Palatin Technologies Inc 10-Q for FY2021 Q1
Palatin Technologies Inc (PTN)
10-Q
2020-11-16
For: 2020-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Palatin Technologies Inc filed this 10-Q on November 16, 2020, covering the quarter ended September 30, 2020 (FY2021 Q1).
Headline figures
Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- -$288.56K
- compared with $97.38K a year earlier
- Net loss
- $3.94M
- compared with a net loss of $4.5M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
☑
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
quarterly period ended September 30, 2020
or
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
transition period from ___________ to __________
Commission
file number: 001-15543
PALATIN TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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95-4078884
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(State
or other jurisdiction of
incorporation
or organization)
|
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(I.R.S.
Employer Identification No.)
|
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4B Cedar Brook Drive
Cranbury, New Jersey
|
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08512
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(Address
of principal executive offices)
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(Zip
Code)
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(609) 495-2200
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of Each Class
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Trading Symbol
|
Name of Each Exchange
on Which Registered
|
|
Common
Stock, par value $.01 per share
|
PTN
|
NYSE
American
|
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.
Yes
☑ No ☐
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). Yes ☑ No ☐
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:
Non-accelerated
filer
☑
Smaller reporting
company
☑
Emerging growth
company
☐
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 ☐ No
☑
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date
(November 13, 2020): 229,901,307
PALATIN
TECHNOLOGIES, INC.
Table of Contents
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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” means 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 business,
financial condition, and results of operations may be adversely
affected by global health epidemics, including the novel strain of
coronavirus (“COVID-19”) pandemic and its resurgence of
cases in the United States, such as, for example, increase in costs
of and delays in conducting human clinical trials and the
performance of our contractors and suppliers, and reduction in our
productivity or the productivity of our contractors and
suppliers;
●
our ability to
successfully commercialize Vyleesi® (the trade name for
bremelanotide) for the treatment of premenopausal women with
hypoactive sexual desire disorder (“HSDD”) in the
United States, which may be adversely affected by delays or
disruptions related to the ongoing COVID-19 pandemic;
●
our ability to
manage the infrastructure to successfully manufacture, through
contract manufacturers, Vyleesi, and to develop the infrastructure
to successfully market and distribute Vyleesi in the United
States;
●
our ability to meet
post-marketing requirements of the U.S. Food and Drug
Administration (“FDA”) to conduct two additional
studies and one additional clinical trial for Vyleesi;
●
our expectations
regarding the potential market size and market acceptance for
Vyleesi for HSDD in the United States and elsewhere in the
world;
●
our expectations
regarding performance of our exclusive licensees of Vyleesi for the
treatment of premenopausal women with HSDD, which is a type of
female sexual dysfunction (“FSD”),
including:
o
Shanghai Fosun
Pharmaceutical Industrial Development Co. Ltd.
(“Fosun”), a subsidiary of Shanghai Fosun
Pharmaceutical (Group) Co., Ltd., for the territories of the
People’s Republic of China, Taiwan, Hong Kong S.A.R. and
Macau S.A.R. (collectively, “China”), and
o
Kwangdong
Pharmaceutical Co., Ltd. (“Kwangdong”) for the Republic
of Korea (“Korea”);
●
our expectations
and the ability of our licensees to timely obtain approvals and
successfully commercialize Vyleesi in countries other than the
United States;
●
estimates of our
expenses, future revenue, and capital requirements;
●
our ability to
achieve profitability;
●
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 the ongoing COVID-19 pandemic;
●
our ability to
advance product candidates into, and successfully complete,
clinical trials;
●
the initiation,
timing, progress and results of future preclinical studies and
clinical trials, and our research and development
programs;
●
the timing or
likelihood of regulatory filings and approvals;
●
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;
●
our ability to
compete with other products and technologies treating the same or
similar indications as our product candidates;
●
the ability of our
third-party collaborators to timely carry out their duties under
their agreements with us;
●
the ability of our
contract manufacturers to perform their manufacturing activities
for us in compliance with applicable regulations;
●
our ability to
recognize the potential value of our licensing arrangements with
third parties;
●
the potential to
achieve revenues from the sale of our product
candidates;
●
our ability to
obtain adequate reimbursement from Medicare, Medicaid, private
insurers, and other healthcare payers;
●
our ability to
maintain product liability insurance at a reasonable cost or in
sufficient amounts, if at all;
●
the performance of
our management team, senior staff professionals, and third-party
contractors and consultants;
●
the retention of
key management, employees, and third-party
contractors;
●
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;
●
our compliance with
federal and state laws and regulations;
●
the timing and
costs associated with obtaining regulatory approval for our product
candidates, including delays and additional costs related to the
ongoing COVID-19 pandemic;
●
the impact of
fluctuations in foreign exchange rates;
●
the impact of
legislative or regulatory healthcare reforms in the United
States;
●
our ability to
adapt to changes in global economic conditions as well as competing
products and technologies; and
●
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.
Palatin
Technologies® and Vyleesi® are registered trademarks of
Palatin Technologies, Inc. Other trademarks referred to in this
report are the property of their respective owners.
PART I – FINANCIAL
INFORMATION
Item 1. Financial Statements.
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PALATIN TECHNOLOGIES, INC.
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and
Subsidiary
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Consolidated Balance Sheets
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(unaudited)
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September 30,
2020
|
June 30,
2020
|
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ASSETS
|
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Current
assets:
|
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|
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Cash and cash
equivalents
|
$86,587,455
|
$82,852,270
|
|
Accounts
receivable
|
5,044,372
|
-
|
|
Inventories
|
5,792,595
|
-
|
|
Prepaid expenses
and other current assets
|
2,360,001
|
738,216
|
|
Total current
assets
|
99,784,423
|
83,590,486
|
|
|
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Property and
equipment, net
|
126,772
|
140,216
|
|
Right-of-use
assets
|
1,190,410
|
1,266,132
|
|
Other
assets
|
56,916
|
56,916
|
|
Total
assets
|
$101,158,521
|
$85,053,750
|
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
|
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Accounts
payable
|
$971,308
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$715,672
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Accrued
expenses
|
3,823,682
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2,899,097
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Short-term
operating lease liabilities
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282,275
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312,784
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Other current
liabilities
|
7,575,000
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-
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Total current
liabilities
|
12,652,265
|
3,927,553
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Long-term operating
lease liabilities
|
911,775
|
953,348
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Other long-term
liabilities
|
10,619,000
|
-
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Total
liabilities
|
24,183,040
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4,880,901
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Commitments and
contingencies (Note 13)
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Stockholders’
equity:
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Preferred stock of
$0.01 par value – authorized 10,000,000 shares; shares issued
and outstanding designated as follows:
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Series A
Convertible: authorized 264,000 shares: issued and outstanding
4,030 shares as of September 30, 2020 and June 30,
2020
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40
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40
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Common stock of
$0.01 par value – authorized 300,000,000 shares:
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issued and
outstanding 229,855,417 shares as of September 30, 2020 and
229,258,400 shares as of June 30, 2020
|
2,298,554
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2,292,584
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Additional paid-in
capital
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396,816,565
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396,079,127
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Accumulated
deficit
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(322,139,678)
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(318,198,902)
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Total
stockholders’ equity
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76,975,481
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80,172,849
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Total liabilities
and stockholders’ equity
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$101,158,521
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$85,053,750
|
The
accompanying notes are an integral part of these consolidated
financial statements.
1
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PALATIN
TECHNOLOGIES, INC.
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and
Subsidiary
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Consolidated Statements of Operations
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(unaudited)
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Three Months Ended
September 30,
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2020
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2019
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REVENUES
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Product revenue,
net
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$(288,560)
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$-
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License and
contract
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-
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97,379
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(288,560)
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97,379
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OPERATING
EXPENSES
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Cost
of products sold
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25,200
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-
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Research and
development
|
2,923,851
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3,127,489
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Selling, general
and administrative
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2,331,606
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1,832,442
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Gain on license
termination agreement
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(1,623,795)
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-
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Total operating
expenses
|
3,656,862
|
4,959,931
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Loss from
operations
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(3,945,422)
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(4,862,552)
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OTHER INCOME
(EXPENSE)
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Investment
income
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12,135
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370,654
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Interest
expense
|
(7,489)
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(9,051)
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Total other income,
net
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4,646
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361,603
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NET
LOSS
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$(3,940,776)
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$(4,500,949)
|
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Basic and diluted
net loss per common share
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$(0.02)
|
$(0.02)
|
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Weighted average
number of common shares outstanding used in computing basic and
diluted net loss per common share
|
236,345,862
|
233,113,241
|
The
accompanying notes are an integral part of these consolidated
financial statements.
2
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PALATIN
TECHNOLOGIES, INC.
|
|||||||
|
and
Subsidiary
|
|||||||
|
Consolidated Statements of Stockholders’
Equity
|
|||||||
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(unaudited)
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Preferred
Stock
|
Common
Stock
|
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Shares
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Amount
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Shares
|
Amount
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Total
|
|
Balance, June 30,
2020
|
4,030
|
$40
|
229,258,400
|
$2,292,584
|
$396,079,127
|
$(318,198,902)
|
$80,172,849
|
|
Stock-based
compensation
|
-
|
-
|
743,112
|
7,431
|
813,743
|
-
|
821,174
|
|
Withholding taxes
related to restricted stock units
|
-
|
-
|
(146,095)
|
(1,461)
|
(76,305)
|
-
|
(77,766)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(3,940,776)
|
(3,940,776)
|
|
Balance, September
30, 2020
|
4,030
|
$40
|
229,855,417
|
$2,298,554
|
$396,816,565
|
$(322,139,678)
|
$76,975,481
|
|
|
Preferred
Stock
|
Common
Stock
|
|
|
|
||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Total
|
|
Balance, June 30,
2019
|
4,030
|
$40
|
226,815,363
|
$2,268,154
|
$394,053,929
|
$(295,772,879)
|
$100,549,244
|
|
Stock-based
compensation
|
-
|
-
|
224,000
|
2,240
|
825,495
|
-
|
827,735
|
|
Sale of common
stock , net of costs
|
-
|
-
|
657,894
|
6,579
|
573,151
|
-
|
579,730
|
|
Warrant
repurchase
|
-
|
-
|
-
|
-
|
(1,333,497)
|
-
|
(1,333,497)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(4,500,949)
|
(4,500,949)
|
|
Balance, September
30, 2019
|
4,030
|
$40
|
227,697,257
|
$2,276,973
|
$394,119,078
|
$(300,273,828)
|
$96,122,263
|
The
accompanying notes are an integral part of these consolidated
financial statements.
3
|
PALATIN
TECHNOLOGIES, INC.
|
||
|
and
Subsidiary
|
||
|
Consolidated Statements of Cash Flows
|
||
|
(unaudited)
|
||
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
2020
|
2019
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(3,940,776)
|
$(4,500,949)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
provided
by operating activities:
|
|
|
|
Depreciation and
amortization
|
13,444
|
18,253
|
|
Cash received in
excess of gain on termination agreement
|
10,376,205
|
-
|
|
Non-cash interest
expense
|
-
|
438
|
|
Decrease in
right-of-use asset
|
75,722
|
72,113
|
|
Stock-based
compensation
|
821,174
|
827,735
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(744,372)
|
60,168,591
|
|
Prepaid expenses
and other assets
|
(1,621,785)
|
39,436
|
|
Inventories
|
25,200
|
-
|
|
Accounts
payable
|
255,636
|
(446,964)
|
|
Accrued
expenses
|
(1,375,415)
|
(1,269,232)
|
|
Operating lease
liabilities
|
(72,082)
|
(72,113)
|
|
Net cash provided
by operating activities
|
3,812,951
|
54,837,308
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Purchases of
property and equipment
|
-
|
(62,880)
|
|
Net cash used in
investing activities
|
-
|
(62,880)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Payment of
withholding taxes related to restricted
|
|
|
|
stock
units
|
(77,766)
|
-
|
|
Payment on notes
payable obligations
|
-
|
(832,851)
|
|
Warrant
repurchases
|
-
|
(1,333,497)
|
|
Proceeds from the
sale of common stock,
|
|
|
|
net of
costs
|
-
|
579,730
|
|
Net cash used in
financing activities
|
(77,766)
|
(1,586,618)
|
|
|
|
|
|
NET INCREASE IN
CASH AND CASH EQUIVALENTS
|
3,735,185
|
53,187,810
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
82,852,270
|
43,510,422
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$86,587,455
|
$96,698,232
|
|
|
|
|
|
SUPPLEMENTAL CASH
FLOW INFORMATION:
|
|
|
|
Cash paid for
interest
|
$7,489
|
$8,132
|
The
accompanying notes are an integral part of these consolidated
financial statements.
(1)
ORGANIZATION
Nature of Business - Palatin Technologies, Inc.
(“Palatin” or the “Company”) is a
specialized biopharmaceutical company developing first-in-class
medicines based on molecules that modulate the activity of the
melanocortin and natriuretic peptide receptor systems. 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
(“MCr”) system is hormone driven, with 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 lead product, Vyleesi®, was approved by the
U.S. Food and Drug Administration (“FDA”) in June 2019
and was being marketed in North America 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”). As disclosed in Note 5, the AMAG License
Agreement was terminated effective July 24, 2020, and the Company
is now marketing Vyleesi in North America.
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.
Natriuretic Peptide Receptor System. The natriuretic peptide
receptor (“NPR”) system regulates cardiovascular
functions, and therapeutic agents modulating this system have
potential to treat cardiovascular and fibrotic diseases. The
Company has designed and is developing potential NPR candidate
drugs selective for one or more different natriuretic peptide
receptors, including natriuretic peptide receptor-A
(“NPR-A”), natriuretic peptide receptor B
(“NPR-B”), and natriuretic peptide receptor C
(“NPR-C”).
