualification would not be material to the Product Business, the Product or the Acquired Assets. Seller has all requisite corporate power and authority to enter into this Agreement, and Seller has all requisite organizational power and authority to enter into the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. Seller has duly and properly taken all organizational acts and other proceedings required to be taken by Seller to authorize the execution, delivery and performance of this Agreement and the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Seller and, prior to the Closing, Seller will have duly executed and delivered each Other Transaction Document to which it is, or is specified to be, a party. Assuming that this Agreement has been duly authorized, executed and delivered by Purchaser, this Agreement constitutes, and, upon the due authorization, execution and delivery of the Other Transaction Documents by Purchaser, each Other Transaction Document will constitute, a legal, valid and binding obligation of Seller, enforceable against such person in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.
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Section 3.02. No Conflicts; Consents.
(a) The execution and delivery of this Agreement by Seller does not, and the execution and delivery of the Other Transaction Documents by Seller will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms and conditions hereof and thereof will not (with or without notice or lapse of time, or both) (i) conflict with or violate any provision of the Certificate of Incorporation or By-Laws of Seller, (ii) conflict with or violate any Law applicable to Seller or by which any of the Acquired Assets or Seller is bound or affected, (iii) contravene, conflict with or result in any breach of or result in a default (or an event which with the giving of notice or lapse of time or both would reasonably be expected to become a default) under, or give to others any right of termination, amendment, acceleration or cancellation or modification of or the exercise of any remedy under, any Transferred Contract to which Seller is a party or by which Seller is bound or to which any Acquired Asset is subject or under which Seller has any rights or the performance of which is guaranteed by Seller, or result in the creation of a Lien on any of the Acquired Assets or Transferred Contracts (other than Permitted Liens), or (iv) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Entity the right to revoke, withdraw, suspend, cancel, terminate or modify, any filing, permit, authorization, consent, approval, right or order that is to be included in the Acquired Assets or is held by Seller and relates to the Acquired Assets.
(b) Except as set forth in Section 3.02(b) of the Seller Disclosure Schedule, no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any person, including any Governmental Entity, is required to be obtained or made by or with respect to Seller in connection with the execution, delivery and performance of this Agreement, the Other Transaction Documents or the consummation of the transactions contemplated hereby or thereby other than (i) those that may be required solely by reason of Purchaser’s or any Affiliate of Purchaser’s (as opposed to any other third party’s) participation in the transactions contemplated hereby or by the Other Transaction Documents, (ii) compliance with any filings, approvals or notices required under applicable Law related to the transfer of Transferred Product Registrations, and (iii) such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make or obtain which, individually or in the aggregate, would not be material to the Product Business, the Product or the Acquired Assets.
Section 3.03. Taxes.
(a) Seller has timely paid, or caused to have been timely paid, all material Taxes due and required to have been paid by Seller as of the Closing Date with respect to the Acquired Assets. There are no Liens for Taxes on the Acquired Assets other than Permitted Liens.
(b) There are no audits or investigations by any Taxing Authority in progress, nor has Seller or any of its Affiliates received any written notice from any Taxing Authority that it intends to conduct such an audit or investigation, that may potentially result in Liability of Purchaser relating to the Acquired Assets.
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(c) None of Seller or any of its Affiliates has executed or entered into any contract or agreement with, or obtained any consents, approvals or clearances from, any Taxing Authority, or has been subject to any ruling guidance specific to Seller or any of its Affiliates that would be binding on Purchaser for any taxable period (or portion thereof) ending after the Closing Date.
(d) No issue has been raised in writing by any Governmental Entity which would reasonably be expected to affect the Tax treatment of the Acquired Assets in any taxable period (or portion thereof) ending after the Closing Date.
Section 3.04. Valid Title; Sufficiency of the Assets.
(a) Seller has good, legal and valid title to the Acquired Assets (other than Transferred Inventory covered by open purchase orders), in each case free and clear of all Liens, except (i) such as are set forth in Section 3.04 of the Seller Disclosure Schedule; (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, (iii) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (iv) Liens for Taxes which are not yet due and payable, (v) non-monetary imperfections of title, if any, which do not, individually or in the aggregate, materially detract from the value or materially impair the continued present use and operation of the Acquired Assets to which they relate, and (vi) non-exclusive licenses of Intellectual Property Rights in the ordinary course of business (the Liens described in clauses (i) through (vi) above are hereinafter referred to collectively as “Permitted Liens”).
(b) The Acquired Assets include all tangible and intangible property that are (i) sufficient for the conduct of the Product Business by Seller as such activities are currently conducted and (ii) sufficient for Seller to Commercialize, Manufacture and Exploit the Product as such Product exists and as such activities are currently conducted. The transfer of the Acquired Assets hereunder conveys to Purchaser good, valid and indefeasible title to, or a leasehold in, the Acquired Assets, free and clear of any Liens (other than Permitted Liens). No Acquired Assets are owned or held by any person other than Seller.
Section 3.05. Financial Information.
(a) Section 3.05 of the Seller Disclosure Schedule sets forth, for the year ended June 30, 2021, June 30, 2022 and June 30, 2023 and, as to be delivered by Seller no later than thirty (30) days following the Closing Date, the interim period ended November 30, 2023, (i) sales in units and sales value of the Product, (ii) returns and allowances recorded within net sales of the Product, (iii) actual returns of the Product received in units and value, (iv) direct cost of sales of the Product recorded within cost of goods sold, and (v) disputed customer accounts receivable. The net sales and cost of goods sold information are derived from and reconcile to the specific financial line items in Seller’s publicly filed financial statements (collectively, the “Product Financial Information”). The Product Financial Information referenced in Section 3.05 of the Seller Disclosure Schedule (i) is derived from and accurately reflects sales of the Product for the relevant periods included in Seller’s internal management accounts, (ii) has been prepared in accordance with GAAP, and (iii) is true and correct in all material respects.
(b) Seller maintains a system of internal controls over financial reporting sufficient to provide reasonable assurances that (i) transactions with respect to the Product are executed in accordance with management’s general or specific authorizations, (ii) transactions with respect to the Product are recorded as necessary to permit preparation of the financial statements in accordance with GAAP and to maintain accountability for its assets, and (iii) the recorded accountability for assets with respect to the Product is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.
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(c) Seller has made and kept all books and records, which, in reasonable detail, accurately and fairly reflect the activities with respect to the Product and the Acquired Assets in all material respects. The books of account and other financial records with respect to the Product and the Acquired Assets have been kept in the ordinary course of business consistent with applicable Law in all material respects.
Section 3.06. Intellectual Property.
(a) Seller exclusively owns all right, title and interest in and to the Transferred Intellectual Property, free and clear of all Liens, except for any Permitted Liens. The Product Business IP constitutes all Intellectual Property Rights owned or controlled by Seller that are used by Seller to Manufacture and Exploit the Product as currently conducted. All Transferred Intellectual Property is subsisting, valid and enforceable.
(b) Section 3.06(b) of the Seller Disclosure Schedule sets forth a true and complete list of all Transferred Intellectual Property that has issued, been registered or granted or that is the subject of an application for registration, issuance or grant and that has not expired or lapsed or been abandoned or withdrawn and lists each jurisdiction in which such applications have been filed (“Registered IP”). All maintenance fees, annuity fees or renewal fees for all Registered IP that are due and payable prior to the Closing have been paid, and all documents and certificates necessary to maintain such material Registered IP have been filed with, as applicable, the U.S. Patent and Trademark Office, U.S. Copyright Office, and any applicable internet authorities or registrars.
(c) Except as set forth on Section 3.06(c) of the Seller Disclosure Schedule, neither Seller nor any of its Affiliates is bound by, and no Transferred Intellectual Property is subject to, any Contract that in any respect limits or restricts the ability to use, license, sublicense, exploit, assert or enforce any such Transferred Intellectual Property.
(d) Section 3.06(d) of the Seller Disclosure Schedule sets forth a true and complete list of all Contracts by which Seller or any of its Affiliates has granted any license, sublicense, option for a license, or similar right to a third party with respect to any of the Transferred Intellectual Property.
(e) The Transferred Intellectual Property, and the Exploitation and Manufacture of the Product, does not, and has not, infringe, misappropriate, dilute or otherwise violate, the Intellectual Property Rights of any person, and does not, and has not constitute unfair competition or trade practices under applicable Law. Neither Seller nor any of its Affiliates has received any written notice from any person claiming that the Transferred Intellectual Property or the Exploitation or Manufacture of any Product infringes, misappropriates, dilutes or otherwise violates the Intellectual Property Rights of any person or constitutes unfair competition or trade practices under applicable Law. Neither Seller nor its Affiliates has received any written communication from any person challenging or threatening to challenge Seller’s ownership of, or right to use and license, any Transferred Intellectual Property.
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(f) To the knowledge of Seller, no third party is engaging, or has engaged, in any activity that infringes, misappropriates, dilutes or otherwise violates any of the Transferred Intellectual Property in any material respect. There is no Action pending, asserted or threatened by Seller or any of its Affiliates against any other person concerning any of the foregoing. There is, and has been, no Action pending, asserted or, to the knowledge of Seller, threatened by or against Seller or its Affiliates concerning, contesting or challenging the ownership, validity, registerability, enforceability or use of any Transferred Intellectual Property. No Transferred Intellectual Property is subject to any outstanding Injunction or other disposition of any Action.
(g) No current or former officer, director, or employee of Seller or any of its Affiliates or, any consultant of Seller or any of its Affiliates, has any right, title or interest in, to or under any Transferred Intellectual Property developed by such person in the course of providing services to Seller or any of its Affiliates that has not been irrevocably assigned, transferred or licensed to Seller or any of its Affiliates.
(h) Seller and its Affiliates take, and have taken, all reasonable steps necessary to protect the confidentiality and value of all Product Confidential Information. Without limiting the foregoing, (i) Seller and its Affiliates have, and use reasonable efforts to enforce, a policy requiring each employee, consultant and contractor employed or engaged in connection with the Product Business to execute proprietary information, confidentiality and assignment agreements restricting the disclosure and use of such Product Confidential Information, and (ii) no material Product Confidential Information has been disclosed by Seller or its Affiliates to any person except pursuant to valid, customary and binding non-disclosure agreements.
(i) No material Transferred Intellectual Property was developed by or on behalf of, or using funding, grants or any other subsidies of, any Governmental Entity or any university, and no government funding, facilities, faculty or students of a university, college, other educational institution were used, directly or indirectly, to develop or create, in whole or in part, any material Transferred Intellectual Property, in each case in a manner that has resulted in such Governmental Entity or institution obtaining ownership or other rights to such material Transferred Intellectual Property.
(j) The execution of this Agreement, the Other Transaction Documents, and the consummation of the transactions contemplated hereby will not alter, impair, or extinguish any of the rights in the Product Business IP.
(k) Seller and its Affiliates are, and have been, in compliance with (i) all applicable Laws, (ii) all of their contractual obligations, and (iii) all of their internal and public-facing privacy policies (including any privacy- or security-related representations, obligations or promises), in each case concerning data privacy and security relating to personal information in their possession or control with respect to the Product Business (such internal and public-facing privacy policies, collectively, “Privacy Policies”). Seller and its Affiliates have made all disclosures to users or customers required by all applicable Law in connection with the operation of the Product Business, and none of such disclosures made or contained in the Privacy Policies has been in violation of any applicable Law.