Business Risks and Liquidity – Since inception, the
Company has generally incurred negative cash flows from operations,
and has expended, and expects to continue to expend, substantial
funds to develop the capability to market and distribute Vyleesi in
the United States and complete its planned product development
efforts. As shown in the accompanying consolidated financial
statements, the Company had an accumulated deficit as of September
30, 2020 of $322,139,678 and a net loss for the three months ended
September 30, 2020 of $3,940,776, and the Company anticipates
incurring significant expenses in the future as a result of
spending on developing marketing and distribution capabilities for
Vyleesi in the United States and spending on its development
programs and will require substantial additional financing or
revenues to continue to fund its planned developmental activities.
To achieve sustained profitability, if ever, the Company, alone or
with others, must successfully develop and commercialize its
technologies and proposed products, conduct successful preclinical
studies and clinical trials, obtain required regulatory approvals
and successfully manufacture and market such technologies and
proposed products. The time required to reach sustained
profitability is highly uncertain, and the Company may never be
able to achieve profitability on a sustained basis, if at
all.
As of
September 30, 2020, the Company’s cash and cash equivalents
were $86,587,455 and current liabilities were $12,652,265.
Management intends to utilize existing capital resources for
general corporate purposes and working capital, including
establishing marketing and distribution capabilities for Vyleesi in
the United States and preclinical and clinical development of the
Company’s MC1r and MC4r peptide programs and natriuretic
peptide program, and development of other portfolio
products.
5
Management
believes that the Company’s cash and cash equivalents as of
September 30, 2020 will be sufficient to fund our current operating
plans through at least December 2021. The Company will need
additional funding to complete required clinical trials for its
other product candidates and, assuming those clinical trials are
successful, as to which there can be no assurance, to complete
submission of required applications to the FDA. If the Company is
unable to obtain approval or otherwise advance in the FDA approval
process, the Company’s ability to sustain its operations
could be materially adversely affected.
The
Company may seek the additional capital necessary to fund its
operations through public or private equity offerings,
collaboration agreements, debt financings or licensing
arrangements. Additional capital that is required by the Company
may not be available on reasonable terms, or at all.
In
March 2020, the World Health Organization declared COVID-19, a
disease caused by a novel strain of coronavirus, a pandemic. The
Company has taken steps to ensure the safety and well-being of its
employees and clinical trial patients to comply with guidance from
federal, state and local authorities, while working to ensure the
sustainability of its business operations as this unprecedented
situation continues to evolve. In mid-March, the Company
transitioned to a company-wide work from home policy.
Business-critical activities continue to be subject to heightened
precautions to ensure safety of employees. The Company continues to
assess its policies, business continuity plans and employee
support.
The
Company continues to evaluate the impact of COVID-19 on the
healthcare system and work with contract research organizations
supporting its clinical, research, and development programs to
mitigate risk to patients and its business and community partners,
taking into account regulatory, institutional, and government
guidance and policies.
The
Company will receive a royalty on sales of Vyleesi by our
licensees. We have licensed third parties to sell Vyleesi in China
and Korea. The COVID-19 coronavirus could adversely impact the time
required to obtain regulatory approvals to sell Vyleesi in China
and Korea, which would delay when the Company receives royalty
income from sales in those countries.
The
Company cannot be certain what the overall impact of the COVID-19
pandemic, including the recent resurgence of cases in the United
States, will be on its business and it has the potential to
materially adversely affect its business, financial condition and
results of operations and cashflows during fiscal 2021 and
beyond.
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 and cash equivalents
are primarily invested in one money market account sponsored by a
large financial institution. For the three months ended September
30, 2020, the Company recorded a gain of $1,623,795 related to the
termination of the AMAG License Agreement. In connection with the
termination agreement, the Company has a receivable balance due
from AMAG of $4,300,000 as of September 30, 2020. For the three
months ended September 30, 2019, the Company reported $97,379 in
revenue related to the AMAG License Agreement.
(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
months ended September 30, 2020 may not necessarily be indicative
of the results of operations expected for the full
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, 2020, filed with
the Securities and Exchange Commission (“SEC”), which
includes consolidated financial statements as of June 30, 2020 and
2019 and for each of the fiscal years in the three-year period
ended June 30, 2020.
6
(3)
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The consolidated
financial statements include the accounts of Palatin and its
wholly-owned inactive subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates – The preparation of consolidated
financial statements in conformity with 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 and 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 consist of $86,396,008 and $82,406,697 in a money
market account at September 30, 2020 and June 30, 2020,
respectively.
Fair Value of Financial Instruments – The
Company’s financial instruments consist primarily of cash
equivalents, accounts receivable and accounts payable. Management
believes that the carrying values of cash equivalents, accounts
receivable and accounts payable 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
accounts receivable are due exclusively from AMAG.
Inventories – Inventory is stated at the lower of cost
or net realizable value, with cost being determined on a first-in,
first-out basis.
On a
quarterly basis, the Company reviews inventory levels to determine
whether any obsolete, expired, or excess inventory exists. If any
inventory is expected to expire prior to being sold, has a cost
basis in excess of its net realizable value, is in excess of
expected sales requirements as determined by internal sales
forecasts, or fails to meet commercial sale specifications, the
inventory is written-down through a charge to cost of products
sold. Once packaged, inventory has a shelf-life ranging from three
to five years.
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.
Accumulated depreciation and amortization was $2,466,289 and
$2,452,845 as of September 30, 2020 and June 30, 2020,
respectively.
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.
7
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, current operating lease liabilities, and noncurrent
operating 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. For operating leases, 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. Operating ROU assets are
calculated as the present value of the remaining lease payments
plus unamortized initial direct costs plus any prepayments less any
unamortized lease incentives received. 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. Lease expense is recognized on a straight-line
basis over the lease term. The Company has elected not to recognize
an ROU asset and obligation for leases with an initial term of
twelve months or less. The expense associated with short term
leases is included in general and administrative expense in the
statement 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.
The
Company has operating leases for office and laboratory space, which
expire on June 30, 2025 and October 31, 2023, respectively. The
Company also has operating leases for copier equipment that expire
October 15, 2021 and phone equipment that expires on June 30,
2023.
Revenue Recognition – The Company principally sells
Vyleesi to specialty pharmacies and payment is currently made
within approximately 30 days. The specialty pharmacies subsequently
resell the products to healthcare providers and patients. In
addition to distribution agreements with customers, the Company
enters into arrangements with healthcare providers and payers that
provide for government-mandated and/or privately-negotiated
rebates, chargebacks, and discounts with respect to the purchase of
the Company’s products.
Revenue
from product sales is recognized when control is transferred to the
customer, which occurs at the point in time when the goods are
shipped. In instances when the Company performs shipping and
handling activities, these are considered fulfillment activities,
and accordingly, the costs are accrued when the related revenue is
recognized.
The
Company records product revenues net of allowances for direct and
indirect fees, discounts, estimated chargebacks and rebates.
Product sales are also subject to return rights, which have not
been significant to date.
Gross
product sales were offset by product sales allowances for the three
months ended September 30, 2020 as follows:
|
Gross product
sales
|
$809,100
|
|
Provision
for product sales allowances and accruals
|
(1,097,660)
|
|
Net
sales
|
$(288,560)
|
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 will be 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.
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.
8
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. 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. 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 date of grant 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. Compensation costs for awards containing a
performance condition are determined using the quoted price of the
Company’s common stock on the date of grant 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 Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”) Topic 260, Earnings per Share.
For the
three months ended September 30, 2020 and 2019, 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 and nine
months ended September 30, 2020 and 2019 was 38,526,609 and
37,497,717, respectively.
Included
in the weighted average common shares used in computing basic and
diluted net loss per common share are 6,444,353 and 5,978,150
vested restricted stock units that had not been issued as of
September 30, 2020 and 2019, respectively, due to a provision in
the restricted stock unit agreements to delay
delivery.
(4)
NEW
AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In August 2020, the FASB issued Accounting Standards Update
(“ASU”) No. 2020-06, Debt
(Topic 470) and Derivatives and Hedging (Topic 815): Accounting for
Convertible Instruments and Contracts in an Entity’s Own
Equity. The amendments in this
update address issues identified as a result of the complexity
associated with applying U.S. GAAP for certain financial
instruments with characteristics of liabilities and equity. The
guidance is effective for public entities for fiscal years
beginning after December 15, 2021, and for interim periods within
those fiscal years, with early adoption permitted. The guidance is
applicable to the Company beginning July 1, 2022. The Company is
currently evaluating the potential effects of this guidance on its
consolidated financial statements.
9
In December 2019, the FASB issued ASU No. 2019-12,
Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes. The amendments in this
update simplify the accounting for income taxes by removing certain
exceptions to the general principles in Topic 740. The amendments
also improve consistent application and simplify U.S. GAAP for
other areas of Topic 740 by clarifying and amending existing
guidance. The guidance is effective for public entities for fiscal
years beginning after December 15, 2020, and for interim periods
within those fiscal years, with early adoption permitted. The
guidance is applicable to the Company beginning July 1, 2021. The
Company is currently evaluating the potential effects of this
guidance on its consolidated financial
statements.
In November 2018, the FASB issued ASU No. 2018-18,
Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic
808 and Topic 606. This
update provides clarification on the interaction between Revenue
Recognition (Topic 606) and Collaborative Arrangements (Topic 808),
including the alignment of unit of account guidance between the two
topics. The guidance is
effective for public entities for fiscal years beginning after
December 15, 2019, and for interim periods within those fiscal
years, with early adoption permitted. The guidance was
applicable to the Company beginning July 1, 2020. The adoption of
this standard did not have a material impact on the Company’s
consolidated financial statements.
In June
2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses:
Measurement of Credit Losses on Financial Instruments, which
requires measurement and recognition of expected credit losses for
financial assets held at the reporting date based on historical
experience, current conditions, and reasonable and supportable
forecasts. This is different from the current guidance as this will
require immediate recognition of estimated credit losses expected
to occur over the remaining life of many financial assets. The new
guidance will be effective for the Company on July 1, 2023 with
early adoption permitted. The adoption of this standard is not
expected to have a material impact on the Company’s
consolidated financial statements.
(5)
AGREEMENTS
WITH AMAG
On
January 8, 2017, the Company entered into the AMAG License
Agreement pursuant to which the Company granted AMAG (i) an
exclusive license in all countries of North America (the
“Territory”), with the right to grant sub-licenses, to
research, develop and commercialize products containing Vyleesi
(each a “Product”, and collectively,
“Products”), (ii) a non-exclusive license in the
Territory, with the right to grant sub-licenses, to manufacture the
Products, and (iii) a non-exclusive license in all countries
outside the Territory, with the right to grant sub-licenses, to
research, develop and manufacture (but not commercialize) the
Products.
Following
the satisfaction of certain conditions to closing, the AMAG License
Agreement became effective on February 2, 2017, and AMAG paid the
Company $60,000,000 as a one-time initial payment. Under the AMAG
License Agreement, AMAG was required to reimburse the Company up to
an aggregate amount of $25,000,000 for reasonable, documented,
direct out-of-pocket expenses incurred by the Company following
February 2, 2017, in connection with development and regulatory
activities necessary to file a New Drug Application
(“NDA”) for Vyleesi for HSDD in the United
States.
The
Company determined there was no stand-alone value for the license,
and that the license and the reimbursable direct out-of-pocket
expenses, pursuant to the terms of the AMAG License Agreement,
represented a combined unit of accounting which totaled
$85,000,000. The Company recognized revenue of the combined unit of
accounting over the arrangement using the input-based proportional
method as the Company completed its development obligations. During
the three months ended September 30, 2019, license and contract
revenue included additional billings for AMAG related Vyleesi costs
of $97,379.
On June
4, 2018, the FDA accepted the Vyleesi NDA for filing. The
FDA’s acceptance triggered a $20,000,000 milestone payment to
Palatin from AMAG. As a result, the Company recognized $20,000,000
in revenue related to regulatory milestones in fiscal 2018. On June
21, 2019, the FDA granted approval of Vyleesi for use in the United
States. The FDA’s approval triggered a $60,000,000 milestone
payment to Palatin from AMAG. As a result, the Company recognized
$60,000,000 in revenue related to regulatory milestones in fiscal
2019.
10
Effective
July 24, 2020, the Company entered into a termination agreement
(the “Termination Agreement”) with AMAG terminating the
AMAG License Agreement. Under the terms of the Termination
Agreement, the Company has regained all development and
commercialization rights for Vyleesi in the Territory. AMAG made a
$12,000,000 payment to the Company at closing of the Termination
Agreement and will make a $4,300,000 payment to the Company on
March 31, 2021. The Company recorded a liability related to
estimated losses on inventory purchase commitments of $18,194,000
as well as accrued expenses for an inventory production run
obligation assumed of $2,300,000. As a result, the Company recorded
a net gain for the Termination Agreement of $1,623,795. The Company
has assumed all Vyleesi manufacturing agreements, and AMAG has
transferred information, data, and assets related exclusively to
Vyleesi to the Company, including existing inventory with a fair
value of $5,817,795.
Under
the Termination Agreement, AMAG is providing certain transitional
services to the Company for a period to ensure continued patient
access to Vyleesi during the transition back to the Company. The
Company is reimbursing AMAG for the agreed upon costs of the
transition services.
(6)
MANUFACTURING
SUPPLY AGREEMENTS FOR VYLEESI:
Pursuant
to the Termination Agreement, the Company assumed Vyleesi
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 (the
“Catalent Agreement”), 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”).
On
September 29, 2020, the Company and Catalent entered into an
agreement to terminate the Catalent Agreement (the “Catalent
Termination Agreement”) in consideration for a one-time
payment of six million euros (€6,000,000) which was paid in
October 2020 and accrued as part of the estimated losses on
inventory purchase commitments assumed as part of the Termination
Agreement as discussed in note 5.
The
Company and Catalent then entered into a new Vyleesi manufacturing
agreement (the “New Catalent Agreement”) which includes
reduced minimum annual purchase requirements (see note 13) as
compared to the original Catalent Agreement and modification of
other financial terms. The New 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 New Catalent Agreement through
August 21, 2025, unless earlier terminated in accordance with the
terms of the New Catalent Agreement. The initial term of the New
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 New Catalent
Agreement also includes customary terms and conditions relating to
forecasting and minimum commitments, ordering, delivery, inspection
and acceptance, and termination, among other matters.
The
term of the Lonza Agreement is through December 31, 2022. There are
specified minimum purchase requirements under the Lonza Agreement,
and under specified circumstances, termination fees may be payable
upon termination of the Lonza Agreement by the Company (see note
13).
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).
(7)
AGREEMENT
WITH FOSUN:
On
September 6, 2017, the Company entered into a license agreement
with Fosun (“Fosun License Agreement”) for exclusive
rights to commercialize Vyleesi in China. Under the terms of the
agreement, the Company received $4,500,000 in October 2017, which
consisted of an upfront payment of $5,000,000 less $500,000 that
was withheld in accordance with tax withholding requirements in
China and recorded as an expense during the year ended June 30,
2018. The Company will receive a $7,500,000 milestone payment when
regulatory approval in China is obtained, provided that a
commercial supply agreement for Vyleesi has been entered into.
Palatin has the potential to receive up to $92,500,000 in
additional sales related milestone payments and high single-digit
to low double-digit royalties on net sales in the licensed
territory. All development, regulatory, sales, marketing, and
commercial activities and associated costs in the licensed
territory will be the sole responsibility of Fosun.
11
(8)
AGREEMENT
WITH KWANGDONG:
On
November 21, 2017, the Company entered into a license agreement with Kwangdong
(“Kwangdong License Agreement”) for exclusive
rights to commercialize Vyleesi in Korea. Under the terms of the
agreement, the Company received $417,500 in December 2017,
consisting of an upfront payment of $500,000, less $82,500, which
was withheld in accordance with tax withholding requirements in
Korea and recorded as an expense during the year ended June 30,
2018. The Company will receive a $3,000,000 milestone payment based
on the first commercial sale in Korea. Palatin has the potential to
receive up to $37,500,000 in additional sales related milestone
payments and mid-single-digit to low double-digit royalties on net
sales in the licensed territory. All development, regulatory,
sales, marketing, and commercial activities and associated costs in
the licensed territory will be the sole responsibility of
Kwangdong.
(9)
PREPAID
EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other
current assets consist of the following:
|
|
September
30,
|
June
30,
|
|
|
2020
|
2020
|
|
Clinical /
regulatory costs
|
$28,346
|
$43,625
|
|
Insurance
premiums
|
78,654
|
84,741
|
|
Vyleesi contractual
advances
|
1,500,000
|
-
|
|
Other
|
753,001
|
609,850
|
|
|
$2,360,001
|
$738,216
|
|
|
|
|
(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.
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)
|
|
September 30,
2020:
|
|
|
|
|
|
Money Market
Account
|
$86,396,008
|
$86,396,008
|
$-
|
$-
|
|
June 30,
2020:
|
|
|
|
|
|
Money Market
Account
|
$82,406,697
|
$82,406,697
|
$-
|
$-
|
(11)
ACCRUED
EXPENSES
Accrued
expenses consist of the
following:
|
|
September
30,
|
June
30,
|
|
|
2020
|
2020
|
|
Clinical /
regulatory costs
|
$701,733
|
$1,722,729
|
|
Other research
related expenses
|
511,803
|
586,185
|
|
Professional
services
|
79,913
|
217,662
|
|
Inventory
purchases
|
2,300,000
|
-
|
|
Other
|
230,233
|
372,521
|
|
|
$3,823,682
|
$2,899,097
|
12
(12)
NOTES PAYABLE:
On July
2, 2015, the Company closed on a $10,000,000 venture loan led by
Horizon Technology Finance Corporation (“Horizon”). The
debt facility was a four-year senior secured term loan that bore
interest at a floating coupon rate of one-month LIBOR (floor of
0.50%) plus 8.50% and provided for interest-only payments for the
first eighteen months followed by monthly payments of principal of
$333,333 plus accrued interest through August 1, 2019. The lenders
also received five-year immediately exercisable Series G warrants
to purchase 549,450 shares of the Company’s common stock
exercisable at an exercise price of $0.91 per share. The Company
recorded a debt discount of $305,196 equal to the fair value of
these warrants at issuance, which were amortized to interest
expense over the term of the related debt. This debt discount was
offset against the note payable balance and was included in
additional paid-in capital on the Company’s balance sheet. In
addition, a final incremental payment of $500,000 was due on August
1, 2019. This final incremental payment was accreted to interest
expense over the term of the related debt and was included in other
current liabilities on the consolidated balance sheet. The Company
incurred $146,115 of costs in connection with the loan agreement.
These costs were capitalized as deferred financing costs and were
offset against the note payable balance. These debt issuance costs
were amortized to interest expense over the term of the related
debt. During the three months ended September 30, 2019, the loan
matured, and on July 31, 2019, the Company made the final
incremental payment of $500,000.
(13)
COMMITMENTS
AND CONTINGENCIES
As a
result of the Termination Agreement and subsequent activity, the
Company has certain supply agreements with manufacturers and
suppliers, including the New Catalent Agreement, Lonza Agreement
and Ypsomed 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 Catalent
Termination Agreement, New Catalent Agreement, Lonza Agreement and
Ypsomed Agreement as of September 30, 2020:
|
|
Total
|
Current
|
1-3
Years
|
4-5
Years
|
|
Inventory purchase commitments
|
$18,667,000
|
$8,048,000
|
$8,226,000
|
$2,393,000
|
As of
September 30, 2020, the Company has $7,575,000 and $10,619,000
accrued within other current and long-term liabilities,
respectively, in the consolidated balance sheet related to
estimated losses for firm commitment contractual obligations under
these agreements. Losses on these firm commitment contractual
obligations are recognized based upon the terms of the respective
agreement and similar factors considered for the write-down of
inventory, including expected sales requirements as determined by
internal sales forecasts.
The Company is subject to numerous 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.
(14)
STOCKHOLDERS’
EQUITY
Financing Transactions – On June 21, 2019, the Company entered into an
equity distribution agreement with Canaccord Genuity LLC
(“Canaccord”) (the “2019 Equity Distribution
Agreement”), 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. The 2019
Equity Distribution Agreement and related prospectus is limited to
sales of up to an aggregate maximum $40.0 million of shares of the
Company’s common stock. The Company pays Canaccord 3.0% of
the gross proceeds as a commission.
Proceeds raised under the 2019 Equity Distribution Agreement are as
follows:
|
|
Three Months Ended
September 30, 2020
|
Three Months Ended
September 30, 2019
|
Cumulative from
inception
|
|||
|
|
Shares
|
Proceeds
|
Shares
|
Proceeds
|
Shares
|
Proceeds
|
|
Gross
proceeds
|
-
|
$-
|
657,894
|
$664,670
|
9,460,509
|
$12,330,242
|
|
Fees
|
-
|
-
|
-
|
(19,940)
|
-
|
(369,908)
|
|
Expenses
|
-
|
-
|
-
|
(65,000)
|
-
|
(90,000)
|
|
Net
proceeds
|
-
|
$-
|
657,894
|
$579,730
|
9,460,509
|
$11,870,334
|
|
|
|
|
|
|
|
|
13
Stock Purchase Warrants – On September 13, 2019, the
Company’s Board of Directors approved a plan to offer to
purchase and terminate certain outstanding common stock purchase
warrants through privately negotiated transactions. The purchase
and termination program has no time limit and may be suspended for
periods or discontinued at any time.
During
the three months ended September 30, 2019, the Company entered into
several warrant termination agreements to repurchase and cancel the
following previously issued Series H and Series J warrants for the
following aggregate buyback prices:
|
|
Warrants
|
Buyback
price
|
|
Series H
Warrants
|
474,045
|
$186,773
|
|
Series J
Warrants
|
2,866,809
|
1,146,724
|
|
|
3,340,854
|
$1,333,497
|
Stock Options – For the three months ended September
30, 2020 and 2019, the Company recorded stock-based compensation
related to stock options of $481,822 and $344,160,
respectively
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, 2020
|
19,902,450
|
$0.76
|
7.4
|
$380,514
|
|
|
|
|
|
|
|
Granted
|
154,500
|
0.58
|
|
|
|
Forfeited
|
-
|
|
|
|
|
Exercised
|
-
|
|
|
|
|
Expired
|
(14,000)
|
1.70
|
|
|
|
Outstanding -
September 30, 2020
|
20,042,950
|
$0.76
|
7.2
|
$269,535
|
|
|
|
|
|
|
|
Exercisable at
September 30, 2020
|
10,790,450
|
$0.78
|
5.6
|
$211,601
|
|
|
|
|
|
|
|
Expected to vest at
September 30, 2020
|
9,252,500
|
$0.74
|
9.0
|
$57,934
|
Stock
options granted to the Company’s executive officers and
employees generally vest over a 48-month period, while stock
options granted to its non-employee directors vest over a 12-month
period.
Included
in the options outstanding above are 1,994,500 and 188,084
performance-based options granted in June 2020 to executive
officers and employees, respectively. The performance-based options
vest on performance criteria relating to advancement of MC1r
programs, including initiation of clinical trials and licensing of
Vyleesi in additional countries or regions.
14
Also
included in the options outstanding are 1,075,000 and 117,500
performance-based options granted in December 2017 to executive
officers and employees, respectively, which vest during a
performance period ending on December 31, 2020, if and upon either
i) as to 100% of the target number of shares upon achievement of a
closing price for the Company’s common stock equal to or
greater than $1.50 per share for 20 consecutive trading days, which
is considered a market condition; or ii) as to thirty percent (30%)
of the target number of shares, upon the acceptance for filing by
the FDA of an NDA for Vyleesi for HSDD in premenopausal women
during the performance period, which is considered a performance
condition; iii) as to fifty percent (50%) of the target number of
shares, upon the approval by the FDA of an NDA for Vyleesi for HSDD
in premenopausal women during the performance period, which is also
considered a performance condition; iv) as to twenty percent (20%)
of the target number of shares, upon entry into a licensing
agreement during the performance period for the commercialization
of Vyleesi for FSD in at least two of the following geographic
areas (a) four or more countries in Europe, (b) Japan, (c) two or
more countries in Central and/or South America, (d) two or more
countries in Asia, excluding Japan and China, and (e) Australia,
which is also considered a performance condition. The fair value of
these options was $602,760. The Company amortized the fair value
over the derived service period of 1.1 years or upon the attainment
of the performance condition. Pursuant to the FDA acceptance of the
NDA filing of Vyleesi, 30% of the target number of options vested
in June 2018 and 50% of the target number of options vested in June
2019 upon FDA approval of Vyleesi.
Restricted Stock Units – For the three months ended
September 30, 2020 and 2019, the Company recorded stock-based
compensation related to restricted stock units of $339,352 and
$483,575, respectively.
A
summary of restricted stock unit activity is as
follows:
|
|
RSUs
|
|
Outstanding at July
1, 2020
|
12,965,570
|
|
Granted
|
-
|
|
Forfeited
|
-
|
|
Vested
|
(743,112)
|
|
Outstanding at
September 30,2020
|
12,222,458
|
|
|
|
Included
in outstanding restricted stock units in the table above 6,444,353
vested shares that have not been issued as of September 30, 2020
due to a provision in the restricted stock unit agreements to delay
delivery.
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.
In June
2020, the Company granted 1,203,500 performance-based restricted
stock units to its executive officers and 113,484 performance-based
restricted stock units to other employees which vest during a
performance period ending June 24, 2024. The performance-based
restricted stock units vest on performance criteria relating to
advancement of MC1r programs, including initiation of clinical
trials and licensing of Vyleesi in additional countries or
regions.
In June
2019, the Company granted 438,000 performance-based restricted
stock units to its executive officers and 182,725 performance-based
restricted stock units to other employees which vest during a
performance period ending June 24, 2023. The performance-based
restricted stock units vest on performance criteria relating to
advancement of MC1r programs, including initiation of clinical
trials and licensing of Vyleesi in additional countries or
regions.
In
December 2017, the Company granted 1,075,000 performance-based
restricted stock units to its executive officers and 670,000
performance-based restricted stock units to other employees which
vest during a performance period, ending on December 31, 2020, if
and upon either i) as to 100% of the target number of shares upon
achievement of a closing price for the Company’s common stock
equal to or greater than $1.50 per share for 20 consecutive trading
days, which is considered a market condition; or ii) as to thirty
percent (30%) of the target number of shares, upon the acceptance
for filing by the FDA of an NDA for Vyleesi for HSDD in
premenopausal women during the performance period, which is
considered a performance condition; iii) as to fifty percent (50%)
of the target number of shares, upon the approval by the FDA of an
NDA for Vyleesi for HSDD in premenopausal women during the
performance period, which is also considered a performance
condition; iv) as to twenty percent (20%) of the target number of
shares, upon entry into a licensing agreement during the
performance period for the commercialization of Vyleesi for FSD in
at least two of the following geographic areas (a) four or more
countries in Europe, (b) Japan, (c) two or more countries in
Central and/or South America, (d) two or more countries in Asia,
excluding Japan and China, and (e) Australia, which is also
considered a performance condition. The fair value of these awards
was $913,750 and $569,500, respectively. The Company amortized the
fair value over the derived service period of 1.1 years or upon the
attainment of the performance condition. Pursuant to the FDA
acceptance of the NDA filing for Vyleesi, 30% of the target number
of shares vested in June 2018. Pursuant to the FDA approval of
Vyleesi, 50% of the target number of shares vested in June
2019.
15
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, 2020.
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, 2020, 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,
2020, have not changed during the three months ended September 30,
2020 with the exception of product revenue, inventory and purchase
commitment liabilities. The preparation of our financial statements
requires us to make estimates and assumptions that affect the
reported carrying value of inventory and purchase commitment
liabilities. Actual results may differ from these estimates under
different assumptions or conditions. In addition to the policies
related to the carrying value of inventory and purchase commitment
liabilities, we believe that our accounting policies and estimates
relating to revenue recognition, accrued expenses and stock-based
compensation are the most critical.
Overview
We are
a specialized 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.