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Section 3.07. Contracts. Each Transferred Contract is in full force and effect and constitutes a legal, valid and binding obligation of Seller, and is enforceable by Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally, general principles of equity and the discretion of courts in granting equitable remedies. Seller has performed all material obligations required to be performed by it to date under the Transferred Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, and, to the knowledge of Seller, no other party to any of the Transferred Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. Neither Seller nor any of its Affiliates has received any written notice from a third party (a) stating that such third party intends to terminate any Transferred Contract or (b) alleging that Seller or its Affiliates is in breach or default in the performance, observance or fulfillment of any material obligation or covenant contained in any Transferred Contract, in each case ((a) and (b)). A true and complete copy of each Transferred Contract, including all amendments and modifications and side agreements relating thereto, has been delivered to Purchaser via being made available in the Data Room.
Section 3.08. Transferred Product Registrations. All Transferred Product Registrations are in full force and effect and have been validly issued to Seller, and Seller has complied in all material respects with all terms and conditions thereof. None of Seller or its Affiliates has received written notice relating to the revocation, withdrawal, suspension, cancellation, termination or modification of any Transferred Product Registration and to the knowledge of Seller there are no circumstances currently existing that would reasonably be expected to lead to any withdrawal of, loss of or refusal to renew any Transferred Product Registration. No Action is pending or, to the knowledge of Seller, threatened regarding the suspension, cancellation, termination, or revocation of any Transferred Product Registration. Seller has delivered to Purchaser via being made available in the Data Room complete and correct copies of all the Transferred Product Registrations. Except as set forth in Section 3.08 of the Seller Disclosure Schedule, the Product sold under the Transferred Product Registrations was designed, developed, formulated, processed, Manufactured, tested and Exploited in accordance with the specifications and standards contained in such Transferred Product Registrations, and is not adulterated or misbranded within the meaning of any applicable Law.
Section 3.09. Litigation. Section 3.09 of the Seller Disclosure Schedule sets forth a list of all criminal, judicial, administrative or arbitral lawsuits, actions, charges, complaints, proceedings, demands, investigations and claims, whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private, commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or private arbitrator or mediator (collectively, “Actions”), in each case, pending, or to the knowledge of Seller, threatened against Seller or any of its Affiliates (i) that are related to the Product, the Product Business, the Acquired Assets or the Assumed Liabilities, or (ii) that would prevent or delay the consummation by Seller of the Acquisition or the other transactions contemplated hereby or affect the legality, validity or enforceability of this Agreement or the Other Transaction Documents. The Seller and its Affiliates are not a party or subject to or in material default under any Injunction applicable to the Product, the Product Business, the Acquired Assets or the Assumed Liabilities. There is no inquiry or investigation pending or, to the knowledge of Seller, threatened by or before a Governmental Entity against or affecting the Product, the Product Business, the Acquired Assets or the Assumed Liabilities (including any inquiry as to the qualification of Seller or its Affiliates to hold or receive any Product Registration related to the Acquired Assets).
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Section 3.10. Compliance with Applicable Laws; Regulatory Matters.
(a) Seller is in compliance in all material respects with all applicable statutes, laws, ordinances, rules, orders, codes, treaties, judgments, decrees, regulations or other requirements or rules of law of any Governmental Entity (“Laws”) that are applicable to the design, development, formulation, processing, Manufacture, testing or Exploitation of the Product or to which the Acquired Assets or the Assumed Liabilities are subject, including (i) those relating to occupational health and safety (ii) any applicable Laws governing the design, development, formulation, processing, approval, Manufacture, testing, Exploitation, marketing, promotion or distribution of drugs and the purchase or prescription of or reimbursement for drugs by any Governmental Entity, private health plan or entity, or individual, and (iii) the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1 et seq.), the U.S. Anti−Kickback Statute (42 U.S.C. §1320a−7(b)), the U.S. False Claims Act (31 U.S.C. §§ 3729, et seq.), and the U.S. Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d et. seq.) and any international anti-bribery conventions or other applicable local anti-corruption or bribery Laws, in each case. To the knowledge of Seller, no event has occurred that will (with or without notice or lapse of time) constitute or result in a material violation by Seller or any of its Affiliates of, or a failure on the part of Seller or any of its Affiliates to comply with, any Law that is applicable to the Product or any of the Acquired Assets or Assumed Liabilities. Seller and its Affiliates have not received any written communication from a Governmental Entity that alleges that Seller is in violation of any applicable Law in any material respect.
(b) To the knowledge of Seller, none of its or its respective Affiliates’ directors, managers, officers, representatives, employees or agents or any other person acting on behalf of any such person, Seller or any of its Affiliates have, with respect to the Product or the Acquired Assets, (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful payments relating to any political activity, (ii) made any material unlawful payment to any government official or employee or any political party or campaign, or (iii) violated any international anti-bribery conventions or applicable local anti-corruption or bribery Laws.
(c) Seller and its Affiliates have at all times, with respect to the Product and the Acquired Assets, been in compliance in all material respects with all (i) U.S. and applicable international economic and trade sanctions, including any applicable Laws administered and/or enforced by the U.S. Department of State, the U.S. Department of the Treasury (including OFAC) and (ii) all anti-boycott applicable Laws, administered by the U.S. Department of Commerce, and have not engaged in any dealings or transactions with (A) any person that appears on the OFAC Specially Designated Nationals and Blocked Persons List or on any other list of blocked persons maintained by OFAC, as may be amended from time to time by OFAC, (B) any person that is otherwise the target of economic sanctions administered and/or enforced by OFAC or organized in a foreign jurisdiction against which any applicable Governmental Entity with jurisdiction over a Seller or its Affiliates, as applicable, maintains a trade embargo, economic sanction or other similar prohibition pursuant to which dealing with such person is prohibited or (C) any person owned or controlled by or acting on behalf of, directly or indirectly, any person described in sub-clauses (A) or (B) above.
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(d) Seller and its Affiliates and, to the knowledge of Seller, any employee or agent of Seller or any of its Affiliates has not made an untrue statement of material fact or fraudulent statement to the FDA, DEA, FTC, CMS or any other Governmental Entity with respect to any Product or failed to disclose a material fact required to be disclosed to any Governmental Entity with respect to any Product. As required under Law, Seller and its Affiliates maintained, filed or furnished to the applicable Regulatory Authority, Governmental Entity or person all material registrations, listings, filings, documents, statements, claims, reports, notices, and other submissions (collectively “Reports”) required to be maintained, filed or furnished on a timely basis with respect to the Product or the Acquired Assets. At the time of maintenance, filing or furnishing, all such Reports were complete and accurate in all material respects, or were subsequently updated, changed, corrected or modified, and no deficiencies have been asserted by any such Governmental Entity with respect to such Reports.
(e) Seller and its Affiliates have not voluntarily or involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any recalls or market withdrawals of any Product. None of Seller or its Affiliates have received any written notice that the FDA, DEA, FTC, CMS, National Institutes of Health, Office of the Inspector General for the Department of Health and Human Services, DOJ or any other Governmental Entity has (i) commenced, or threatened to initiate, any action to revoke, deny or withdraw any Product Registration or other marketing authority of the Product, or request the recall, market withdrawal, removal or replacement of any Product, (ii) commenced, or threatened to initiate, any action to seize any Product or enjoin the design, development, formulation, Manufacture, testing, processing, packaging, labeling, repackaging, relabeling, storage or Exploitation of any Product, or (iii) commenced, or threatened to initiate, any action to seize any Product or enjoin the design, development, formulation, Manufacture, testing, processing, packaging, labeling, repackaging, relabeling, storage or Exploitation of any Product produced at any facility where any Product is designed, developed, formulated, Manufactured, tested, processed, packaged, labeled, repackaged, relabeled, stored or held for Exploitation.
(f) All clinical and pre-clinical studies conducted by or on behalf of or sponsored by Seller or its Affiliates with respect to the Product were and, if still pending, are being, conducted in accordance with all applicable Laws and “good laboratory practices” and “good clinical practices,” in each case, in accordance with applicable industry standards in the United States. Seller and its Affiliates have not received any written notices, correspondence or other communication from any Regulatory Authority requiring the hold, termination, or suspension of any clinical trials conducted by, or on behalf of, Seller or its Affiliates with respect to the Product.
(g) All drug distribution activities with respect to the Product are in full compliance with the Drug Supply Chain Security Act, including requirements for registration, reporting, licensing, drug listing, product tracing and identification, and systems for verification and handling of suspect or illegitimate product.
(h) Seller and its Affiliates have not, with respect to the Product, received or been subject to any FDA Form 483, notice of adverse finding, warning letters or other similar notices or correspondence from any Regulatory Authority, and there is no Action pending or, to the knowledge of Seller, threatened by any such Regulatory Authority, with respect to the approval of, Exploitation of, Manufacture of, design of, development of, formulation of, purity of, testing of, processing of, packaging of, repackaging of, stability of, storage of, or the labeling, relabeling or promotion of the Product, or otherwise alleging any violation of Law with respect to, the Product.
(i) There have been no (i) regulatory inspections of any facility in which the Product is Manufactured for sale, or (ii) written correspondence from any Governmental Entity, in each case asserting that the manufacturing operations of any facilities in which the Product is Manufactured for sale is not in compliance in all material respects with all applicable Laws.
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(j) Seller and its Affiliates have not received any material written information from any Regulatory Authority with jurisdiction over the marketing, promotion, Exploitation, preclinical and clinical development, handling and control, safety, efficacy, purity, reliability, testing, processing, importation, packaging, labeling, Manufacturing, federal health care program price reporting information and information required by Law or Regulatory Authority to be retained related to such price reporting, of the Product which would reasonably be expected to result in the revocation, withdrawal, or denial of, or refusal to renew any Transferred Product Registration with respect to the Product Business.
(k) With respect to the Product and the facilities in which the Product is designed, developed, formulated, Manufactured, tested, processed, packaged, repackaged, labeled, relabeled or stored, Seller and its Affiliates have not received or been subject to any written correspondence, in each case from the FDA or any other Governmental Entity alleging that the Product or the facilities in which the Product is designed, developed, formulated, Manufactured, tested, processed, packaged, labeled or stored are or were in violation in any material respect of any Law or any applicable clearance, Permit, exemption, guidance or guideline, or alleging that the Product or the other facilities in which the Product are designed, developed, formulated, Manufactured, tested, processed, packaged, labeled or stored are or were the subject of any pending, or to the knowledge of Seller, threatened, Action by a Regulatory Authority. The Product has been designed, developed, formulated, Manufactured, tested, processed, packaged, labeled, repackaged, relabeled and stored in compliance in all material respects with applicable Law, including cGMP (or equivalent), and applicable Product Registrations.
(l) Seller and its Affiliates have not and, to the knowledge of Seller, each director, manager, officer, employee, agent or distributor of Seller or any of its Affiliates that is involved in the Product Business, has not, committed or been convicted of any crime or engaged in any conduct, or been the subject of any proceeding for which debarment or suspension is mandated by 21 U.S.C. § 335a(a) or any similar Law or authorized by 21 U.S.C. § 335a(b) or any similar Law. Seller and its Affiliates have not and, to the knowledge of Seller, each director, manager, officer, employee, agent or distributor of Seller or any of its Affiliates that is involved in the Product Business, has not been convicted of any crime or engaged in any conduct, or been the subject of any proceeding for which such person was or could be excluded from participating in the Federal Health Care Programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar Law. As of the date hereof, no Actions that would reasonably be expected to result in a debarment, suspension, exclusion or inability to participate in federal procurement and non-procurement programs are pending or, to the knowledge of Seller, threatened, against Seller or any of its Affiliates or, to the knowledge of Seller, any of their directors, managers officers, employees, agents or distributors that is involved in the Product Business. None of Seller, its Affiliates or any of their respective employees or, to the knowledge of Seller, any consultant of Seller who has undertaken activities for or on behalf of the Product Business has been debarred or deemed subject to debarment pursuant to Section 306 of the United States Federal Food, Drug and Cosmetic Act, nor, to the knowledge of Seller, are any such persons the subject of a conviction described in such section.
(m) With respect to the Product and the Product Business, Seller and its Affiliates have complied in all material respects with all requirements of Federal Health Care Programs, requirements relating to the Veterans Healthcare Act of 1992, and requirements relating to sales to 340B Program entities.
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(n) None of Seller or its Affiliates or, to the knowledge of Seller, any of their respective officers, directors, managers or employees, any of their respective Affiliates or any third parties, in each case, acting on behalf of Seller and its Affiliates, has (i) knowingly presented or caused to be presented a claim for reimbursement for services to any state, federal or foreign Governmental Entity, including any Federal Health Care Program, that is materially false, (ii) knowingly offered, paid, solicited, or received any remuneration (including any kickback, bribe, rebate, or fee), overtly or covertly, in cash or in kind: (A) in return for referring any individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by a Federal Health Care Program, or (B) to secure any improper advantage or to obtain or retain business that would cause Seller to be in violation of any Law, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), (iii) otherwise given, received, offered to pay to or solicited any remuneration from, in cash or kind, directly or indirectly, any past or present patient, customer, physician, other healthcare provider, supplier, vendor, contractor, Federal Health Care Program or other government program, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), or (iv) knowingly made or caused to be made or induced or sought to induce the making of any false statement or representation (or omitted to state a material fact required to be stated therein) in order that any past or present patient, customer, physician, other healthcare provider, supplier, vendor, or contractor may receive reimbursement from a Federal Health Care Program or government program or in order that Seller or any of its Affiliates may collect reimbursement from a Governmental Entity or Federal Health Care Program.
(o) Seller and its Affiliates have not received written notice of any adverse outcomes related to the Product or any of its ingredients that would reasonably be expected to be adverse to the Product or the Acquired Assets.
(p) Seller has engaged third parties and corresponded with the FDA related to the design and activities reasonably determined by Seller to be necessary to initiate and complete the FDA studies that are described on Exhibit C attached hereto (the “Specified FDA Studies”).
Section 3.11. Absence of Changes or Events. Except as set forth on Section 3.11 of the Seller Disclosure Schedule, since January 1, 2023 (i) Seller and its Affiliates have conducted the Product Business only in the ordinary course of the business, and (ii) there has not been any event, occurrence or development that, individually or in the aggregate with any such events, changes, occurrences or circumstances, has had or would reasonably be expected have a Seller Material Adverse Effect.
Section 3.12. Transferred Inventory.
(a) The Transferred Inventory is owned by Seller or its Affiliates free and clear of all Liens (other than Permitted Liens). Except as set forth in Section 3.12(a) of the Seller Disclosure Schedule, the Transferred Inventory (i) is useable or saleable and merchantable in the ordinary course of business, (ii) was designed, developed, formulated, processed, Manufactured and tested in compliance in all material respects with cGMP and in accordance with the applicable Transferred Product Registrations and applicable Law and (iii) is not adulterated or misbranded within the meaning of any applicable Law. Seller is not in possession of any Transferred Inventory not owned by Seller.
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(b) Except as set forth in Section 3.12(b) of the Seller Disclosure Schedule and except as would not, individually or in the aggregate, be reasonably likely to be material, to the extent that the Transferred Inventory contains or consists of raw materials and work-in-process, such raw materials and work-in-process have been designed, developed, formulated, processed, manufactured, tested, handled, maintained, packaged and stored at all times in compliance, in all material respects, with cGMP (or equivalent), the specifications set forth in the Transferred Product Registrations, and applicable Law.
Section 3.13. Product. The Product is not subject to any guaranty, warranty or other indemnity other than the applicable standard terms and conditions of Seller that have been made available to Purchaser. Seller has taken reasonable steps to ensure that the Product was designed, developed, formulated, processed, Exploited, Manufactured, tested, stored, packaged, repackaged, labeled, relabeled or licensed in conformity with all applicable contractual commitments, Laws and express and implied warranties, and is not adulterated or misbranded within the meaning of any applicable Law. Except as set forth in Section 3.13 of the Seller Disclosure Schedule, in the past three (3) years, no person has made any claim arising out of any personal injury and/or death proximately caused or alleged to be proximately caused by the use of the Product.
Section 3.14. Brokers. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker’s, finder’s or similar fee or other commission from, Seller or any of its Affiliates in connection with this Agreement or the transactions contemplated hereby.
Section 3.15. No Channel Stuffing. Since January 1, 2023, Seller and its Affiliates (a) have sold Product to wholesalers or distributors only in the ordinary course of business and in amounts that are generally consistent with past sales by Seller and its Affiliates to their wholesale and distributor customers during comparable periods (which, for the avoidance of doubt, shall take into account seasonality, cyclicality and other market conditions) and (ii) have not engaged in any practice with the intent of increasing the levels of inventory of the Product in the distributor or wholesaler channels outside of the ordinary course of business and in anticipation of entering into this Agreement or any similar transactions with respect to the Product.
Section 3.16. Suppliers, Customers and Payers. Since January 1, 2023, there has been no termination, cancellation or material curtailment of the business relationship of Seller or its Affiliates with any material supplier or customer of the Product Business or any material Payer, nor, to the knowledge of Seller, has any such supplier, customer or Payer indicated an intent to so terminate, cancel or materially curtail its business relationship with Seller or its Affiliates.
Section 3.17. Insurance. Seller has in force the product liability insurance policy set forth on Section 3.17 of the Seller Disclosure Schedule. Within the past five (5) years, Seller has had a product liability insurance policy in place. There are no claims which relate to the Acquired Assets, the Assumed Liabilities, the Product or the Product Business currently pending under any of Seller’s insurance policies.
Section 3.18. Non-Reliance. Except for the representations and warranties of Purchaser set forth in Article 4 and the Other Transaction Documents, neither Seller nor any Affiliate of Seller is relying and has not relied on any other representations or warranties whatsoever regarding the subject matter of this Agreement whether express or implied.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as of the date hereof (unless the representation and warranty is as of a specified date, in which case it shall be as of such specified date) as follows:
Section 4.01. Authority. Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Purchaser has all requisite corporate power and authority to enter into this Agreement, and Purchaser has all requisite corporate power and authority to enter into the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. Purchaser has duly and properly taken all corporate acts and other proceedings required to be taken by Purchaser to authorize the execution, delivery and performance of this Agreement and the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Purchaser and, prior to the Closing, Purchaser will have duly executed and delivered each Other Transaction Document to which it is, or is specified to be, a party. Assuming that this Agreement has been duly authorized, executed and delivered by Seller, this Agreement constitutes, and, upon the due authorization, execution and delivery of the Other Transaction Documents by Seller, each Other Transaction Document will constitute, a legal, valid and binding obligation of Purchaser, as the case may be, enforceable against such person in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.
Section 4.02. No Conflicts; Consents.
(a) The execution and delivery of this Agreement by Purchaser does not, and the execution and delivery of the Other Transaction Documents by Purchaser will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms and conditions hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a Lien upon any of the properties or assets under, any provision of (i) its certificate of incorporation or by-laws, [**] other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, would not be reasonably likely to have a Purchaser Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any person, including any Governmental Entity, is required to be obtained or made by or with respect to Purchaser in connection with the execution, delivery and performance of this Agreement, the Other Transaction Documents or the consummation of the transactions contemplated hereby or thereby other than (i) those that may be required solely by reason of Seller (as opposed to any other third party’s) participation in the transactions contemplated hereby or by the Other Transaction Documents and (ii) such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make or obtain which, individually or in the aggregate, would not be reasonably likely to have a Purchaser Material Adverse Effect.
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Section 4.03. Actions and Proceedings. There are no (a) outstanding judgments, orders, injunctions or decrees of any Governmental Entity or arbitration tribunal against Purchaser, (b) Actions pending or, to the knowledge of Purchaser, threatened against Purchaser, or (c) investigations by any Governmental Entity which are pending or, to the knowledge of Purchaser, threatened against Purchaser, which, in the case of each of clauses (a), (b) and (c), have had or would be reasonably likely to have a Purchaser Material Adverse Effect.
Section 4.04. Availability of Funds. Purchaser will have, as of the date any Contingent Payment is required to be made pursuant to the terms of this Agreement, the financial capability to pay such Contingent Payment.
Section 4.05. Brokers. No broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker’s finder’s or similar fee or other commission from, Purchaser in connection with this Agreement or the transactions contemplated hereby.
Section 4.06. No Implied Representations. Purchaser agrees that neither Seller nor any other person acting on behalf of Seller has made or is making any representations or warranties, express or implied, except those representations set forth in Article 3 of this Agreement. Purchaser acknowledges and agrees that, in determining to enter into this Agreement and consummate the transactions contemplated hereby, other than the representations explicitly set forth in Article 3, it has not relied and is not relying upon any representation or warranty of any kind, express or implied, made or purportedly made by or on behalf of any person. WITHOUT LIMITING THE GENERALITY OR EFFECT OF THE FOREGOING, PURCHASER ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, PURCHASER IS ACQUIRING THE ACQUIRED ASSETS “AS-IS” AND “WHERE-IS” AS OF THE CLOSING DATE, WITHOUT ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO THE FITNESS, MERCHANTABILITY, NON-INFRINGEMENT OR CONDITION OF THE ASSETS OR AS TO ANY OTHER MATTER. Notwithstanding the foregoing, no event shall this Section 4.06 limit in any way Purchaser from pursuing a claim of Fraud against any person, in any case, with respect to the representations explicitly set forth in Article 3.
ARTICLE 5
COVENANTS OF SELLER
Seller covenants and agrees as follows:
Section 5.01. Non-Competition.
(a) As a material inducement to Purchaser to enter into this Agreement, Seller shall not, and shall cause each of its current and future Affiliates not to, for a period of five (5) years after the Closing Date, directly or indirectly through any person, except as contemplated by this Agreement or any Other Transaction Document, (i) Commercialize, Exploit or Manufacture, or knowingly assist any other person in Commercializing, Exploiting or Manufacturing, any Seller Competing Product, or (ii) own, acquire, manage, operate, control or participate in the ownership, management, operation or control of any person engaged in the Commercialization, Exploitation or Manufacture of any Seller Competing Product; provided, that, for the avoidance of doubt, nothing in this Section 5.01(a) shall prohibit Seller from entering into any Contract with any vendors, manufacturers or other suppliers of the Product, so long as Seller otherwise complies with the restrictive covenants set forth in this Section 5.01(a).