In
January 2020, our North American licensee for Vyleesi®
(bremelanotide injection), AMAG Pharmaceuticals, Inc.
(“AMAG”), announced that it had completed a strategic
review of its product portfolio and business strategy, and was
pursuing options to divest its female health products, including
Vyleesi. On July 27, 2020, Palatin and AMAG announced that they had
mutually terminated the license agreement for Vyleesi effective
July 24, 2020, and that we were assuming responsibility for
manufacturing, marketing and distribution of Vyleesi in North
America, including the United States.
Melanocortin Receptor System. The melanocortin receptor
(“MCr”) system is hormone driven, with 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
lead product, Vyleesi, was approved by the FDA on June 21, 2019,
and since July 24, 2020 we have been marketing Vyleesi in the
United States. Prior to July 24, 2020, the product was marketed in
North America by AMAG pursuant to a license agreement that was
terminated on that date. Vyleesi, a melanocortin receptor agonist,
is an “as needed” therapy used in anticipation of
sexual activity and self-administered by premenopausal women with
HSDD in the thigh or abdomen via a single-use subcutaneous
auto-injector. The most common adverse events are nausea, flushing,
injection site reactions, headache, and vomiting. Vyleesi is
contraindicated in women with uncontrolled hypertension or known
cardiovascular disease. In addition, the Vyleesi label includes
precautions that it may cause (i) small, transient increases in
blood pressure with a corresponding decrease in heart rate; (ii)
focal hyperpigmentation (darkening of the skin on certain parts of
the body), including the face, gums (gingiva) and breasts; and
(iii) nausea.
16
Our
current new product development activities focus primarily on
peptides which are agonists at MC1r, and in some instances
additional melanocortin receptors, 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 we are developing 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.
Natriuretic Peptide Receptor System. The natriuretic peptide
receptor (“NPR”) system regulates cardiovascular
functions, and therapeutic agents modulating this system have
potential to treat fibrotic diseases, cardiovascular diseases,
including reducing cardiac hypertrophy and fibrosis, heart failure,
acute asthma, pulmonary diseases and hypertension. We have designed
and are developing potential NPR candidate drugs selective for one
or more different natriuretic peptide receptors, including
natriuretic peptide receptor-A (“NPR-A”), natriuretic
peptide receptor B (“NPR-B”), and natriuretic peptide
receptor C (“NPR-C”).
Pipeline Overview
The
following chart illustrates the status of our drug development
programs and Vyleesi, which has been approved by the FDA for the
treatment of premenopausal women with acquired, generalized
HSDD.
Our Strategy
Key
elements of our business strategy include:
●
Maximizing revenue
from Vyleesi by marketing Vyleesi in the United States, supporting
our existing licensees for China and South Korea, and seeking
licensees for Vyleesi in the United States and additional
regions;
●
Assembling and
maintaining a team to create, develop and commercialize MCr and NPR
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
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.
17
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 months Ended September 30, 2020 Compared to the Three months
Ended September 30, 2019:
Revenues – For the three months ended September 30,
2020 we recognized $(288,560) in product revenue, net of allowances
as the result of our regaining all North American development and
commercialization rights to Vyleesi in July 2020 (see notes 5 and 6
of our accompanying consolidated financial statements). For the
three months ended September 30, 2020, we recognized no contract
and license revenue compared to $97,379 for the three months ended
September 30, 2019 pursuant to our prior license agreement with
AMAG.
Research and Development – Research and development
expenses were $2,923,851 and $3,127,489 for the three months ended
September 30, 2020 and 2019, respectively. The decrease for the
three months ended September 30, 2020, as compared to the three
months ended September 30, 2019, is related to the overall
decreases in program spending offset by higher compensation related
expenses.
Research
and development expenses related to our Vyleesi, PL3994, PL8177,
MC1r, MC4r and other preclinical programs were $1,872,305 and
$2,297,542 for the three months ended September 30, 2020 and 2019,
respectively. The decrease is the result of timing of activities in
research and development programs.
The
amounts of project spending above exclude general research and
development spending, which was $1,051,546 and $829,947 for the
three months ended September 30, 2020 and 2019, respectively. The
increase in general research and development spending for the three
months ended September 30, 2020 compared to the three months ended
September 30, 2019 is primarily attributable to an increase in
compensation related expenses.
Cumulative
spending from inception to September 30, 2020 was approximately
$311,600,000 on our Vyleesi program and approximately $157,400,000
on all our other programs (which include PL3994, PL8177, other
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, 2020, 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.
Cost of Products Sold – Cost of products sold was
$25,200 for the three months ended September 30, 2020.
Selling, General and Administrative – Selling, general
and administrative expenses, which consist mainly of compensation
and related costs, were $2,331,606 and $1,832,442 for the three
months ended September 30, 2020 and 2019, respectively. The
increase in selling, general and administrative expenses for the
three months ended September 30, 2020 is primarily attributable to
selling expenses related to Vyleesi and an increase in compensation
related expenses.
Gain on License Termination Agreement - For the three months
ended September 30, 2020, we recorded a gain of $1,623,795 as a
result of the Vyleesi Termination Agreement. (see note 5 of the
accompanying consolidated financial statements).
Other Income (Expense) – Total other income (expense),
net was $4,646 and $361,603 for the three months ended September
30, 2020 and 2019, respectively. For the three months ended
September 30, 2020 and 2019, we recognized $12,135 and $370,654,
respectively, of investment income offset by $7,489 and $9,051,
respectively, of interest expense. The decrease in investment
income is a result of lower interest rates as a result of the
COVID-19 pandemic.
18
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;
●
product approval or
clearance;
●
regulatory
compliance;
●
good manufacturing
practices (“GMP”) compliance;
●
intellectual
property rights;
●
product
introduction;
●
marketing, sales,
and competition; and
●
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 increase
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 three months ended September 30, 2020, net cash provided by
operating activities was $3,812,951 compared to $54,837,308 for the
three months ended September 2019. The difference in cash provided
by operations for the nine months ended September 30, 2020 compared
to the three months ended September, 2019 was primarily related to
the timing of the receipt of payments related to our license
agreement with AMAG, including payments related to the FDA’s
approval of Vylessi.
During
the three months ended September 30, 2020, net cash used in
investing activities was zero compared to $62,880 for the three
months ended September 30, 2019 for the purchase of
equipment.
During
the three months ended September 30, 2020, net cash used in
financing activities was $77,766, which consisted of payment of
withholding taxes related to restricted stock units. During the
three months ended September 30, 2019, net cash used in financing
activities was $1,586,618, which consisted of payment on a note
payable obligation of $832,851 and repurchase and cancellation of
outstanding warrants of $1,333,497 offset by proceeds from the sale
of common stock of $579,730 in our “at-the-market”
offering program.
19
We have
incurred cumulative negative cash flows from operations since our
inception, and have expended, and expect to continue to expend in
the future, substantial funds to develop the capability to market
and distribute Vylessi and to complete our planned product
development efforts. Continued operations are dependent upon our
ability to generate future income from sales of Vylessi in the
United States and from existing licenses, including royalties and
milestones, to complete equity or debt financing activities and to
enter into additional licensing or collaboration arrangements. As
of September 30, 2020, our cash and cash equivalents were
$86,587,455 and our current liabilities were
$12,652,265.
We
intend to utilize existing capital resources for general corporate
purposes and working capital, establishing marketing and
distribution capabilities for Vyleesi in the United States,
preclinical and clinical development of our MC1r and MC4r peptide
programs and natriuretic peptide program, and development of other
portfolio products.
We
believe that our existing capital resources will be adequate to
fund our planned operations through at least December 2021. We will
need additional funding to complete required clinical trials for
our other 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, the COVID-19 pandemic 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 2021 and
beyond.
We
expect to incur significant expenses as we continue to develop
marketing and distribution capability for Vylessi in the United
States and continue to develop our natriuretic peptide and MC1r
product candidates. These expenses, among other things, have had
and will continue to have an adverse effect on our
stockholders’ equity, total assets and working
capital.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
We have
entered into various contractual obligations and commercial
commitments. The following table summarizes our most significant
contractual obligations as of September 30,2020:
|
|
Total
|
Current
|
1 - 3
Years
|
4 - 5
Years
|
|
Inventory purchase
commitments
|
$18,667,000
|
$8,048,000
|
$8,226,000
|
$2,393,000
|
|
Operating
leases
|
1,190,410
|
282,275
|
474,839
|
433,296
|
|
|
$19,857,410
|
$8,330,275
|
$8,700,839
|
$2,826,296
|
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 effective as of September 30, 2020.
There were no 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.
20
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.
There
have been no material changes to our risk factors disclosed in Part
I, Item 1A, of our Annual Report on Form 10-K for the year ended
June 30, 2020.
Item 2. Unregistered Sales of
Equity Securities and Use of Proceeds.
As
disclosed in the table below, 146,095 shares were withheld during
the three months ended September 30, 2020 at the direction of the
employees as permitted under the 2011 Stock Incentive Plan in order
to pay the minimum amount of tax liability owed by the employees
from the vesting of those units:
|
Fiscal Month
Period
|
Total Number of
Shares Purchased (1)
|
Weighted Average
Price per Share
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Maximum Number of
Shares that May Yet be Purchased Under Announced Plans or
Programs
|
|
July 1, 2020
through July 31, 2020
|
-
|
$-
|
-
|
-
|
|
August 1, 2020
through August 31, 2020
|
-
|
-
|
-
|
-
|
|
September 1, 2020
through September 30, 2020
|
146,095
|
0.53
|
-
|
-
|
|
Total
|
146,095
|
$0.53
|
-
|
-
|
|
|
|
|
|
|
(1) Consists solely of 146,095 shares that were withheld to
satisfy tax withholding amounts due from employees upon the vesting
of previously issued restricted stock units.
Item 3. Defaults Upon Senior
Securities.
None.
Item 4. Mine Safety
Disclosures.
Not
applicable.
Item 5. Other
Information.
None.
21
Item 6. Exhibits.
Exhibits
filed or furnished with this report:
|
Exhibit Number
|
Description
|
Filed Herewith
|
Form
|
Filing Date
|
SEC File No.
|
|
Termination
and Release Agreement dated September 29, 2020, by and between
Catalent Belgium S.A. and Palatin Technologies, Inc.
|
X
|
|
|
|
|
|
Commercial
Supply Agreement dated September 29, 2020, by and between Catalent
Belgium S.A. and Palatin Technologies, Inc.
|
X
|
|
|
|
|
|
Certification
of Chief Executive Officer.
|
X
|
|
|
|
|
|
Certification
of Chief Financial Officer.
|
X
|
|
|
|
|
|
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.
|
X
|
|
|
|
|
|
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.
|
X
|
|
|
|
|
|
101.INS
|
XBRL
Instance Document.
|
X
|
|
|
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document.
|
X
|
|
|
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document.
|
X
|
|
|
|
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase Document.
|
X
|
|
|
|
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase Document.
|
X
|
|
|
|
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase Document.
|
X
|
|
|
|
†
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 any omitted schedule and/or exhibit
upon request. The confidential portions of this exhibit were
omitted by means of marking such portions with asterisks because
the identified confidential portions (i) are not material and (ii)
would be competitively harmful if publicly disclosed.
22
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:
November 16, 2020
|
|
Carl
Spana, Ph.D.
President
and
Chief
Executive Officer (Principal
Executive
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Stephen T. Wills
|
|
|
Date:
November 16, 2020
|
|
Stephen
T. Wills, CPA, MST
Executive
Vice President, Chief Financial Officer and Chief Operating
Officer
(Principal
Financial and Accounting Officer)
|
|
23
EXHIBIT 10.1
TERMINATION AND RELEASE AGREEMENT
THIS
TERMINATION AND RELEASE AGREEMENT (the “Agreement”), dated as of September
29, 2020 (the “Effective
Date”), is by and between by and between Palatin
Technologies, Inc., a New Jersey corporation, with a place of
business at 4-B Cedar Brook Drive, Cranbury, New Jersey, USA 08512
(“Palatin”), and
Catalent Belgium S.A., a Belgian company, with a place of business
at Rue Font St. Landry, 10 Parc Mercator B-1120, Neder over
Heembeek, Belgium (“Catalent”).
RECITALS
A. Palatin and
Catalent entered into that certain Commercial Supply Agreement
dated June 10, 2016, as amended (the “Commercial Supply Agreement”),
pursuant to which Catalent provides manufacturing and supply
services to Palatin related to production of Bremelanotide (the
“Product”).
B. Pursuant to the
Commercial Supply Agreement, Palatin has a Minimum Requirement to
purchase a certain amount of Product during each Contract
Year.
C. The Parties
anticipate that, based on current projections, Palatin may be
obligated to pay excess of Eleven Million Euros
(€11.000.000,00) over the next few Contract Years due to
shortfall of projected orders against the Minimum
Requirement.
D. In consideration
for a one-time settlement payment relating to the projected Minimum
Requirement shortfall, the Parties now desire to terminate the
Commercial Supply Agreement by mutual agreement, in accordance with
the terms and conditions set forth in this Agreement.
AGREEMENT
In
consideration for the mutual promises and releases set forth
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties,
Catalent and Palatin hereby agree as follows:
1.
Settlement
Payment. Within
thirty (30) days following the Effective Date, Palatin shall pay to
Catalent Six Million Euros (€6.000.000,00) as a one-time
settlement payment under this Agreement, which shall be
non-refundable and payable against an invoice rendered by Catalent
on or after the Effective Date. In consideration for the foregoing
settlement payment, Catalent agrees to terminate the Commercial
Supply Agreement as set forth in Section 2 below.
2.
Termination of
Commercial Supply Agreement. Effective upon Catalent’s
receipt of the settlement payment described in Section 1, the
Commercial Supply Agreement shall terminate by mutual agreement of
the parties with respect to all obligations other than those that
survive pursuant to Section 16.5 of the Commercial Supply
Agreement.
3.