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(b) The covenants and undertakings contained in this Section 5.01 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 5.01 may cause irreparable injury to Purchaser, such that money damages alone would not be a sufficient remedy for such violation. Therefore, Purchaser shall be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of this Section 5.01 without the necessity of proving actual Losses or posting any bond. The rights and remedies provided by this Section 5.01 are cumulative and in addition to any other rights and remedies which Purchaser may have hereunder or at Law or in equity.
(c) Notwithstanding anything contained in this Agreement to the contrary, if Seller or any of its Affiliates breaches Section 5.01(a), and Purchaser seeks and obtains an injunction, restraining order or other equitable relief from any court of competent jurisdiction, the five-year period referred to in Section 5.01(a) shall be computed from the date relief is granted to Purchaser instead of from the Closing Date and reduced by any time following the Closing Date during which Seller complied with its respective obligations thereunder.
(d) If any court of competent jurisdiction in a final nonappealable judgment determines that a specified time period, geographical area, business limitation or any other relevant feature of this Section 5.01 is unreasonable, arbitrary or against public policy, then the maximum time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy shall be enforced against the applicable party.
Section 5.02. Purchaser Right of First Offer and Right of First Refusal.
(a) Purchaser Right of First Offer.
(i) In the event that, prior to [**], Seller desires to license, sublicense, sell or transfer any right of Seller (or any of its Subsidiaries) to Commercialize one or more Specified Products to any person (other than a wholly-owned subsidiary of Seller) in a single transaction or a series of transactions (each, a “Specified Product Transfer”), Seller shall [**].
(ii) During each [**].
(iii) In the event that Seller and Purchaser do not [**], Seller shall be entitled to offer to engage in discussions with any third party with respect to the applicable Specified Product Transfer, subject to the terms of Section 5.02(b).
(iv) If Seller does not engage in any applicable Specified Product Transfer [**].
(b) Right of First Refusal.
(i) In the event that, [**].
(ii) Purchaser shall have the right and option to accept Seller’s offer to enter into the Specified Product Transfer identified in the Specified Product Sale Notice by delivering a notice of acceptance of such offer to Seller [**].
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(iii) In the event that Purchaser does not exercise its option to accept Seller’s offer to enter into the Specified Product Transfer identified in the Specified Product Sale Notice [**], then Seller shall be entitled [**].
Section 5.03. Non-Disparagement. For a period of five (5) years after the Closing Date, each of Seller and Purchaser will not, and will cause their respective Affiliates not to, make any disparaging or defamatory public comments reasonably be expected to harm the reputation of the other party (including, as to Seller, with respect to the Product), or to encourage or participate with anyone to make such statements or any such comments with respect to the other party (or, as to Seller, the Product) as applicable; provided, however, that the foregoing is not intended to, and shall not, prevent any party from reasonably engaging in activities not otherwise in violation of this Agreement or from making any truthful statements.
Section 5.04. Confidentiality. From and after the Closing Date, except as expressly permitted under any Other Transaction Document, Seller shall not, and shall cause its Affiliates not to, directly or indirectly, disclose or use for their own benefit or for the benefit of any person, any Product Confidential Information, except that Seller or any its Affiliates may disclose the Product Confidential Information or portions thereof (i) to those of its directors, officers, employees, agents, advisor, sublicensees and representatives who need to know such Product Confidential Information for the purpose of exercising its rights or performing its obligations under this Agreement, (ii) if it becomes legally compelled (by deposition, interrogation, requests for documents, subpoena, civil investigation, demand or otherwise) to disclose such Product Confidential Information; provided prompt prior written notice is provided to Purchaser (to the extent legally permissible), (iii) to a regulatory authority as required in connection with any filing, application or request for regulatory approval for the Product. For purposes hereof, “Product Confidential Information” means any and all non-public technical and non-technical confidential or proprietary information exclusively relating to the Product Business, including trade secrets, techniques, Know-How, processes, equipment, algorithms, software, design details and specifications, financial information, customer lists, business forecasts, sales and marketing plans as well as all notes, analysis, reports, compilations, studies, interpretations, summaries or other documents.
Section 5.05. Insurance. [**], Seller shell maintain products liability insurance covering sales of the Product prior to the Closing in amounts consistent with Seller’s current policies.
ARTICLE 6
MUTUAL COVENANTS
Section 6.01. Cooperation; Further Assurances.
(a) Purchaser and Seller shall cooperate with each other, and shall cause their respective officers, employees, agents, auditors and representatives to cooperate with each other, during the term of the Transition Services Agreement, to ensure the orderly transition of the Product and the Acquired Assets from Seller to Purchaser and to minimize any disruption to the respective businesses of Seller and Purchaser that might result from the transactions contemplated hereby. After the Closing, upon reasonable written notice, Purchaser and Seller shall furnish or cause to be furnished to each other and their employees, counsel, auditors and representatives reasonable access, during normal business hours, to such information and assistance relating to the Product and the Acquired Assets as is reasonably necessary for financial reporting and accounting matters, the preparation and filing of any Tax returns, reports or forms, or the defense of any Tax claim or assessment. The obligation to cooperate pursuant to the preceding sentence insofar as it concerns Taxes shall terminate at the time the relevant applicable statute of limitations expires (giving effect to any extension thereof). Each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 6.01. Neither party shall be required by this Section 6.01 to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations.
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(b) From time to time, as and when requested by either party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement.
(c) Subject to Section 1.07, if any party discovers, within twelve (12) months after the Closing Date, that any assets held by Seller or any of its Subsidiaries are Acquired Assets, but were not transferred to Purchaser as part of the consummation of the transactions under Section 1.04, then any such assets shall be deemed to have been held in trust by Seller or its Affiliates for Purchaser, and Seller shall promptly transfer, assign and convey such assets to Purchaser without any additional consideration therefor free and clear of all Liens (other than Permitted Liens).
(d) The parties hereby agree that, for a period of two (2) years following the Closing, Seller shall, and Seller shall cause its Affiliates to, use commercially reasonable efforts to cooperate with Purchaser to, upon the reasonable written request of Purchaser, deliver to Purchaser any Regulatory Documentation or Product Records of Seller that relate to the Product and that are within the possession and control of Seller and were not previously provided to Purchaser.
Section 6.02. Publicity. Seller and Purchaser agree that, from and after the date of this Agreement, no public release or announcement or communication concerning the transactions contemplated hereby shall be issued by either Seller or Purchaser or their respective Affiliates without the prior written consent of the other party (which consent shall not be unreasonably withheld, delayed or conditioned), except as such release or announcement may be required by applicable Law or the rules or regulations of any securities exchange to which such party is subject, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance; provided that Purchaser may disclose on a confidential basis in the course of its ordinary course reporting and fund raising activities the existence or content of any this Agreement and the transactions contemplated hereby to its Affiliates and its and their respective general partners, limited partners, equity holders, investors and potential investors.
Section 6.03. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller and its Affiliates with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Acquired Assets to Purchaser.
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Section 6.04. Tax Matters.
(a) Periodic Taxes. All personal property Taxes, real property Taxes and similar ad valorem obligations levied with respect to the Acquired Assets for any Pre-Closing Tax Period shall be apportioned between Seller, on the one hand, and Purchaser, on the other hand, as of the Closing Date based on the number of days of such Pre-Closing Tax Period included in the period ending with and including the Closing Date, and the number of days of such taxable period beginning after the Closing Date (with respect to any such taxable period, the “Post-Closing Tax Period”). Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period and Purchaser shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period. The portion of Tax attributable to a Post-Closing Tax Period will be attributable in a corresponding manner to Purchaser. Purchaser shall be responsible for preparing and filing all such periodic non-income Tax returns required to be filed after the Closing Date. Each of Seller, on the one hand, and Purchaser, on the other hand, shall provide reimbursement to the other party as necessary to give effect to this Section 6.04(a). Any Tax return filed by Purchaser for a Pre-Closing Tax Period that relates in whole or in part to the Acquired Assets and which includes Taxes for which Seller could reasonably be expected to be responsible under this Agreement or applicable Law (“Pre-Closing Purchaser-Filed Return”) shall be submitted by Purchaser to Seller (together with schedules, statements and, to the extent reasonably requested by Seller, supporting documentation) at least twenty (20) days prior to the due date (including any applicable extension) of such return; provided, however, that in the case of any Pre-Closing Purchaser-Filed Return that is due within twenty (20) days of the Closing, Purchaser shall submit such returns to Seller as soon as is reasonably practicable. If Seller, within ten (10) days after review of any such Pre-Closing Purchaser-Filed Return, notifies Purchaser in writing that it objects to any items in such return, Purchaser shall consider such objection in good faith.
(b) Cooperation. The parties hereto shall cooperate in good faith (i) to provide any information and documentation that may be reasonably requested in writing by the other party in order to obtain any reduction in or exemption from any Transfer Taxes and (ii) in connection with the preparation and filing of any tax return or the conduct of any audit, examination or other proceeding with respect to Taxes with respect to the Acquired Assets. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information reasonably relevant to any such matter.
(c) Purchase Price Allocation. Seller shall provide to Purchaser, no later than sixty (60) days after the Closing Date, a draft allocation of the Purchase Price (including, as appropriate for Tax purposes, assumptions of liabilities and other items properly treated as purchase price) among the Acquired Assets for Tax purposes (the “Allocation Statement”). Such allocation will comply with the requirements of Section 1060 of the Code and Section 2.01(a) of the Seller Disclosure Schedule and Seller and Purchaser shall cooperate in good faith to agree to such allocation. If within ten (10) days after the delivery of the Allocation Statement, Purchaser notifies Seller in writing that Purchaser objects to the allocation set forth in the Allocation Statement, Seller and Purchaser shall use commercially reasonable efforts to resolve such dispute within twenty (20) days. If Seller and Purchaser agree on the allocation, then each of Seller and Purchaser agrees that it shall (i) report the sale and purchase of the Acquired Assets for United States Tax purposes in accordance with such allocations and (ii) not take any position inconsistent with such allocations on any of their respective United States Tax returns. If Seller and Purchaser do not so agree, each of Seller and Purchaser (and their respective Affiliates) (x) shall not be required to agree to an allocation, (y) shall each be permitted to used its own purchase price allocation for any Tax purpose and (z) shall not have any liability to the other for any additional Taxes or other liabilities as a result of inconsistencies between the respective allocations of Purchaser and Seller.
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(d) Purchaser Post-Closing Activities. Purchaser shall not take any position with respect to Taxes relating to the Acquired Assets that reasonably would be expected to materially and adversely affect Seller or that would have the effect of shifting Tax to a Pre-Closing Tax Period unless, in each case, Seller shall have consented in writing to such action by Purchaser or such action shall be required by applicable Law.