Mutual
Release. For good and valuable consideration, the adequacy
of which is acknowledged, effective upon Catalent’s receipt
of the settlement payment described in Section 1, each party hereby
irrevocably and unconditionally covenants not to sue and releases,
quits and forever discharges the other party and all of such
party’s stockholders, directors, officers, employees, agents,
representatives, attorneys, successors and assigns, and any of its
parent and affiliated companies and all persons acting by, through,
under or in concert with any of them (collectively the
“Releasees”) from any and
all complaints, claims, charges, liabilities, obligations,
promises, agreements, contracts, suits, costs, debts, fees
(including, but not limited to, any claims for attorneys’
fees), expenses, sums of money, and causes of action of any nature
whatsoever, whether known or unknown at this time (collectively,
“Claims”) to the extent
arising out of or relating to the Commercial Supply Agreement, the
Minimum Requirement, the settlement payment, any other Claims with
respect to the Product, except for (a) any Claim to enforce this
Agreement and (b) any Claim arising under Section 13 of the
Commercial Supply Agreement or for which a party is entitled to
indemnification under Section 13 of the Commercial Supply
Agreement.
4.
Confidentiality.
The parties agree to keep strictly confidential the existence and
terms of this Agreement and the discussions and negotiations
relating to this Agreement, together with any related
correspondence or documents save for (a) any disclosures required
by law or any regulatory body whose rules a party (or its parent
company) is bound to adhere; and (b) to the extent necessary to
enforce this Agreement.
5.
Further
Assurances. The parties agree to execute, acknowledge and
deliver such further instruments and to take all such other
incidental acts as may be reasonably necessary or appropriate to
carry out the purpose and intent of this Agreement.
6.
Entire
Agreement. This Agreement constitutes and contains the
entire agreement and understanding between the parties concerning
the subject matter hereof, and supersedes all prior negotiations,
proposed agreements or understandings, if any, by and among the
parties concerning the subject matter hereof.
7.
Modification.
This Agreement may be modified only in a written document signed by
an authorized representative on behalf of each party.
8.
Assignment;
Successors and Assigns. This Agreement may not be assigned,
whether in whole or in part, by a party (acting in its sole
discretion) without the prior written consent of each other party
(which consent shall not be unreasonably withheld). This Agreement
shall inure to the benefit of and be binding on each of the parties
and their respective successors and assigns.
9.
Governing
Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of New Jersey, without
application of its conflict of laws provisions.
10.
Counterparts.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will
constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by fax or e-mail in an image format
(e.g., .pdf file) shall be as effective as delivery of a manually
executed counterpart of this Agreement.
[Signature page follows]
IN
WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Agreement as of the Effective
Date.
|
CATALENT BELGIUM S.A.
|
PALATIN TECHNOLOGIES, INC.
|
|
|
|
|
By:
/s/ Wim Blendeman
|
By:
/s/ Stephen T. Wills
|
|
Name: Wim Blendeman
|
Name:
Stephen T. Wills
|
|
Title:
General Manager
|
Title:
CFO
|
EXHIBIT 10.2
Portions of this Exhibit have been redacted because they are both
(i) not material and (ii) would be competitively harmful if
publicly disclosed. Information that was omitted has been noted in
this document with a placeholder identified by the mark
“[***]”
COMMERCIAL SUPPLY AGREEMENT
(Bremelanotide–Pre-filled syringe in
auto-injector)
THIS COMMERCIAL SUPPLY AGREEMENT (“Agreement”) is made as of this
29th day
of September, 2020 (“Effective Date”)
BETWEEN
(1)
Palatin
Technologies, Inc., a New Jersey corporation, with a place of
business at 4-B Cedar Brook Drive, Cranbury, New Jersey, USA 08512
(“Palatin”);
and
(2)
Catalent Belgium
S.A., a Belgian company, with a place of business at Rue Font St.
Landry, 10 Parc Mercator B-1120, Neder over Heembeek, Belgium
(“Catalent”).
RECITALS
A.
Palatin is a
biopharmaceutical company that develops, tests and commercializes,
directly or through third parties, pharmaceutical
products.
B.
Catalent is a
leading provider of advanced technologies, and development,
manufacturing and packaging services for pharmaceutical,
biotechnology and consumer healthcare companies.
C.
Palatin desires to
engage Catalent to provide certain services to Palatin in
connection with the processing of Palatin’s Product (as
defined below), and Catalent desires to provide such services, all
pursuant to the terms and conditions set out in this
Agreement.
THEREFORE, the parties agree as
follows:
1. DEFINITIONS
The
following terms have the following meanings in this
Agreement:
1.1 “Acknowledgement” has the meaning
set out in Clause 4.3.
1.2 “Affiliate” means (a) with respect to Palatin, any
corporation or other business entity that, directly or indirectly,
is controlled by, controls, or is under common control with
Palatin; and (b) with respect to Catalent, Catalent, Inc., Catalent
Pharma Solutions, Inc. and any corporation or other business entity
controlled, directly or indirectly, by Catalent Pharma Solutions,
Inc. For such purposes, “control” means the direct or indirect ownership of
at least fifty percent (50%) of the voting interest in such
corporation or other entity or the power in fact to control the
management directions of such entity.
1.3 “Agreement” has the meaning set out
in the introductory paragraph, and includes all its Attachments and
other appendices (all of which are incorporated herein by
reference).
1.4 “Annual Product Maintenance Fee”
has the meaning set forth in Clause 7.1C.
1.5 “API”
means the compound bremelanotide, as further described in the
Specifications.
1.6 “API Inventions” has the meaning
set out in Section 11.
1.7 “Applicable Laws” means,
with respect to Palatin, all
laws, statutes, statutory provisions or subordinate legislation,
currently in effect or enacted or promulgated during the Term, and
as amended from time to time, of each jurisdiction in which API or
Product is produced, marketed, distributed, used or sold; and with
respect to Catalent, cGMP and all other laws, statutes, statutory
provisions and subordinate legislation, currently in effect or
enacted or promulgated during the Term, and as amended from time to
time, of the jurisdiction in which Catalent Processes
Product.
1.8 “Auto Injector Assembly Line” means
the Processing line expansion for auto injector assembly undertaken
by Catalent pursuant to the Manufacturing Preparation and Services
Agreement.
1.9 “Batch” means a defined quantity of
Product that has been or is being Processed in accordance with the
Specifications.
1.10 “Catalent
Defective Processing” has the meaning set out in
Clause 5.2.
1.11 “Catalent”
has the meaning set out in the introductory paragraph. Catalent
shall have the right to cause any of its Affiliates to perform any
of its obligations hereunder, and Palatin shall accept such
performance as if it were performance by Catalent.; provided, however, that Catalent shall remain
fully liable for the performance by its Affiliate of
Catalent’s obligations under this Agreement to the same
extent as if Catalent had performed or failed to perform its
obligations under this Agreement.
1.12 “Catalent
Indemnitees” has the meaning set out in Clause
13.2.
1.13 “Catalent
IP” has the meaning set out in Section
11.
1.14 “cGMP”
means current Good Manufacturing Practices promulgated by the
Regulatory Authorities in the jurisdictions included in Applicable
Laws. This includes 2003/94/EEC Directive (as supplemented by
Volume 4 of EudraLex published by the European Commission), as
amended, if and as implemented in the relevant constituent country;
and in the United States, this includes 21 C.F.R. Parts 210 and
211, as amended.
1.15 “Change
of Control” means, with respect to a party: (a) any
merger, reorganization, consolidation, or other business
combination of such party with a third party that results in the
voting securities of such party outstanding immediately prior
thereto ceasing to represent at least fifty percent (50%) of the
combined voting power of the surviving entity immediately after
such merger, reorganization, consolidation, or other business
combination; (b) a third party becoming the beneficial owner of
fifty percent (50%) or more of the combined voting power of such
party in a single transaction or series of related transactions; or
(c) the sale, transfer, exchange or other disposition to a third
party of all or substantially all of a party’s assets or
business relating to this Agreement (whether alone or in connection
with a sale, transfer, exchange or other disposition of other
assets or businesses of such party).
1.16 “Confidential
Information” has the meaning set out in Clause
10.1.
1.17 “Contract
Year” means, with respect to the initial Contract
Year, the period beginning on the Effective Date and ending on
August 20, 2021, and, with respect to each successive Contract
Year, each consecutive 12 month period beginning on August 21 and
ending on August 20 of the following calendar year, as
applicable.
1.18 “CPR”
has the meaning set out in Clause 18.10.
1.19 “Defective
Product” has the meaning set out in Clause
5.2.
1.20 “Discloser”
has the meaning set out in Clause 10.1.
1.21 “Effective
Date” has the meaning set out in the introductory
paragraph.
1.22 “Equipment”
means any equipment to be supplied by Catalent to use in the
Processing, including any equipment procured under the
Manufacturing Preparation and Services Agreement.
1.23 “Exception
Notice” has the meaning set out in Clause
5.2.
1.24 “Facility”
means Catalent’s facility in Brussels, Belgium or such other
Catalent facility as mutually agreed by the parties.
1.25 “FDA”
means the United States Food and Drug Administration or any
successor thereto.
1.26 “Firm
Commitment” has the meaning set out in Clause
4.2.
1.27 “Invention”
has the meaning set out in Section 11.
1.28 “Losses”
has the meaning set out in Clause 13.1.
1.29 “Manufacturing
Preparation and Services Agreement” means that certain
manufacturing preparation and services agreement, dated as of June
10, 2016 between Catalent and Palatin.
1.30 “Minimum
Requirement” has the meaning set out in Clause
4.1.
1.31 “Palatin”
has the meaning set out in the introductory paragraph, or any
successor or permitted assign.
1.32 “Palatin
Indemnitees” has the meaning set out in Clause
13.1.
1.33 “Palatin
IP” has the meaning set out in Section
11.
1.34 “Palatin-supplied
Materials” means any materials to be supplied by or on
behalf of Palatin to Catalent for Processing, as provided in
Attachment C,
including API, Ypsomed auto injector components and parts, and
reference standards.
1.35 “Price”
shall have the meaning set forth in Attachment D
hereto.
1.36 “Process”
or “Processing”
means the compounding, filling, producing, manufacturing,
assembling and packaging (clinical, secondary or retail packaging)
of Palatin-supplied Materials and Raw Materials into Product by
Catalent, in accordance with the Specifications and under the terms
of this Agreement.
1.37 “Processing
Date” means the day on which the first step of
physical Processing is scheduled to occur, as identified in an
Acknowledgement.
1.38 “Process
Inventions” has the meaning set out in Section
11.
1.39 “Product”
means the pharmaceutical product containing the API, as more
specifically described in the Specifications.
1.40 “Product
Maintenance Services” has the meaning set out in
Clause 2.3.
1.41 “Purchase
Order” has the meaning set out in Clause
4.3.
1.42 “Quality
Agreement” has the meaning set out in Clause
9.6.
1.43 “Raw
Materials” means all raw materials, supplies,
components, syringes, and packaging necessary to manufacture and
ship Product in accordance with the Specifications, as provided in
Attachment C, but
excluding Palatin-supplied Materials.
1.44 “Recall”
has the meaning set out in Clause 9.5.
1.45 “Recipient”
has the meaning set out in Clause 10.1.
1.46 “Regulatory
Approval” means any approvals, permits, product and/or
establishment licenses, registrations or authorizations, including
European marketing authorizations and applications and U.S.
Investigational New Drug applications, New Drug Applications and
Abbreviated New Drug Applications, as applicable, of any Regulatory
Authorities that are necessary or advisable in connection with the
development, manufacture, testing, use, storage, exportation,
importation, transport, promotion, marketing, distribution or sale
of API or Product in the Territory.
1.47 “Regulatory
Authority” means the regulatory bodies or agencies in
the Territory that are responsible for (A) the regulation
(including pricing) of any aspect of pharmaceutical or medicinal
products intended for human use or (B) health, safety or
environmental matters generally. This includes the European
Medicines Agency; and in the United States, this includes the
United States Food and Drug Administration.
1.48 “Representatives”
of an entity means such entity’s duly-authorized officers,
directors, employees, agents, accountants, attorneys or other
professional advisors.
1.49 “Review
Period” has the meaning set out in Clause
5.2.
1.50 “Required
Disclosure” has the meaning set out in Clause
5.2.
1.51 “Rolling
Forecast” has the meaning set out in Clause
4.2.
1.52 “Specifications”
means the procedures, requirements, standards, quality control
testing and other data and the scope of services as set out in
Attachment C, as
modified from time to time in accordance with Section
8.
1.53 “Supply
Failure” has the meaning set forth in Clause
4.7.
1.54 “Term”
has the meaning set out in Clause 16.1.
1.55 “Territory”
means the European Union and the United States and its territories
and possessions, those countries that are listed in Attachment E,
and any other country that the parties agree in writing to add to
this definition of Territory in an amendment to this Agreement;
provided, however, that Territory shall not be amended to include
countries that are targeted by the comprehensive sanctions,
restrictions or embargoes administered by the United Nations,
European Union, United Kingdom, or the United States. Catalent
shall not be obliged to Process Products for sale in any of such
countries if it is prevented from doing so, or would be required to
obtain or apply for special permission to do so, due to any
restrictions (such as embargoes) imposed on it by any governmental
authorities, including without limitation, those imposed by the
U.S. Office of Foreign Asset Control.
1.56 “Uncured
Supply Failure” has the meaning set out in Clause
4.7.
1.57 “Unit
Pricing” has the meaning set out in Clause
7.1B.
1.58 “Validation
Services” has the meaning set out in Clause
2.1.
1.59 “Vendor”
has the meaning set out in Clause 3.2B.
2. VALIDATION,
PROCESSING & RELATED SERVICES
2.1 Validation Services. Catalent
shall perform the Product qualification, validation and stability
services set out in Attachment A (the
“Validation
Services”).
2.2 Supply and Purchase of Product.
Catalent shall Process Product in accordance with the
Specifications, Applicable Laws and this Agreement. Except as set
forth in Clause 4.7, Palatin and its Affiliates shall purchase
[***]
from Catalent [***] of Palatin’s and its Affiliates’
requirements of Product in the Territory in accordance with this
Agreement.
2.3 Product Maintenance Services.
Palatin will receive the product maintenance services set out in
Attachment B (the
“Product Maintenance
Services”).
2.4 Other Related
Services.
A. Catalent shall
provide any other Product-related services as the parties may agree
in writing (the “Services”). The Services to be
performed by Catalent under this Agreement shall be detailed in
individual statements of work in the form attached hereto as
Attachment F, each
of which, upon acceptance and execution by both parties, will be
binding on both parties and incorporated into the Agreement (each a
“Statement of
Work”). In addition to a description of the Services
to be provided, each Statement of Work shall include a schedule for
completion of the Statement of Work, a fee and payment schedule,
and such other information as is necessary for Catalent to perform
the relevant Services, including any Palatin-supplied Materials
required to complete the Services and the respective
responsibilities of the parties. Catalent shall not initiate work
or incur fees or expenses chargeable to Palatin until a Statement
of Work has been fully executed.
B. Either party may
request a written amendment to any Statement of Work prior to the
completion of Services. Any such request shall detail the requested
changes to the applicable task, responsibility, duty, pricing, time
line or other matter and shall be promptly reviewed by the other
party. Such amendment will become effective upon the execution by
both parties. Both parties shall act in good faith and promptly
when considering an amendment requested by the other party. Without
limiting the foregoing, Palatin shall not unreasonably withhold
approval of an amendment if the proposed changes in pricing or time
lines result from, among other appropriate reasons, forces outside
the reasonable control of Catalent or changes in the assumptions
upon which the initial pricing or time lines were based. Catalent
shall not be obligated to perform any modified Services, and shall
not initiate any additional or supplemental Services, until an
amendment has been executed by the parties with respect to such
modified, additional or supplemental Services.
C. Each Statement of
Work, together with any associated amendments, shall constitute a
unique agreement and shall stand alone with respect to any other
Statement of Work. Each fully signed Statement of Work, together
with any associated amendments, will be subject to the terms of
this Agreement and will be incorporated herein and form part of
this Agreement.
D. Any Statement of
Work hereunder may be terminated in whole or in part [***] by
Palatin. Upon termination of a Statement of Work, neither Catalent
nor Palatin will have any further obligations under such Statement
of Work, except that:
(1)
Catalent will
terminate all affected Services in progress in an orderly manner as
soon as practical and in accordance with a schedule agreed to by
Palatin and as permitted by Applicable Laws, unless Palatin
specifies in the notice of termination that Services in progress
should be completed;
(2)
Catalent will
deliver or, at Palatin’s option and sole expense, dispose of,
any Palatin-supplied Materials in its possession or control and all
deliverables developed through the date of
termination;
(3)
Palatin will pay
Catalent any unpaid amounts due and owing Catalent for (i) all
Services performed up to the date of termination, (ii) all
reimbursable costs and expenses actually incurred as of the date of
termination in accordance with the Statement of Work, and (iii) all
non-cancelable commitments made in the performance of the Services,
in each case including any costs incurred to wind down and cease
any ongoing Services; and
(4)
with respect to any
advance payments made by Palatin for the Services in excess of
amounts payable by Palatin pursuant to Section 2.4(D)(3), Catalent
will promptly refund such amounts to Palatin for Services not
rendered.
E. Notwithstanding
the foregoing, nothing in this Agreement will obligate either party
to enter into any Statement of Work under this Agreement. Unless
otherwise expressly agreed in the applicable Statement of Work, in
the event of a conflict between the terms and conditions of the
Agreement and the Statement of Work, the terms of the Agreement
shall take precedence and control.
3. MATERIALS,
EQUIPMENT AND AUTO INJECTOR ASSEMBLY LINES
3.1 Palatin-supplied
Materials.
A. Palatin shall
supply to Catalent for Processing, at [***]cost, all
Palatin-supplied Materials, in quantities sufficient to meet
Palatin’s requirements for Product. Palatin shall deliver DDP
(Incoterms 2010) such items and associated certificates of analysis
to the Facility no later than [***] (but not earlier than [***]
unless otherwise agreed by Catalent) before the Processing Date.
Palatin shall be responsible at its cost for securing necessary
export or import, or similar clearances, permits or certifications
required in respect of such supply. Catalent shall use
Palatin-supplied Materials solely for Processing. To the extent not
previously provided, Palatin shall provide to Catalent, prior to
delivery of any Palatin-supplied Materials, a copy of all
associated material safety data sheets, safe handling instructions,
health and environmental information, and any regulatory
certifications or authorizations that may be required under
Applicable Laws relating to the API and Product, and shall promptly
provide any updates thereto.
B. Within [***]
following receipt of Palatin-supplied Materials, Catalent shall
inspect such items to verify their identity. Unless otherwise
expressly required by the Specifications, Catalent shall have no
obligation to test such items to confirm that they meet the
associated specifications or certificate of analysis or otherwise;
but in the event that Catalent detects a nonconformity with
Specifications, Catalent shall give Palatin prompt notice of such
nonconformity. Catalent shall not be liable for any defects in
Palatin-supplied Materials, or in Product as a result of defective
Palatin-supplied Materials unless Catalent failed to properly
perform the foregoing obligations. Catalent shall follow
Palatin’s reasonable written instructions in respect of
return or disposal of defective Palatin-supplied
Materials.
C. Palatin shall
retain title to Palatin-supplied Materials at all times, and
Palatin shall bear the risk of loss thereof, except in the event of
losses related to Catalent’s gross negligence or willful
misconduct, in which case Catalent’s liability shall be
limited pursuant to Section 14 below.
3.2 Raw Materials.
A. Catalent shall
procure Raw Materials only from vendors that are approved in
writing by Palatin or otherwise qualified in accordance with the
provisions of the Quality Agreement. Catalent shall be responsible
for procuring Raw Materials as necessary to meet the Firm
Commitment. Catalent shall not be liable for any delay in delivery
of Product if (i) Catalent is unable to obtain, in a timely manner,
a particular Raw Material necessary for Processing and (ii)
Catalent placed orders for such Raw Materials promptly following
receipt of Palatin’s Firm Commitment. In the event that any
Raw Material becomes subject to purchase lead time beyond the Firm
Commitment time frame, the parties will negotiate in good faith an
appropriate amendment to this Agreement, including Clause
4.2.
B. In certain
instances, Palatin may require a specific supplier, manufacturer or
vendor (“Vendor”) to be used for Raw
Material. In such an event, (i) such Vendor will be identified in
the Specifications and (ii) the Raw Materials from such Vendor
shall be deemed Palatin-supplied Materials for purposes of this
Agreement. If the cost of the Raw Material from any such Vendor
(other than a Vendor specified in the Specifications as of the
Effective Date) is greater than Catalent’s costs for the same
raw material of equal quality from other vendors, Catalent shall
add the difference between Catalent’s cost of the Raw
Material and the Vendor’s cost of the Raw Material to the
Unit Pricing. Palatin will be responsible for all reasonable,
out-of-pocket costs incurred by Catalent associated with
qualification of any such Vendor who has not been previously
qualified by Catalent.
C. In the event of (i)
a Specification change for any reason, (ii) obsolescence of any Raw
Material or (iii) termination or expiry of this Agreement, Palatin
shall bear the cost of any unused Raw Materials (including
packaging), so long as Catalent (a) purchased such Raw Materials in
quantities consistent with Palatin’s then current Firm
Commitment and any minimum purchase obligations required by the
vendor and (b) used commercially reasonable efforts to mitigate
such costs by using any such unused Raw Materials in the
manufacture of other products.
3.3 Artwork and Labeling. Palatin
shall provide, or approve prior to Catalent’s procurement of
applicable Raw Material, all artwork, advertising and labeling
information necessary for Processing, if any. Such artwork,
advertising and labeling information is and shall remain the
exclusive property of Palatin, and Palatin shall be solely
responsible for the content thereof. Such artwork, advertising and
labeling information or any reproduction thereof may not be used by
Catalent, during or after the Term, in any manner other than
performing its obligations hereunder.
3.4 [***].
3.5 Auto Injector Assembly Line.
With respect to all equipment and components of the Auto Injector
Assembly Line, notwithstanding any amounts that Palatin contributes
to the purchase of equipment and components in connection with the
establishment of such Auto Injector Assembly Line, Catalent shall
solely own all right, title and interest in and to such line, and
all equipment and components relating thereto, and shall bear the
risk of loss thereof. [***] The parties shall work together in good
faith to plan and schedule such Palatin priority access based on a
combination of Palatin’s (i) Rolling Forecasts and Firm
Commitment and (ii) Minimum Requirements for the applicable
Contract Year(s). In the event that during a Contract Year(s),
Catalent uses the Auto Injector Assembly Line for another Catalent
customer in keeping with the priority access requirements set forth
in this Clause 3.5, then [***] .
4. MINIMUM
REQUIREMENT, FORECASTS & PURCHASE ORDERS
4.1 Minimum Requirement. During
each Contract Year, Palatin (or its Affiliates or licensees) shall
purchase the minimum number of units of Product set out on
Attachment D
(“Minimum
Requirement”). If during any Contract Year Palatin
purchases a number of units of Product that is less than the
Minimum Requirement (the difference, a “Purchase Shortfall”), then within
[***] after the end of such Contract Year, Palatin shall pay
Catalent an amount equal to [***].
4.2 Forecast. On or before [***],
and thereafter on a [***], Palatin shall furnish to Catalent a
written [***] rolling forecast of the quantities of Product that
Palatin intends to order from Catalent during such period
(“Rolling
Forecast”); provided that to the extent feasible at
least [***] of the total number of units purchased in the relevant
Contract Year shall be purchased in each of the first and second
six months of such relevant Contract Year. The [***] of such
Rolling Forecast shall constitute a binding commitment to purchase
the quantities of Product specified therein (“Firm Commitment”) and [***] of the
Rolling Forecast shall be non-binding, good faith
estimates.
4.3 Purchase Orders.
A. Concurrently with
the submission of each Rolling Forecast, Palatin shall submit to
Catalent a binding, non-cancelable purchase order for Product,
specifying the Batch size (to the extent the Specifications permit
Batches of different sizes) and the requested delivery date for
each Batch (“Purchase
Order”); provided, that each Purchase Order
shall be for not less than the Firm Commitment (but only to the
extent the Firm Commitment was not covered in a previous Purchase
Order). Purchase Orders for quantities of Product in excess of the
Firm Commitment shall be submitted by Palatin at least [***] in
advance of the delivery date requested in the Purchase
Order.
B. Within [***] after
receipt of a Purchase Order, Catalent shall issue a written
acknowledgement (“Acknowledgement”) that it accepts
or rejects such Purchase Order. Each acceptance Acknowledgement
shall either confirm the delivery date set out in the Purchase
Order or provide a reasonable alternative delivery date (which, in
any event, shall be [***] ), and shall include the Processing Date.
Catalent may reject any Purchase Order in excess of the Firm
Commitment or otherwise not given in accordance with this
Agreement; provided,
however, that Catalent
shall use its commercially reasonable efforts to supply Palatin
with quantities of Product which are up to [***] in excess of the
quantities specified in the Firm Commitment, subject to
Catalent’s other supply commitments and manufacturing,
packaging and equipment capacity. A properly submitted Purchase
Order shall be deemed [***] within [***] after receipt of such
Purchase Order.
C. In the event of a
conflict between the terms of any Purchase Order or Acknowledgement
and this Agreement, the terms of this Agreement shall control
unless the terms of the Purchase Order expressly override the terms
set forth herein.
4.4 Catalent’s Cancellation of
Purchase Orders. Notwithstanding Clause 4.5, Catalent
reserves the right to cancel all, or any part of, a Purchase Order
upon written notice to Palatin, and Catalent shall have no further
obligations or liability with respect to such Purchase Order, if
Palatin refuses or fails to timely supply conforming
Palatin-supplied Materials in accordance with Clause 3.1 and such
failure is not cured within [***] after the giving of written
notice of such failure. Any such cancellation of Purchase Orders
shall not constitute a breach of this Agreement by Catalent nor
shall it absolve Palatin of its obligation in respect of the
Minimum Requirement.
4.5 Palatin’s Modification or
Cancellation of Purchase Orders.
A. Palatin may modify
the delivery date or quantity of Product in a Purchase Order only
by submitting a written change order to Catalent at least [***] in
advance of the earliest Processing Date covered by such change
order. To the extent the change order modifies the delivery date or
modifies the quantity of Product in a Purchase Order, such change
order shall be effective and binding against Catalent only upon the
written approval of Catalent, and notwithstanding the foregoing,
Palatin shall remain responsible for the Firm
Commitment.
B. Changes to or
postponement of any Batch of Product by Palatin will not reduce or
in any way affect Palatin’s Minimum Requirement obligations
set out in Clause 4.1.
4.6 Unplanned Delay or Elimination of
Processing. Catalent shall use commercially reasonable
efforts to meet the Purchase Orders, subject to the terms and
conditions of this Agreement. Catalent shall provide Palatin with
as much advance notice as practicable, and shall provide at least
[***]advance notice where possible, if Catalent determines that any
Processing will be delayed or eliminated for any
reason.
4.7 Supply Failure. For purposes of
this Agreement, a “Supply
Failure” shall mean a failure by Catalent to supply
Product meeting the Specifications, subject to Clauses 5.2, 5.3 and
5.4, in the quantities ordered by Palatin (subject to the
limitations and terms set forth in Clauses 4.3 and 4.4) for
[***] , where such failure is [***] . In the event of [***] (such
event, an “Uncured Supply
Failure”), Palatin shall have the right [***] . In the
event of such Uncured Supply Failure, [***] , the parties shall
meet to discuss in good faith how to equitably manage any Minimum
Requirement for the then current Contract Year, [***]
..