(e) Transfer Taxes. All excise, sales, use, value added, transfer (including real property transfer or gains), stamp, documentary, filing, recordation and other similar Taxes imposed or assessed as a result of the Acquisition or the transactions contemplated by the Other Transaction Documents (“Transfer Taxes”) [**]. Any Tax returns and other required documentation that must be filed in connection with Transfer Taxes shall be prepared and filed by Purchaser and shared with Seller at least ten (10) days prior to the due date. The Seller shall pay its [**] share of any applicable Transfer Tax to the Purchaser at least five (5) days before the due date for the payment of any such Transfer Tax. To the extent required by applicable Law, Seller shall cooperate with Purchaser by executing the applicable Tax returns or other required documentation relating to such Transfer Taxes.
Section 6.05. Recordation and Transfer.
(a) Purchaser shall be responsible for making all applicable recordations (and preparation of such recordations and other applicable instruments of transfer or assignment) of the assignment or transfer of the Acquired Assets, including the Transferred Intellectual Property and the Transferred Product Registrations (and including the replacement of any applicable Transferred Product Registration naming Purchaser as the product registration holder). Seller shall cooperate, as reasonably requested by Purchaser in writing (email to be sufficient), to assist Purchaser in any such recordings or transfers. Purchaser and Seller shall share equally in all third party costs and expenses of all such recordations or transfers.
(b) As soon as practicable following the Closing Date, but subject to Section 6.05(d), Purchaser shall submit to or file with the relevant Governmental Entities all transfer applications and other documents required to be submitted or filed in order to effect the transfer to Purchaser of the Transferred Product Registrations (including the replacement of any applicable Transferred Product Registration naming Purchaser as the product registration holder), and Purchaser agrees to use its commercially reasonable efforts to cooperate fully with the relevant Governmental Entities and to take such other actions as are necessary or required to promptly effect such transfers, applications and cancellations, as applicable. Purchaser shall keep Seller reasonably informed of the progress of Purchaser in effecting the transfer to Purchaser of the Transferred Product Registrations (including the replacement of any applicable Transferred Product Registrations), including confirming in writing (including email) the completion of such transfer.
(c) Subject to the terms and conditions of this Agreement, including Section 6.05(d), each of the parties hereto shall (and shall cause their respective Affiliates, if applicable, to) work together to make all filings with and give all required notices to all Governmental Entities, [**]. The parties agree to use their commercially reasonable efforts to take any other actions required by the FDA or any other Governmental Entity to effect such filings, notifications and transfers.
(d) Purchaser and Seller shall file the [**].
(e) Prior to the Closing, in addition to the documentation provided pursuant to Section 1.04, Seller shall, or shall cause its Affiliates to, make available in the Data Room copies of all documentation relating to the Transferred Product Registrations. Seller shall retain all originals of documents while it remains the product registration holder as required by applicable Law.
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Section 6.06. Regulatory Responsibilities. Subject to the terms of the Other Transaction Documents, and except as required by a party to comply with applicable Law or to exercise its rights and obligations hereunder or under any Other Transaction Document, (i) prior to the transfer of the Transferred Product Registrations to Purchaser, Seller and its Affiliates shall have, and (ii) after the transfer of the Transferred Product Registrations to Purchaser, Purchaser shall have, the sole right and responsibility (the “Regulatory Responsibility”) for (a) taking all actions, paying all fees and conducting all communications with applicable Governmental Entities with respect to the Transferred Product Registrations, including preparing and filing all reports (including Adverse Event reports) with applicable Governmental Entities, (b) taking all actions and conducting all communications with third parties in respect of Product sold pursuant to the Transferred Product Registrations, including responding to all complaints in respect thereof, and (c) investigating all Adverse Events in respect of Product sold pursuant to the Transferred Product Registrations; provided that the other party shall provide reasonable cooperation to the party with the Regulatory Responsibility.
ARTICLE 7
INDEMNIFICATION
Section 7.01. Survival.
(a) Other than with respect to any claims arising from, in connection with or related to Fraud, (i) the representations and warranties in this Agreement (other than the Fundamental Representations) and the covenants and agreements of the parties contained in this Agreement to be performed at or prior to Closing shall survive the Closing and shall terminate at the close of business [**] of the Closing Date, (ii) the Fundamental Representations shall survive the Closing and shall terminate at the close of business on the [**]and (iii) any claim for Fraud and the representations and warranties set forth in Section 4.04 shall [**].
(b) All of the covenants and agreements of the parties contained in this Agreement to be performed after the Closing shall survive after the date of this Agreement in accordance with their terms.
Section 7.02. Indemnification by Seller. Subject to the provisions of this Article 7, from and after the Closing, Seller shall indemnify, defend and hold harmless Purchaser and its Affiliates and each of their respective officers, directors, managers, employees, agents and representatives against and hold them harmless from any loss, Liability, claim, injury, damage, settlement, damage, Tax, expense (including reasonable legal fees and expenses), out-of-pocket cost (including reasonable out-of-pocket costs of investigation and defense) (“Losses”) [**].
Section 7.03. Indemnification by Purchaser. From and after the Closing, Purchaser shall indemnify, defend and hold harmless Seller and its Affiliates and each of their respective officers, directors, managers, employees, agents and representatives against and hold them harmless from any Losses [**].
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Section 7.04. Limitations on Liability; Cooperation.
(a) Notwithstanding any provision herein, neither Seller nor Purchaser shall in any event be liable to the other party or its Affiliates, officers, directors, managers, employees, agents or representatives on account of any breach of this Agreement or of any indemnity obligation set forth in Section 7.02 or Section 7.03 for any punitive or exemplary damages (in each case, except to the extent actually paid to a third party in connection with a Third Party Claim).
(b) Other than with respect to [**], no indemnified party shall have any liability under Section 7.02(a) or Section 7.03(a) unless the aggregate of all Losses for which the indemnifying party would be liable exceeds on a cumulative basis an amount equal to [**].
(c) Other than with respect to [**], no indemnified party shall have any liability under Section 7.02(a) or Section 7.03(a) in excess of the greater of [**].
(d) Seller’s aggregate liability for Losses under [**] shall not, in the aggregate, exceed the Purchase Price.
(e) Notwithstanding anything in this Agreement to the contrary, for the purpose of determining whether a breach actually occurred and the amount of Losses of indemnified parties, the representations and warranties of any party in this Agreement that are qualified by materiality or Seller Material Adverse Effect or Purchaser Material Adverse Effect, as applicable, shall be deemed to be made without such materiality or Seller Material Adverse Effect or Purchaser Material Adverse Effect, as applicable, qualifiers.
(f) Purchaser and Seller shall use their commercially reasonable efforts to mitigate, reduce or eliminate any Losses to which it may be entitled; provided, that such mitigation obligations shall not require Purchaser to make claims against customers or suppliers if, in Purchaser’s reasonable view and on the advice of Purchaser’s counsel, such claim would materially harm the Product, the Acquired Assets, or the Assumed Liabilities.
Section 7.05. Losses Net of Insurance, Etc. The amount of any Loss for which indemnification is provided under this Article 7 shall be net of any amounts actually recovered by the indemnified party from any third party or under insurance policies with respect to such Loss (net of any costs of collection and increased premiums). Notwithstanding anything contained herein to the contrary, after the Closing, in any case where an indemnified party actually recovers, under insurance policies or from any other person alleged to be responsible for indemnifiable Losses, any amount in respect of a matter for which such indemnified party was indemnified pursuant to Section 7.02 or Section 7.03, such indemnified party shall promptly pay over to the indemnifying party the amount so recovered, but not in excess of the amount received by such indemnified party (net of any previously unpaid or unreimbursed expenses incurred in collecting such amounts).
Section 7.06. Procedures Relating to Indemnification for Third Party Claims.
(a) A party believing that it is entitled to indemnification under Section 7.02 or Section 7.03 (an “indemnified party”) shall give prompt written notification to the other party (the “indemnifying party”) of the commencement of any claim, action, lawsuit or other proceeding for which indemnification may be sought or, if earlier, upon the assertion of any such claim, action, lawsuit or other proceeding by any person against the indemnified party (a “Third Party Claim”) (it being understood and agreed, however, that the failure by an indemnified party to give notice of a Third Party Claim as provided in this Section 7.06 shall not relieve the indemnifying party of its indemnification obligation under this Agreement except and only to the extent that such indemnifying party is actually materially prejudiced as a result of such failure to give notice, except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice).
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(b) Within thirty (30) days after delivery of such notification, the indemnifying party may, upon written notice thereof to the indemnified party, assume control of the defense of such Third Party Claim. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel (reasonably satisfactory to the indemnifying party), at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof (other than during the period prior to the time the indemnified party shall have given notice of the Third Party Claim as provided above).
(c) The indemnifying party shall keep the indemnified party advised of the status of such Third Party Claim and the defense thereof and shall consider recommendations made by the indemnified party with respect thereto. The indemnified party shall deliver to the indemnifying party, promptly after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim.
(d) If the indemnifying party so elects to assume the defense of any Third Party Claim, all of the indemnified parties shall reasonably cooperate with the indemnifying party in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s reasonable request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third Party Claim, and the indemnified parties shall use their reasonable best efforts to make their employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.
(e) Whether or not the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge such Third Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld or delayed). If the indemnifying party assumes the defense of a Third Party Claim, the indemnifying party shall not agree to any compromise, discharge or settlement of such Third Party Claim or consent to any judgment in respect thereof, in each case without the prior written consent of the indemnified party, unless (i) such compromise, discharge, or settlement provides for a complete and unconditional release of the indemnified party from all liability with respect thereto and does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the indemnified party or any of its officers, directors, managers, employees, agents or representatives, and (ii) the sole relief provided in connection therewith is the payment of a cash settlement and does not impose an injunction or other equitable relief upon the indemnified party.
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Section 7.07. Procedures Related to Indemnification for Other Claims. In the event any indemnified party should have a claim against any indemnifying party under Section 7.02 or Section 7.03 that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. The failure by any indemnified party to so notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to such indemnified party under Section 7.02 or Section 7.03, except to the extent that the indemnifying party demonstrates that it has been materially prejudiced by such failure. If the indemnifying party disputes its liability with respect to such claim, the indemnifying party and the indemnified party shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of competent jurisdiction.
Section 7.08. Right to Satisfy Indemnification Claims by Reducing Contingent Payments.
(a) Purchaser is expressly authorized, but shall not be obligated, to set off up to 100% of any Losses for which it is entitled to indemnification hereunder (subject to the limitations set forth in Section 7.04) that have been finally determined to be owing by Seller to Purchaser in accordance with Article 7 against any Contingent Payment to be made to Seller following the Closing.
(b) Neither the exercise nor the failure or delay to exercise such right of set off pursuant to this Section 7.08 will constitute an election of remedies or limit the rights and remedies of Purchaser hereunder.
Section 7.09. Tax Treatment of Payments. For all Tax purposes, Purchaser, Seller and each of their respective Affiliates agree to treat any indemnity payment under this Agreement as an adjustment to the Purchase Price received by Seller for the transactions contemplated by this Agreement unless a final determination (as defined in Section 1313 of the Code or any similar provision of state, local or non-United States law) provides otherwise or otherwise required under applicable Law.
Section 7.10. Exclusive Remedy. From and after the Closing, the remedies provided by this Article 7 shall be the sole and exclusive monetary remedies of the indemnified parties for the recovery of Losses resulting from, relating to or arising out of this Agreement or the transactions contemplated hereby. Notwithstanding the foregoing or anything else in this Agreement to the contrary, nothing herein shall limit any indemnified party’s right or ability to make, pursue, enforce or prosecute a claim for (i) equitable relief pursuant to Section 1.03 or Section 5.01(b), (ii) Fraud, (iii) breach or violation of Section 5.01, (iv) breach or violation of the Other Transaction Documents (including but not limited to the Transition Services Agreement) or (vi) payment of any payments owed or otherwise payable in accordance with Section 1.01.
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ARTICLE 8
MISCELLANEOUS
Section 8.01. Assignment. Neither Seller nor Purchaser may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other party, except that either party may make such an assignment or transfer without the other party’s prior written consent (i) to any of its Affiliates (but only for so long as such person is and remains an Affiliate of such party, it being agreed that such party shall cause such assignment to terminate prior to such time, if any, as such person ceases to be an Affiliate of such party) or (ii) to any purchaser of all of their assets or businesses; provided, that no such assignment by Purchaser shall be valid unless such purchaser expressly assumes in writing all of the obligations of Purchaser under this Agreement, and provided further, that no such assignment shall relieve Purchaser of its obligations under this Agreement (including its obligation to make any Contingent Payment). Any permitted successor or assignee of rights and/or obligations hereunder shall, in a writing delivered to the other party, expressly assume performance of such rights and/or obligations. In the event of an assignment or transfer as provided above in this Section 8.01, the assigning or transferring party shall remain responsible (jointly and severally) with such assignee or transferee for the performance of such assigned or transferred obligations. Any assignment or transfer, or attempted assignment or transfer, by either party in violation of the terms of this Section 8.01 shall be null and void and of no legal effect. This Agreement shall be binding on, and inure to the benefit of, each party, its successors and permitted assigns.
Section 8.02. No Third-Party Beneficiaries. Except for the rights of parties entitled to indemnification pursuant to Article 7, this Agreement is for the sole benefit of the parties hereto and their permitted assigns, and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.
Section 8.03. Expenses. Except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement, the Other Transaction Documents and the transactions contemplated hereby and thereby shall be paid by the party incurring such costs or expenses.
Section 8.04. Amendments; Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing, Purchaser, on the one hand, or Seller, on the other hand, may waive compliance by the other with any term or provision of this Agreement that such other party was or is obligated to comply with or perform. Any such waiver shall only be effective in the specific instance and for the specific and limited purpose for which it was given and shall not be deemed a waiver of any other provision of this Agreement or of the same breach or default upon any recurrence thereof. No failure on the part of any party to exercise and no delay in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall 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. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.
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Section 8.05. Notices. All notices, requests, consents, claims, demands, waivers or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by email (with written confirmation of receipt) or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand or email, when receipt is so confirmed, or if mailed, three (3) days after mailing (one (1) business day in the case of overnight mail or overnight courier service), as follows (or at such other address for a party as shall be specified by like notice):
(a) if to Purchaser:
Cosette Pharmaceuticals, Inc.
200 Crossing Blvd
Bridgewater, NJ 08807
Attention: General Counsel
Email: [**]
with a copy to:
Dentons Cohen & Grigsby P.C.
625 Liberty Avenue 5th Floor
Pittsburgh, Pennsylvania 15222-3152
Attention: Matthew Clark, Steven Taibl, Mark Mazza
Email: [**] and
and
Dentons US LLP
101 John F Kennedy Pkwy
Short Hills, NJ 07078 Attention: Ilan Katz
Email: [**]
(b) if to Seller,
Palatin Technologies, Inc.
4-B Cedar Brook Drive
Cranbury, NJ 08512
Attention: Stephen T. Wills
Email: [**]
with a copy to:
Thompson Hine LLP
300 Madison Avenue, 27th Floor
New York, NY 10017
Attention: Faith L. Charles
Email: [**]
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Section 8.06. Interpretation; Exhibits, Seller Disclosure Schedule and Other Schedules; Certain Definitions. The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “or” when used in this Agreement is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. All terms defined in this Agreement shall have their defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth therein), (b) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (c) all references herein to Articles, Sections, Exhibits or Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules of this Agreement, (d) the headings contained in this Agreement, the Seller Disclosure Schedule, other Schedules or any Exhibit and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, (e) a reference to any legislation or to any provision of any legislation will include any modification, amendment or re-enactment thereof, any legislative provision substituted therefore and all rules, regulations and statutory instruments issued or related to such legislation, (f) if any action is to be taken by any party hereto pursuant to this Agreement on a day that is not a business day, such action will be taken on the next business day following such day, (g) references to a person are also to its permitted successors and assigns, and (h) unqualified references to “$” or “dollars” are to U.S. dollars. Any matter set forth in any provision, subprovision, section or subsection of the Seller Disclosure Schedule shall be deemed set forth for all purposes of the Seller Disclosure Schedule to the extent relevant and reasonably apparent. The Seller Disclosure Schedule, all other Schedules and all Exhibits hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in the Seller Disclosure Schedule, any other Schedule or any Exhibit annexed hereto but not otherwise defined therein shall have the meaning as defined in this Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. No parol evidence will be introduced in the construction or interpretation of this Agreement unless the ambiguity or uncertainty in issue is plainly discernible from a reading of this Agreement without consideration of any extrinsic evidence.
(a) For all purposes hereof:
“Accounts Payable” means all accounts payable and Liabilities, obligations and commitments, regardless of when asserted, billed or imposed (including any gross-to-net deductions which are payable) of Seller, all other accounts or notes payable by Seller and any claim, remedy or other right related to any of the foregoing, as of the end of the day immediately prior to the Closing Date, in each case with respect to Product sold prior to the Closing.
“Accounts Receivable” means all accounts receivable, notes receivable and other indebtedness due and owed by any third party to Seller as of the end of the day immediately prior to the Closing Date, including all trade accounts receivable representing amounts receivable in respect of products sold, goods shipped or services rendered prior to the day immediately prior to the Closing Date, and any security, claim, remedy or other right related to any of the foregoing.
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“Adverse Event” means, with respect to the Product, any undesirable, untoward or noxious event or experience associated with the use, or occurring during or following the administration, of such Product in humans, occurring at any dose, whether expected or unexpected and whether or not considered related to or caused by such Product or any of its ingredients, including such an event or experience as occurs in the course of the use of such Product in professional practice, in a clinical trial, from overdose, whether accidental or intentional, from abuse or misuse, from withdrawal or from a failure of expected pharmacological or biological therapeutic action of such Product, and including those events or experiences that are required to be reported to the FDA under 21 C.F.R. sections 312.32, 314.80 or 600.80, as applicable, or to non-U.S. Governmental Entities under corresponding applicable Law outside the United States.
“Affiliate” means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person whether now or in the future; and for the purposes of this definition, “control”, when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Annual Net Sales” means, with respect to the Product, Net Sales of such Product by Purchaser and its Affiliates and licensees in the United States in a Calendar Year. For the avoidance of any doubt Annual Net Sales shall not include any sales made pursuant to the terms of the Shanghai Fosun License Agreement or the Kwangdong License Agreement.
“API” means active pharmaceutical ingredient.
“Assumption Agreement” means the assumption agreement to be executed by Purchaser to evidence its assumption of the Assumed Liabilities, in a form reasonably satisfactory to Purchaser and Seller.
“Bill of Sale” means a bill of sale and assignment agreement in customary form with respect to the transfer and assignment of the Acquired Assets, in a form reasonably satisfactory to Purchaser and Seller.
“business day” means any day, other than a Saturday or Sunday, on which commercial banks are not required or authorized to close in the City of New York, New York.
“cGMP” means the then-current standards of good manufacturing practice for the manufacture, processing, packaging, testing, holding or distributing of a medicinal product for human use to assure that such medicinal product meets (a) the requirements of applicable Law and other requirements of any applicable Governmental Entity as to safety, purity, identity and strength, and (b) the quality and purity characteristics that it purports or is represented to possess.
“CMS” means the Centers for Medicare and Medicaid Services within the United States Department of Health and Human Services, or any successor organization or agency.
“Code” means the United States Internal Revenue Code of 1986, as amended.
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“Commercialize” means to market, promote, distribute, offer for sale, sell, have sold, import, have imported, export, have exported or otherwise commercialize a compound or product.
“Commercially Reasonable Efforts” means, [**].
“Copyrights” means all copyrights and works of authorship, whether or not published, all copyright registrations and applications therefor and all extensions, restorations, reversions and renewals thereof and all rights in copyrightable works and other works of authorship and derivative works thereof.
“Data Room” means the online data room maintained by Seller and hosted by [**].
“DEA” means the U.S. Drug Enforcement Administration, or any successor organization or agency.
“dollars” or “$” means lawful money of the United States of America.
“Exploit” means (and, with correlative meanings, the terms “Exploited,” “Exploitation” and “Exploiting”) to import, export, use, have used, sell, offer for sale, have sold, commercialize, hold or keep (whether for disposal or otherwise), transport, distribute, promote, market or otherwise dispose of.
“FDA” means the United States Food and Drug Administration and any successor agency thereto.
“Federal Health Care Program” means “federal health care program” as such term is defined in 42 U.S.C. § 1320a-7b(f), including Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), the U.S. Department of Veterans Affairs, TRICARE and similar or successor programs that are funded, in whole or in part, by the United States Government.
“Fifth Net Sales Milestone” means [**].
“Finished Goods Inventory” means [**] of Finished Inventory having an expiration of no earlier than [**].
“Finished Inventory” means all inventory of the Product in finished packaged form (together with the Product packaging materials thereon) that is owned by Seller or any of its Affiliates and that is labeled for sale.
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“First Net Sales Milestone” means the first attainment of Annual Net Sales of not less than fifteen million dollars ($15,000,000).
“First Net Sales Milestone” means [**].
“Fourth Net Sales Milestone” means [**].
“Fraud” means actual and intentional fraud by a party in the making of the representations and warranties expressly made by such party in this Agreement or any Other Transaction Document. Notwithstanding the foregoing, in no event shall “Fraud” be deemed to include equitable fraud, constructive fraud or other claims based on constructive knowledge, negligent misrepresentation, recklessness or similar theories.
“FTC” means the United States Federal Trade Commission.
“Fundamental Representations” means the representations and warranties set forth in Section 3.01 (Authority), Section 3.02(a) (No Conflicts; Consents), Section 3.04(a) (Valid Title), Section 3.06(a) (Intellectual Property Ownership), Section 3.10 (Compliance with Applicable Laws; Regulatory Matters), Section 3.14 (Brokers), Section 4.01 (Authority), Section 4.02(a) (No Conflicts; Consents) and Section 4.05 (Brokers).
“GAAP” means the United States generally accepted accounting principles as in effect from time to time.
“Governmental Entity” means any international, federal, state or local government or any court, arbitrator or tribunal of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, including any Regulatory Authority.
“Injunction” means any judgment, executive order, writ, stipulation, decree, legally binding agreement, decision, determination, temporary restraining order, ruling, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by, or executed with, any Governmental Entity.