4.8 Observation of Processing. In
addition to Palatin’s audit right pursuant to Clause 9.4,
Palatin may send [***] Representatives to the Facility to observe
Processing for a maximum of [***] (unless otherwise agreed by
Catalent in writing), upon at least [***] prior notice, at
reasonable times during regular business hours. Such Palatin
Representatives shall abide by all Catalent safety rules and other
applicable policies and procedures, and Palatin shall be
responsible for such compliance. Palatin shall defend, indemnify
and hold harmless Catalent for any action, omission or other
activity of such Palatin Representatives while on Catalent’s
premises. Palatin’s Representatives shall be required to sign
Catalent’s standard visitor confidentiality agreement prior
to being allowed access to the Facility.
5. TESTING;
SAMPLES; RELEASE
5.1 Batch Records and Data;
Release.
A. Subject to Clause
5.1B, unless otherwise agreed to by the parties in writing, within
[***] after Catalent completes Processing of a Batch, Catalent
shall provide Palatin with copies of executed Batch records
prepared in accordance with the Specifications; provided, that if testing reveals an
out-of-Specification result, Catalent shall provide such Batch
records within [***] after resolution of the out-of-Specification
result. After Catalent completes Processing of a Batch, Catalent
shall also provide Palatin or its designee with a certificate of
analysis for such Batch. Issuance of a certificate of
conformance/analysis constitutes release of the Batch by Catalent
to Palatin. Palatin shall be responsible for final release of
Product (including testing), at its cost, to the
market.
B. If testing reveals
an out-of-Specification result with respect to a Batch, Catalent
shall report such result to Palatin as soon as practicable, and in
any event within [***] after obtaining such result. Within [***]
after resolution of the out-of-Specification result, Catalent shall
provide Palatin a written report detailing the cause of such
out-of-Specification result and the manner in which it was
resolved. Catalent shall provide Palatin with such further
information as Palatin reasonably requests with respect to such
out-of-Specification result.
5.2 Testing; Rejection. Following
Palatin’s receipt of a shipment of a Batch, Palatin or
Palatin’s designee may test samples of such Batch to confirm
that the Specifications have been met. Unless within [***] after
Palatin’s receipt of a Batch (“Review Period”), Palatin or its
designee notifies Catalent in writing (an “Exception Notice”) that such Batch
is not in compliance with Clause 12.1A (“Defective Product”), and provides
a sample of the alleged Defective Product, the Batch shall be
deemed accepted by Palatin and Palatin shall have no right to
reject such Batch. Upon timely receipt of an Exception Notice from
Palatin, Catalent shall in its sole discretion conduct an
appropriate investigation to determine whether or not it agrees
with Palatin that Product is Defective Product and to determine the
cause of any nonconformity. If Catalent agrees that Product is
Defective Product and determines that the cause of nonconformity is
attributable to Catalent’s negligence or willful misconduct
(“Catalent Defective
Processing”), then Clause 5.4 shall
apply.
5.3 Discrepant Results. If the
parties disagree as to whether Product is Defective Product and/or
whether the cause of the nonconformity is Catalent Defective
Processing, without regard to whether Catalent conducts an
appropriate investigation as provided in Clause 5.2, and this is
not resolved within [***] of the Exception Notice date, the parties
shall cause a mutually acceptable independent third party to review
records, test data and to perform comparative tests and/or analyses
on samples of the alleged Defective Product and its components,
including Palatin-supplied Materials. The independent party’s
results as to whether or not Product is Defective Product and the
cause of any nonconformity shall be final and binding. Unless
otherwise agreed to by the parties in writing, the costs associated
with such testing and review shall be borne by Catalent if Product
is Defective Product attributable to Catalent Defective Processing,
and by Palatin in all other circumstances. For avoidance of doubt,
where the cause of nonconformity cannot be determined or assigned,
it shall be deemed not Catalent Defective Processing.
5.4 Defective Processing. Catalent
shall, [***] either (A) [***] or (B) [***] . This shall be
Palatin’s sole and exclusive remedy under this Agreement for
Defective Product attributable to Catalent Defective Processing,
other than as provided in Clause 4.7, 9.5 and 13.1 of this
Agreement.
6. DELIVERY
6.1 Delivery. Catalent shall
deliver Product Ex Works (Incoterms 2010) the Facility promptly
following Catalent’s release of Product. Catalent shall
segregate and store all Product until tender of delivery. Title to
Product shall transfer to Palatin upon Catalent’s tender of
delivery. Palatin shall qualify or validate at least three carriers
to ship Product and then designate the priority of such qualified
carriers to Catalent, and Catalent shall not, without
Palatin’s prior written consent, utilize any other carrier
for purposes of delivering Product to Palatin or its designees.
Catalent shall include with each shipment of Product the applicable
Purchase Order number, the Batch number and the quantity of
Product.
6.2 Storage Fees. If Catalent
performs in accordance with the Purchase Order, and Palatin fails
to take delivery of any Product on any agreed delivery date,
Catalent shall store such Product and Palatin shall be invoiced on
the first day of each month following such scheduled delivery for
reasonable storage costs. All such storage shall be under
conditions set forth in the Specifications. For each such Batch of
stored Product, risk of loss shall transfer to Palatin upon
placement into storage and Catalent shall have the right to ship
such Product to Palatin within two months after
billing.
6.3 Bill and Hold. From time to
time, at Palatin’s request, the agreed delivery date of the
Purchase Order may be extended under a bill and hold arrangement as
more fully set forth below. For each such Batch of stored Product,
Palatin agrees that: (A) Palatin has made a fixed commitment to
purchase the Product, (B) risk of loss for such Product passes to
Palatin upon placement into storage, (C) such Product shall be on a
bill and hold basis for legitimate business purposes, (D) Palatin
shall identify a fixed delivery date for the Product and (E)
Palatin shall agree to be invoiced and to pay such invoice in
accordance with the payment terms set forth in Clause 7.3 of this
Agreement. Upon making a request for a bill and hold arrangement,
Palatin shall provide Catalent with a letter confirming items (A)
through (E) of this Clause 6.3 for each Batch of stored
Product.
7. PAYMENTS;
LICENSING; CHANGE OF CONTROL
7.1
Fees. In consideration for
Catalent performing services hereunder:
A. Palatin shall pay
to Catalent the fees for Validation Services set out on
Attachment A.
Catalent shall submit an invoice to Palatin for such fees upon the
completion of the relevant phase of the Validation
Services.
B. Palatin shall pay
Catalent the unit pricing for Product set out on Attachment D
(“Unit
Pricing”). Catalent shall submit an invoice to Palatin
for such fees upon tender of delivery of Product as provided in
Clause 6.1.
C. Except as provided
in Clause 3.5, Palatin shall pay Catalent the annual fees for
Product Maintenance Services set out on Attachment D (the
“Annual Product Maintenance
Fee”). Catalent shall submit an invoice to Palatin for
such Annual Product Maintenance Fee payable upon [***] and upon
each anniversary of such date thereafter during the
Term.
D. Other Fees. Palatin shall pay
Catalent for all other fees and expenses of Catalent owing in
accordance with the terms of this Agreement, including pursuant to
Clauses 2.4, 4.1, 6.2, 9.2.1 and 16.4. Catalent shall submit an
invoice to Palatin for such fees as and when appropriate. All such
invoices shall contain sufficient detail and appropriate
itemization of fees and expenses (with copies of supporting
documentation for expenses provided upon written request), and
shall reference the applicable Palatin purchase order number.
Catalent shall remit all invoices to the following
address:
By
Mail:
Palatin
Technologies, Inc.
4-B
Cedar Brook Drive
Cranbury, New
Jersey 08512 USA
Attn:
Accounts Payable
By electronic
mail:
accountspayable@palatin.com
7.2 Unit Pricing Adjustment. From
and after [***] , the Unit Pricing shall be adjusted [***] ,
effective as of [***] . Catalent shall give Palatin written notice
of such adjustment by [***] . The written notice shall specify the
basis for each adjustment in the Price, including increases or
decreases in the cost of Raw Materials, continuous improvement
benefits and any increase or decrease of any other component of
Unit Pricing. The amount of any increase in the cost of components
of Unit Pricing other than Raw Materials shall not exceed [***] .
The cost of Raw Materials shall be passed through to Palatin [***]
.. To manage the cost of Raw Materials, Palatin, at its option, may
negotiate the terms of a supply agreement with any supplier of Raw
Materials, including but not limited to [***] with respect to the
supply of [***] .
7.3 Payment Terms. Payment of all
Catalent invoices shall be due [***] after the later of (A) the
date of the invoice and (B) the date of delivery. Palatin shall
make payment in euros. Unless an invoice is disputed by Palatin in
good faith, if any payment is not received by Catalent by its due
date, then Catalent may charge interest on the outstanding sum from
the due date (both before and after any judgment) at [***] per
month until paid in full (or, if less, the maximum amount permitted
by Applicable Laws). Further, if Palatin shall fail to make any
payment when due other than for an invoice disputed by Palatin in
good faith, and shall not have cured such non-payment within [***]
after receiving from Catalent written notice of non-payment, then
Catalent shall have the right, at its option, to suspend any
further performance hereunder until such default is corrected,
without thereby releasing Palatin from its obligations under this
Agreement.
7.4 Taxes. All taxes, duties and
other levies assessed (excluding tax based on net income) on or in
connection with Palatin-supplied Materials, services or Product in
connection with provision or sale to Catalent or Palatin, shall be
reimbursed by Palatin to Catalent (and shall be included in
invoices) and all charges are exclusive of any applicable taxes,
duties and levies which shall be added to invoices directed at
Palatin.
7.5 Palatin
and Third Party Expenses. Except as may be expressly covered
by Product Maintenance Service fees, Palatin shall be responsible for 100% of its own
and all third-party expenses associated with the development,
Regulatory Approvals and commercialization of Product, including
regulatory filings and post-approval marketing
studies.
8. CHANGES
TO SPECIFICATIONS
All
Specifications and any changes thereto agreed to by the parties
from time to time shall be in writing, dated and signed by the
parties. Any change to the Process shall be deemed a Specification
change. No change in the Specifications shall be implemented by
Catalent, whether requested by Palatin or requested or required by
any Regulatory Authority, until the parties have agreed in writing
to such change, the implementation date of such change, and any
increase or decrease in costs, expenses or fees directly resulting
from such change (including any change to Unit Pricing). Catalent
shall respond promptly to any request made by Palatin for a change
in the Specifications, and both parties shall use commercially
reasonable, good faith efforts to agree to the terms of such change
in a timely manner. As soon as reasonably practicable after a
request is made for any change in Specifications, Catalent shall
notify Palatin of the costs associated with such change and shall
provide such supporting documentation as Palatin may reasonably
require. Palatin shall pay all direct costs associated with such
agreed upon changes. If there is a conflict between the terms of
this Agreement and the terms of the Specifications, this Agreement
shall control unless the parties mutually agree that the terms of
the Specifications expressly override the terms set forth herein.
Catalent reserves the right to postpone effecting changes to the
Specifications until such time as the parties agree to and execute
the required written amendment.
9. RECORDS;
REGULATORY MATTERS
9.1 Record Keeping. Catalent shall
maintain materially complete and accurate Batch, laboratory data,
reports and other technical records relating to Processing in
accordance with Catalent standard operating procedures and all
Applicable Laws. Such information shall be maintained for a period
of at least [***] from the relevant finished Product expiry date or
longer if required under Applicable Laws or the Quality
Agreement.
9.2 Regulatory Compliance. Catalent
shall obtain and maintain all permits and licences with respect to
general Facility operations required by any Regulatory Authority in
the jurisdiction in which Catalent Processes Product. Palatin shall
obtain and maintain all other Regulatory Approvals and other
authorizations and certificates, including those necessary for
Catalent to commence Processing. During the Term, Catalent will
assist Palatin with all regulatory matters relating to Processing,
at Palatin’s request and sole expense. Catalent reserves the
right to assess Palatin for any regulatory fees that may be
established by any Regulatory Authority subsequent to the Effective
Date of this Agreement, which fees result directly from
Catalent’s formulation, development, manufacturing,
processing, filing, packaging, storing or testing of the Product or
Palatin-supplied Materials. Except as required under Applicable
Laws or by any governmental agency, Palatin shall not identify
Catalent in any regulatory filing or submission without
Catalent’s prior written consent. Such consent shall not be
unreasonably withheld and shall be memorialized in a writing signed
by authorized representatives of both parties. Upon
Catalent’s written request, Palatin shall provide Catalent
with a copy of any Regulatory Approvals required to distribute,
market and sell Product in one or more countries within the
Territory. If Palatin is unable to provide such information,
Catalent shall have no obligation to deliver Product to Palatin,
notwithstanding anything to the contrary in this Agreement. The
parties intend and commit to cooperate to allow each party to
satisfy its obligations under Applicable Laws relating to
Processing under this Agreement.
9.2.1 GDUFA Fees. Palatin shall
reimburse Catalent for any fees Catalent may be required to pay
pursuant to the US Generic Drug User Fee Amendments of 2012
("GDUFA Fees"), [***] .
GDUFA Fees are assessed on Catalent when an Abbreviated New Drug
Application ("ANDA")
applicant identifies Catalent in an ANDA application filed with
FDA. GDUFA Fees are assessed by the FDA annually and shall be paid
by Palatin annually, where applicable. Prior to October 1st of each
year, and where applicable, Catalent will invoice Palatin for [***]
the annual GDUFA Fees Catalent incurs for each Catalent
manufacturing or packaging facility identified in any Palatin
ANDA(s) pursuant to FDA regulations (this includes but is not
limited to any Catalent facility which manufactured or packaged
Palatin's registration batches).