“Intellectual Property Rights” means any and all intellectual property, industrial or related proprietary rights, however arising, pursuant to the Laws of any jurisdiction throughout the world, including: (a) Patents; (b) Trademarks; (c) Copyrights; (d) Know-How; (e) rights of privacy and publicity and moral rights; (f) registrations and applications for registration of any and all of the foregoing, including any renewals, extensions, continuations (in whole or in part), divisionals, provisionals, reexaminations or reissues or equivalent or counterpart thereof; and (g) all claims, causes of action, rights of recovery and rights of set-off of any kind (including the right to sue and recover for past infringements or misappropriations) against any person.
“IP Assignment Agreement” means the Intellectual Property Assignment Agreement between Seller and Purchaser substantially in the form of Exhibit A.
“Know-How” means all know-how, trade secrets, data, designs, processes, methods, confidential data, technical information, technology, formulations, chemical manufacturing control data, quality control and testing procedures, clinical data and specifications (including specifications for mixing and preparation of ingredients and packaging specifications).
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“knowledge of Seller” means the current actual knowledge of Stephen T. Wills, Carl Spana, PhD, Robert Jordan, PMP, J. Don Wang, PhD, and, Samrat Sisodia, PhD.
“Kwangdong Development Milestone Payment” means [**].
“Kwangdong License Agreement” means the License Agreement, dated November 21, 2017, by and between Kwangdong Pharmaceutical Co., Ltd. and Seller.
“Liabilities” means any debts, liabilities, losses, damages, fines, penalties, obligations, commitments, claims or complaints or any kind, whether accrued or unaccrued, matured or unmatured, asserted or unasserted, liquidated or unliquidated, known or unknown, fixed or contingent, determined or determinable, whether or not the same would be required to be reflected in financial statements or disclosed in the notes thereto and whether in Contract, tort, strict liability or otherwise, including any arising under any Law.
“Liens” means liens (statutory or otherwise), claims, encumbrances, security interests, options, charges, mortgages, pledges, hypothecations, right of others, title defects, title retention agreements, voting trust agreements, third party rights or other right or interests, options, rights of first refusal, offer or negotiation, rights of preemption or rights to acquire, or other restrictions or limitations, including any restrictions on the right to vote, sell or otherwise dispose of the subject property, other than any restrictions or limitations imposed by this Agreement.
“Manufacture” and “Manufacturing” means all activities related to the production, manufacture, processing, filling, finishing, testing, packaging, labeling, and shipping and holding (prior to distribution) of the Product or any ingredient or intermediate thereof, including quality assurance and quality control.
“Net Sales” means, with respect to a particular period, the aggregate gross amounts invoiced by or on behalf of Purchaser or any of its Affiliates for sales of the Product in arm’s length transactions to third parties, less the following items to the extent actually taken, incurred or estimated with respect to sales of the Product and to the extent not previously deducted in calculating the amount invoiced or billed and all in accordance with Purchaser’s standard accounting procedures under GAAP as consistently applied (except as otherwise provided below):
(i) rebates, credits or allowances for returns, price adjustments, claims, rejections or recalls (including due to spoilage, damage, expiration of useful life or otherwise), obsolescence, and manufacturing variances;
(ii) Taxes on sales or delivery of such Product (such as import, export, excise, sales, use, and value added Taxes or other Taxes levied on, absorbed determined and/or imposed with respect to such sales, tariffs and customs duties to the extent allocable to sales of such Product), but excluding any Taxes based on or measured by income;
(iii) any quantity, cash, promotion, or other trade discounts, prompt pay discounts, rebates (or their equivalent), returns, refunds, chargebacks, billbacks, administrative fees, stocking or other allowances, fees, credits or allowances, short-dated discounts, cash and non-cash coupons or retroactive price reductions or corrections (including billing errors or shipping errors) to any third party, including any purchasers, reimbursers, customers, distributors, wholesalers and group purchasing and managed care organizations and other similar entities and institutions (including amounts incurred in connection with government-mandated rebate and discount programs, rebates and chargebacks, and hospital buying group/group purchasing organization administration fees and payor organizations), in each case, which effectively reduce the selling price or gross sales of the Product;
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(iv) fees paid to wholesalers, distributors and selling agents or allocation of internal resources performing similar services, in each case with respect to the Product, and other similar fees that are customary in the industry and incurred for the sales of the Product to customers;
(v) redistribution center (RDC) and wholesaler fees;
(vi) the costs incurred by Purchaser (or any of its Affiliates) in connection with patient support services, including insurance benefit investigations, co-pay assistance (not including administrative costs), and provision of free or low-cost drug to patients demonstrating financial need; and
(vii) any other deductions taken by Purchaser or any of its Affiliates in calculating net sales in the ordinary course of its business, consistent with GAAP (or the applicable accounting standard of such Purchaser or any of its Affiliates, if the sale occurs in a jurisdiction outside of the United States).
For clarity, and notwithstanding anything contained herein, (a) Net Sales shall not include any payments between or among Purchaser and its Affiliates, (b) sales by Purchaser or any of its Affiliates to a third party consignee shall not be recognized as Net Sales until the third party consignee sells the Product to a third party and so notifies Purchaser, (c) sales by Purchaser or its Affiliates of the Product to a licensee or to a third party distributor or wholesaler shall be considered a sale to a licensee or to a third party customer and shall be included in Net Sales but any subsequent sale by any such licensee or third party distributor or wholesaler to a third party customer shall not be included in Net Sales, and (d) the Product distributed as free promotional samples or used in research or development activities or for compassionate use shall be disregarded in determining Net Sales.
“OFAC” means the Office of Foreign Asset Control.
“ordinary course of business” means any action taken by Seller which is consistent with the past customs and practices of Seller.
“Other Transaction Documents” means (i) the Bill of Sale, (ii) the Assumption Agreement, (iii) the IP Assignment Agreement, (iv) the Transition Services Agreement, and (v) each other agreement, document, instrument or certificate contemplated hereby or thereby or to be executed by Seller or Purchaser in connection with the consummation of the transactions contemplated hereby, including the Additional Transfer Documents.
“Patents” means all domestic and foreign patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and reexaminations thereof, and any identified invention disclosures, inventions (whether patentable or not and whether or not reduced to practice), registered designs, industrial models, industrial designs, utility models, certificates of invention, and designs.
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“Payer” means an insurer, health maintenance organization or other payer of health-related claims.
“Permit” means any license, permit, authorization, registration, clearance, application, submission, consent or approval (including Product Registrations) from any Governmental Entity.
“person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion up to and including the Closing Date of any Tax period that includes (but does not end on) the Closing Date. All real property Taxes, personal property Taxes and similar ad valorem obligations levied with respect to the Acquired Assets (including, for the avoidance of doubt, any fee or other amounts payable pursuant to the Prescription Drug User Fee Act, as amended from time to time) for a Tax period that includes (but does not end on) the Closing Date shall be apportioned between the Pre-Closing Tax Period and the period after the Closing Date based on the number of days of such Tax period included in the Pre-Closing Tax Period and the number of days of such Tax period after the Closing Date.
“Product Business” means any and all of the following activities as conducted by Seller or any of its Affiliates as of the Closing Date, in each case, of the Product anywhere in the world: the development, manufacturing, researching (including non-clinical and clinical research), testing, and commercialization (including marketing, promotion, pricing, selling, importing and exporting).
“Product Business IP” means (a) all Transferred Intellectual Property and (b) all Product Know-How.
“Product Know-How” means Know-How not included in the Patents of Seller that is: (i) owned by Seller immediately prior to the Closing; and (ii) necessary for, or is used by Seller as of the Closing Date in connection with, the development, manufacture (including synthesis, formulation, finishing or packaging), use, holding, marketing, offer for sale, sale, distribution, export or import of the Product.
“Product Labeling” means, with respect to the Product, (a) the Governmental Entity-approved full prescribing information for such Product, including any required patient information and (b) all labels and other written, printed or graphic matter upon a container, wrapper or any package insert utilized with or for such Product.
“Product Records” means, other than Regulatory Documentation and Marketing Materials, all (a) books and records (other than financial books and records) exclusively related to the Manufacture or Exploitation of the Product in the 12-month period prior to the Closing Date, including all sales and promotional literature, manuals, laboratory records and preclinical, clinical and marketing studies (in all cases, in any form or medium) and (b) current customer lists exclusively related to the Product.
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“Product Registrations” mean (i) any and all approvals, consents, licenses, applications or filings pending or issued to Seller by the relevant Governmental Entities prior to Closing solely related to the Exploitation and/or Manufacture of the Product, (ii) any rights that Seller has in any approval referred to in clause (i) of this definition under any agreement pursuant to which any such approval is held in the name of a third person, and (iii) supporting documentation in Seller’s files with respect to any of the foregoing, including supplements, annual reports, field alerts, and adverse event reports, toxicology, chemistry and efficacy data, studies, protocols, final reports and raw data. The Product Registrations shall include the pricing and reimbursement approval (if applicable or available), labeling approvals and all national drug code numbers (if any) assigned to the Product.
“Purchaser FDA Transfer Letter” means an executed letter from Purchaser to the FDA assuming responsibility for each of the applicable Product Registrations approved by the FDA, in customary form.
“Purchaser Material Adverse Effect” means any state of facts, change, development, condition, effect, event or occurrence that individually or in the aggregate (a) prevents or materially impedes or delays the consummation of the Acquisition or the other transactions contemplated by this Agreement or (b) has, or could reasonably be expected to have, a material adverse effect on the ability of Purchaser to perform its obligations under this Agreement and the Other Transaction Documents.
“Regulatory Authority” means any Governmental Entity that is concerned with the safety, efficacy, reliability, Manufacture, investigation, sale or marketing of pharmaceutical products, medical products, biologics or biopharmaceuticals, including the FDA, the DEA and the CMS.
“Regulatory Documentation” means all (a) documentation comprising the Transferred Product Registrations and written correspondence with any Regulatory Authority pertaining to Product Registrations for the Product, (b) correspondence and reports relating to the Product submitted to or received from Governmental Entities (including minutes, letters and official contact reports relating to any communications with any Governmental Entity) and relevant supporting documents submitted to or received from Governmental Entities with respect thereto, including regulatory drug lists, final versions of advertising and promotion documents, Product Labeling used as of the Closing Date, Adverse Event files and complaint files, safety reports or updates, complaint files and product quality reviews, all clinical or pre-clinical data derived from clinical studies conducted or sponsored by, or on behalf of Seller or its Affiliates, (c) all data (including clinical and pre-clinical data) related to the Product contained in any of the foregoing, and (d) all other documents, reports, records, dossiers, files and other data, information and materials directly related to compliance with the applicable Law relating to the Product, product safety related information (including periodic safety update reports and adverse event database information), regulatory submissions, expiration dating, federal health care program price reporting information, in each case, required by Law or Regulatory Authority to be retained.
“Second Net Sales Milestone” means [**].
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“Seller Competing Product” means any pharmaceutical product that (x) is intended to treat female hypoactive sexual desire disorder or (y) that includes bremelanotide as an API alone or in combination with any other API and that is not, in either case, a Specified Product.
“Seller FDA Transfer Letter” means an executed letter from Seller to the FDA transferring to Purchaser the rights to each of the applicable Product Registrations approved by the FDA, in customary form.
“Seller Material Adverse Effect” means any state of facts, change, development, condition, effect, event or occurrence that, individually or in the aggregate, (x) has, or would reasonably be expected to have, a material adverse effect on the business, assets, Liabilities, results of operations or financial condition of Seller and its Affiliates in respect of the Acquired Assets and the Assumed Liabilities, taken as a whole (including any business related thereto), (y) prevents or materially impedes or delays the consummation of the Acquisition or the other transactions contemplated by this Agreement or (z) has, or would reasonably be expected to have, a material adverse effect on the ability of Seller to perform its obligations under this Agreement and the Other Transaction Documents or consummate the transactions hereunder. For purposes of this Agreement, “Seller Material Adverse Effect” shall exclude any effects to the extent resulting from (i) changes in the United States or foreign economies or political, regulatory or financial market conditions in general (including disruptions thereof), (ii) changes in applicable Law or applicable accounting regulations or principles or interpretations thereof, (iii) changes in the pharmaceutical industry in general and not specifically relating to the Acquired Assets, (iv) the pendency or announcement of the Acquisition or the other transactions contemplated by this Agreement or any Other Transaction Document (including the disclosure of the identity of Purchaser), including any Action resulting therefrom or with respect thereto, and adverse change in customer, governmental, supplier or similar relationships resulting therefrom (v) any action taken or omission to act with the express written consent or upon the written request of Purchaser or any action or omission to act which is required or expressly permitted by this Agreement, (vi) failure of Seller or any of its Affiliates to meet internal or published projections, revenue predictions or forecasts relating to the Product (provided that the underlying reason for such failure may be taken into account in determining the existence of a Seller Material Adverse Effect), and (vii) hurricanes, earthquakes, floods or other natural disasters, acts of God, epidemics or pandemics (including COVID-19 and any developments related thereto) or political, regulatory, legislative or social conditions (including the commencement, continuation or escalation of a war, armed hostilities, acts of terrorism or any other local, international or national calamity); provided that with respect to clauses (i), (ii), (iii), and (vii), such matter shall be considered to the extent (but solely the disproportionate extent) that it disproportionately affects the Product as compared to similar pharmaceutical products being manufactured, marketed or sold by pharmaceutical businesses.
“Seventh Net Sales Milestone” means [**].
“Shanghai Fosun Development Milestone Payment” means [**].
“Shanghai Fosun License Agreement” means the License Agreement dated September 6, 2017 by and between Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. and Seller.
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“Sixth Net Sales Milestone” means [**].
“Specified Product” means any product that includes bremelanotide as an API in combination with one or more other APIs that is to be Commercialized solely for the treatment of male erectile disfunction and/or obesity.
“Subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such person.
“Tax” or “Taxes” means (a) any income, corporate, capital stock, capital gains, capital acquisitions, commercial activity, inheritance, deposit interest retention, gift, alternative minimum, add-on minimum, gross income, gross receipts, sales, use, ad valorem, net worth, transfer, franchise, profits, license, value-added, withholding, payroll, employment or unemployment, disability, social security (or similar), excise, severance, registration, stamp, occupation, premium, property, environmental or windfall profit tax, customs duty or other tax, governmental fee or other like assessment or charge whatsoever, together with any interest or any penalty or addition to tax imposed in respect of the foregoing, and (b) any Liability for the payment of any amounts of the type described in clause (a) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any taxable period.
“Taxing Authority” means any Governmental Entity that imposes, administers, assesses, adjudicates or collects Taxes or Tax returns.
“Third Net Sales Milestone” means [**].
“Trademarks” means all trademarks, service marks, designs, trade dress, logos, slogans, emblems, trade names, brand names, domain names and all other indicia of origin (whether registered, common law, statutory or otherwise), together with all translations, adaptations, derivations, and combinations thereof, and all registrations, applications for registration thereof and social media handles associated therewith, together with any extensions and renewals thereof and all goodwill associated therewith.
“Transition Services Agreement” means the Transition Services Agreement between Seller and Purchaser substantially in the form of Exhibit B.
“United States” means the United States of America, including its territories and possessions (excluding all military bases and other military installations outside of the continental United States, Alaska, Hawaii and Washington, D.C.).
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(b) The following terms have the meanings given such terms in the Sections set forth below:
| Term |
| Section |
| Acquisition |
| 1.01 |
| Acquired Assets |
| 1.04(a) |
| Actions |
| 3.09 |
| Additional Transfer Documents |
| 2.01(b)(ii) |
| Agreement |
| Preamble |
| Allocation Statement |
| 6.04(c) |
| Assumed Liabilities |
| 1.05(a) |
| Closing |
| 2.01(a) |
| Closing Date |
| 2.01(a) |
| Closing Payment |
| 1.01(a) |
| Contingent Payments |
| 1.01(d) |
| Contracts |
| 1.04(a)(iv) |
| Deferred Purchase Price Payment |
| 1.01(c) |
| Excluded Assets |
| 1.04(b) |
| Excluded Contracts |
| 1.04(b)(x) |
| Excluded Inventory |
| 1.04(b)(i) |
| Excluded Liability |
| 1.05(b) |
| Excluded Records |
| 1.04(b)(iv) |
| Excluded Tax Liability |
| 1.05(b)(i) |
| Fifth Net Sales Milestone Payment |
| 1.01(d)(iv) |
| First Milestone Payment |
| 1.01(c) |
| Fourth Net Sales Milestone Payment |
| 1.01(d)(iii) |
| indemnified party |
| 7.06(a) |
| indemnifying party |
| 7.06(a) |
| Inventory Payment |
| 1.01(b) |
| Laws |
| 3.10 |
| Losses |
| 7.02 |
| Marketing Materials |
| 1.04(a)(i)(G) |
| Milestone Termination Date |
| 1.01(d)(i) |
| Other Rights |
| 1.04(a)(vii) |
| Permitted Liens |
| 3.04 |
| Post-Closing Tax Period |
| 6.04(a) |
| Pre-Closing Purchaser-Filed Return |
| 6.04(a) |
| Pre-Closing Tax Period |
| 6.04(a) |
| Privacy Policies |
| 3.06(k) |
| Product Business |
| Recitals |
| Product Confidential Information |
| 5.04 |
| Product Financial Information |
| 3.05 |
| Purchase Price |
| 1.01(b) |
| Purchaser |
| Preamble |
| Registered IP |
| 3.06(b) |
| Regulatory Responsibility |
| 6.06 |
| Reports |
| 3.10(d) |
| ROFN Period |
| 5.02(a) |
| Second Net Sales Milestone Payment |
| 1.01(d)(i) |
| Seller |
| Preamble |
| Seller Competing Product |
| 5.01(a) |
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| Term |
| Section |
| Seller Disclosure Schedule |
| Article 3 |
| Seventh Net Sales Milestone Payment |
| 1.01(d)(vi) |
| Sixth Net Sales Milestone Payment |
| 1.01(d)(v) |
| Specified Product ROFN Notice |
| 5.02(a) |
| Specified Product Sale Notice |
| 5.02(b) |
| Specified Product Transfer |
| 5.02(a) |
| Specified Product Transfer Agreement |
| 5.02(b) |
| Third Net Sales Milestone Payment |
| 1.01(d)(ii) |
| Third Party Claim |
| 7.06(a) |
| Transfer Taxes |
| 6.04(e) |
| Transferred Contracts |
| 1.04(a)(iv) |
| Transferred Intellectual Property |
| 1.04(a)(i) |
| Transferred Inventory |
| 1.04(a)(iii) |
| Transferred Other Rights |
| 1.04(a)(vii) |
| Transferred Patents |
| 1.04(a)(i)(B) |
| Transferred Product Registrations |
| 1.04(a)(v) |
| Transferred Records |
| 1.04(a)(ix) |
| Transferred Regulatory Documentation |
| 1.04(a)(vi) |
| Transferred Trademarks |
| 1.04(a)(i)(A) |
Section 8.07. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties hereto and delivered to the other party. Delivery of an executed counterpart of a signature page of this Agreement by facsimile, “.pdf” or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 8.08. Entire Agreement. This Agreement, the Other Transaction Documents and the Confidentiality Agreement contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein, in the Other Transaction Documents or in the Confidentiality Agreement.
Section 8.09. Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances and a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision.
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Section 8.10. Consent to Jurisdiction. Each of Purchaser and Seller irrevocably submits to the exclusive jurisdiction of the federal or state courts of the State of New Jersey, for the purposes of any suit, action or other proceeding arising out of this Agreement and the Other Transaction Documents or any transaction contemplated hereby or thereby. Each of Purchaser and Seller further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address(es) set forth above shall be effective service of process for any action, suit or proceeding in New Jersey with respect to any matters to which it has submitted to jurisdiction in this Section 8.10. Each of Purchaser and Seller irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Other Transaction Documents or the transactions contemplated hereby or thereby in such courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
Section 8.11. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement and the Other Transaction Documents or any transaction contemplated hereby or thereby. Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges and agrees that it and the other parties hereto have been induced to enter into this Agreement and the Other Transaction Documents, as applicable, by, among other things, the mutual waivers and certifications in this Section 8.11.
Section 8.12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
Section 8.13. Specific Performance. The parties hereto agree that irreparable damage would occur and that the parties hereto would not have any adequate remedy at law if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the federal or state courts of the State of New Jersey, and any appellate court from any thereof, this being in addition to any other remedy to which any party hereto is entitled at law or in equity.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.
| PALATIN TECHNOLOGIES, INC.
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| By: | /s/ Stephen T. Wills |
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| Name: Stephen T. Wills |
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| Title: Chief Financial Officer |
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| COSETTE PHARMACEUTICALS, INC.
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| By: | /s/ Apurva Saraf |
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| Name: Apurva Saraf |
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| Title: President and CEO |
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Signature Page to the Asset Purchase Agreement
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EXHIBIT 31.1
Certification of Chief Executive Officer
I, Carl Spana, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Palatin Technologies, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 14, 2024
| /s/ Carl Spana |
|
| Carl Spana, President and Chief Executive Officer |
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EXHIBIT 31.2
Certification of Chief Financial Officer
I, Stephen T. Wills, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Palatin Technologies, Inc.; |
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|
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: February 14, 2024
| /s/ Stephen T. Wills |
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| Stephen T. Wills, Executive Vice President, Chief Financial Officer and Chief Operating Officer |
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EXHIBIT 32.1
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Carl Spana, President and Chief Executive Officer of Palatin Technologies, Inc., hereby certify, to my knowledge, that the Quarterly Report on Form 10-Q for the period ended December 31, 2023 of Palatin Technologies, Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Palatin Technologies, Inc.
Dated: February 14, 2024
| /s/ Carl Spana |
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| Carl Spana, President and Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 32.2
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Stephen T. Wills, Executive Vice President, Chief Financial Officer and Chief Operating Officer of Palatin Technologies, Inc., hereby certify, to my knowledge, that the Quarterly Report on Form 10-Q for the period ended December 31, 2023 of Palatin Technologies, Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Palatin Technologies, Inc.
Dated: February 14, 2024
| /s/ Stephen T. Wills |
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| Stephen T. Wills, Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) |
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