9.3 Governmental Inspections and
Requests. Catalent shall promptly advise Palatin if an
authorized agent of any Regulatory Authority (A) notifies Catalent
that it intends to or does visit the Facility for the purpose of
reviewing the Processing or (B) takes any regulatory action with
respect to the Product or the Processing. Catalent shall promptly
provide to Palatin a report of the result of any such inspection by
any Regulatory Authority to the extent directly related to the
Processing of the Product and furnish to Palatin a copy of all
written information provided by such Regulatory Authority to the
extent specifically and directly related to the Processing of the
Product, if any, within 10 days of Catalent’s receipt of such
information, in each case redacted as appropriate to protect any
Confidential Information of Catalent and/or confidential
information Catalent’s other customers. Palatin acknowledges
that it may not direct the manner in which Catalent fulfills its
obligations to permit inspection by and to communicate with
Regulatory Authorities. Notwithstanding the foregoing, Catalent
shall not initiate or participate in any communications with any
Regulatory Authority concerning the Product or the Processing
thereof without prior consultation with Palatin, unless Catalent
(i) reasonably believes it is required by Applicable Law to
make the communication under conditions that make such prior
consultation impossible or impractical, in which case Catalent
shall promptly thereafter notify Palatin in writing of the nature
and content of the communication, or (ii) is requested to do so by
Palatin. If any inspection by Regulatory Authorities is related to
the Processing of the Product, Palatin shall reimburse Catalent for
all reasonable and documented costs associated with such inspection
attributable to the Processing of the Product. If deficiencies are
identified in connection with any inspection by Regulatory
Authorities related to or otherwise affecting the Processing of the
Product, Catalent shall use commercially reasonable efforts to
correct all such deficiencies in a timely manner. Catalent shall
advise Palatin periodically of progress being made with respect to
such deficiencies and notify Palatin, in writing, upon completion
of any corrective action taken.
9.4 Palatin Facility Audits. During
the Term, Palatin’s Representatives shall be granted access
upon [***] prior notice, at reasonable times during regular
business hours, to (A) the portion of the Facilities where Catalent
performs Processing, (B) relevant personnel involved in Processing
and (C) Processing records described in Clause 9.1, in each case
solely for the purpose of verifying that Catalent is Processing in
accordance with cGMPs, the Specifications and the Product master
Batch records. Palatin may not conduct an audit under this Clause
9.4 more than [***] ; provided, that additional inspections may be
conducted in the event there is a material quality or compliance
issue concerning Product or its Processing. Palatin’s Quality
Assurance Manager will arrange Palatin audits with Catalent Quality
Management. Audits shall be designed to minimize, to the extent
reasonably possible, disruption of operations at the applicable
Facility. Palatin’s Representatives shall be required to sign
Catalent’s standard visitor confidentiality agreement prior
to being allowed access to the Facility. Such Representatives shall
comply with the Facility’s rules and regulations. Palatin
shall defend, indemnify and hold harmless Catalent for any action
or activity of such Representatives while on Catalent’s
premises.
9.5 Recall. If Catalent believes a
recall, field alert, Product withdrawal or field correction
(“Recall”) may
be necessary with respect to any Product supplied under this
Agreement, Catalent shall promptly notify Palatin. Catalent will
not act to initiate a Recall without the express prior written
approval of Palatin, unless otherwise required by Applicable Laws.
If Palatin believes a Recall may be necessary with respect to any
Product supplied under this Agreement, Palatin shall promptly
notify Catalent and Catalent shall provide all necessary
cooperation and assistance to Palatin. Palatin shall provide
Catalent with an advance copy of any proposed submission to a
Regulatory Authority in respect of any Recall, and shall consider
in good faith any comments from Catalent. The cost of any Recall
shall be borne by Palatin, and Palatin shall reimburse Catalent for
expenses incurred in connection with any Recall, in each case
unless such Recall is caused solely by Catalent’s breach of
its obligations under this Agreement with respect to Processing,
violation of Applicable Laws or its negligence or willful
misconduct, then such cost shall be borne by Catalent; provided, however, that for purposes hereof, such
Catalent cost shall be limited to reasonable, actual and documented
administrative costs incurred by Palatin (or its Affiliates,
licensees or distributors) for such Recall and, subject to Section
14, replacement of the Product subject to Recall in accordance with
Section 5.
9.6 Quality Agreement. Within six
months after the Effective Date, and in any event prior to the
first Processing of Product hereunder, the parties shall negotiate
in good faith and enter into a quality or technical agreement (the
“Quality
Agreement”). The Quality Agreement shall in no way
determine liability or financial responsibility of the parties for
the responsibilities set out therein. In the event of a conflict
between any of the provisions of this Agreement and the Quality
Agreement with respect to quality-related activities, including
compliance with cGMP, the provisions of the Quality Agreement shall
govern. In the event of a conflict between any of the provisions of
this Agreement and the Quality Agreement with respect to any
commercial matters, including allocation of risk, liability and
financial responsibility, the provisions of this Agreement shall
govern.
9.7 Quality Assurance/Quality Control
Standards. Upon Palatin’s written request, Catalent
shall deliver to Palatin copies of Catalent’s quality
assurance/quality control investigations, deviations,
out-of-Specification notifications and change controls relevant to
the Processing of Product. Catalent shall notify Palatin of any
material changes made to any of the foregoing or any Specifications
during the Term.
10. CONFIDENTIALITY
AND NON-USE
10.1 Definition.
As used in this Agreement, the term “Confidential Information” includes
all information furnished by or on behalf of Catalent or Palatin
(the “Discloser”), its Affiliates or any
of its or their respective Representatives, to the other party (the
“Recipient”),
its Affiliates or any of its or their respective Representatives,
whether furnished before, on or after the Effective Date and
furnished in any form, including written, verbal, visual,
electronic or in any other media or manner and information acquired
by observation or otherwise during any site visit at the other
party’s facility. Confidential Information includes all
proprietary technologies, know-how, trade secrets, discoveries,
inventions and any other intellectual property (whether or not
patented), analyses, compilations, business or technical
information and other materials prepared by either party, their
respective Affiliates, or any of its or their respective
Representatives, containing or based in whole or in part on any
information furnished by the Discloser, its Affiliates or any of
its or their respective Representatives. Confidential Information
also includes the existence of this Agreement and its
terms.
10.2 Exclusions.
Notwithstanding Clause 10.1, Confidential Information does not
include information that (A) is or becomes generally available to
the public or within the industry to which such information relates
other than as a result of a breach of this Agreement, (B) is
already known by the Recipient at the time of disclosure as
evidenced by the Recipient’s written records, (C) becomes
available to the Recipient on a non-confidential basis from a
source that is entitled to disclose it on a non-confidential basis
or (D) was or is independently developed by or for the Recipient
without reference to the Confidential Information of the Discloser
as evidenced by the Recipient’s written records.
10.3 Mutual
Obligation. The Recipient agrees that it will not use the
Discloser’s Confidential Information except in connection
with the performance of its obligations hereunder and will not
disclose, without the prior written consent of the Discloser,
Confidential Information of the Discloser to any third party,
except that the Recipient may disclose the Discloser’s
Confidential Information to any of its Affiliates and its or their
respective Representatives that (A) need to know such Confidential
Information for the purpose of performing under this Agreement, (B)
are advised of the contents of this Clause and (C) are bound to the
Recipient by obligations of confidentiality at least as restrictive
as the terms of this Clause. Each party shall be responsible for
any breach of this Clause by its Affiliates or any of its or their
respective Representatives.
10.4 Permitted
Disclosure. The Recipient may disclose the Discloser’s
Confidential Information to the extent required under Applicable
Laws or by the rules of any stock exchange on which the securities
of the Discloser are listed in each case upon the reasonable advice
of Recipient’s legal counsel; provided, that prior to making any such
legally required disclosure, the Recipient shall give the Discloser
as much prior notice of the requirement for and contents of such
disclosure as is practicable under the circumstances and use
reasonable efforts to limit the scope of any such disclosure and to
obtain confidential treatment of all Confidential Information
disclosed pursuant to such requirement. Any such disclosure,
however, shall not relieve the Recipient of its confidentiality
obligations as set forth in this Section 10.
10.5 Disclosure
of this Agreement. A public disclosure of this Agreement or
the Manufacturing Preparation and Services Agreement is permitted
if, upon the reasonable advice of legal counsel of the party making
the public disclosure, it is required by law (a "Required Disclosure"), including without
limitation in a filing with the US Securities and Exchange
Commission or the NYSE MKT, provided that the party making the
public disclosure shall provide copies of the Required Disclosure
to the non-disclosing party reasonably in advance of such filing or
other disclosure for the non-disclosing party's review and comment
(but not approval). Each party shall consider in good faith any
comments provided by the other party with respect to the content of
the Required Disclosure, including with respect to the redaction of
this Agreement and any other agreement that is to be filed or
otherwise publicly disclosed in connection with the Required
Disclosure, and shall incorporate such comments or redactions in
the Required Disclosure if doing so does not interfere with the
disclosing party's ability to comply with any requirements under
applicable law or any request or requirement of the US Securities
and Exchange Commission or the NYSE MKT.
10.6 No
Implied License. Except as expressly set out in Clause 10.1,
the Recipient will obtain no right of any kind or license under any
Confidential Information of the Discloser, including any patent
application or patent, by reason of this Agreement. All
Confidential Information will remain the sole property of the
Discloser, subject to Section 11.
10.7 Return
of Confidential Information. Upon expiry or termination of
this Agreement, the Recipient will (and will cause its Affiliates
and its and their respective Representatives to) cease its use and,
upon written request, within [***] either return or destroy (and
certify as to such destruction) all Confidential Information of the
Discloser, including any copies thereof, except for a single copy
which may be retained for the sole purpose of ascertaining
compliance with its obligations under this Agreement and any copies
remaining on the Recipient’s standard computer back-up
devices.
10.8 Survival.
The obligations of confidentiality and non-use contained in this
Section 10 will terminate [***] after the expiry or termination of
this Agreement, except with respect to trade secrets, for which the
obligations of confidentiality and non-use contained in this
Section 10 will continue for so long as such information remains a
trade secret under applicable law.
11. INTELLECTUAL
PROPERTY
For
purposes hereof, “Palatin
IP” means all intellectual property and embodiments
thereof owned by or licensed to Palatin as of the Effective Date or
developed by Palatin other than in connection with this Agreement;
“Catalent IP”
means all intellectual property and embodiments thereof owned by or
licensed to Catalent as of the Effective Date or developed by
Catalent other than in connection with this Agreement;
“Invention”
means any intellectual property developed by either party or
jointly by the parties in connection with this Agreement; [***] .
The parties shall cooperate to achieve the allocation of rights to
Inventions anticipated herein and each party shall be solely
responsible for costs associated with the protection of its
intellectual property.
12. REPRESENTATIONS
AND WARRANTIES
12.1 Catalent.
Catalent represents, warrants and undertakes to Palatin
that:
A. at the time of
delivery by Catalent as provided in Clause 6.1, all Product shall
have been Processed in accordance with Applicable Laws and in
conformance with the Specifications and the Quality Agreement and
will not be adulterated, misbranded or mislabeled within the
meaning of Applicable Laws; provided, that Catalent shall not be
liable for defects attributable to Palatin-supplied Materials
(including artwork, advertising and labeling);
B. Catalent will
comply with all Applicable Laws applicable to Catalent’s
performance under this Agreement and its use of any
Palatin-supplied Materials;
C. To Catalent’s
knowledge, there are no patents owned by others, or trade secrets
or other proprietary rights of others, that would be infringed by
the Catalent IP in Catalent’s performance of the
Agreement;
D. Catalent and its
employees, affiliates, contractors, and agents have never been (i)
debarred or (ii) convicted of a crime for which a person can be
debarred, under Section 335(a) or 335(b) of the Federal Food, Drug,
and Cosmetic Act; and
E. Catalent will not
release any Batch of Product if the required certificates of
conformance indicate that Product does not comply with the
Specifications.
12.2 Palatin.
Palatin represents, warrants and undertakes to Catalent
that:
A. all
Palatin-supplied Materials shall have been produced in accordance
with Applicable Laws, shall comply with all applicable
specifications, including the Specifications, shall not be
adulterated, misbranded or mislabeled within the meaning of
Applicable Laws, and shall have been provided in accordance with
the terms and conditions of this Agreement;
B. the content of all
artwork provided to Catalent shall comply with all Applicable
Laws;
C. all Product
delivered to Palatin by Catalent will be held, used and disposed of
by or on behalf of Palatin in accordance with all Applicable Laws,
and Palatin will otherwise comply with all laws, rules, regulations
and guidelines applicable to Palatin’s performance under this
Agreement;
D. Palatin will not
release any Batch of Product if the required certificates of
conformance indicate that Product does not comply with the
Specifications and if Palatin does not hold all necessary
Regulatory Approvals to market and sell the Product;
E. Palatin has all
necessary authority to use and to permit Catalent to use pursuant
to this Agreement all intellectual property related to Product or
Palatin-supplied Materials (including artwork), and the Processing
of the foregoing, including any copyrights, trademarks, trade
secrets, patents, inventions and developments; to Palatin’s
knowledge, there are no patents owned by others related to the
Palatin IP utilized with the Product that would be infringed or
misused by Palatin’s performance of the Agreement; and, to
Palatin’s knowledge, no trade secrets or other proprietary
rights of others related to the Palatin IP utilized with the
Product would be infringed or misused by Palatin’s
performance of this Agreement; and
F. to Palatin’s
knowledge, the work to be performed by Catalent under this
Agreement will not violate or infringe upon any trademark,
tradename, copyright, patent, trade secret, or other intellectual
property or other right held by any person or entity.
12.3 Mutual:
No transactions or dealings under this Agreement shall be conducted
with or for an individual or entity that is designated as the
target of any sanctions, restrictions or embargoes administered by
the United Nations, European Union, United Kingdom, or the United
States.
12.4 Limitations.
Save as expressly set out in this Agreement, neither party gives
any representation or warranty in respect of the subject matter of
this Agreement, and all representations and warranties that may be
implied (by statute or otherwise) are hereby excluded to the
maximum extent permitted by law.
13. INDEMNIFICATION
13.1 Indemnification
by Catalent. Catalent shall defend, indemnify and hold
harmless Palatin, its Affiliates, and their respective directors,
officers and employees (“Palatin Indemnitees”) from and
against any and all claims, losses, demands, liabilities, damages,
costs and expenses (including reasonable attorneys’ fees and
reasonable investigative costs) in connection with any claim or
action by any third party (“Losses”) arising out of or
resulting from (A) any breach of its representations, warranties or
obligations set out in this Agreement, (B) any negligence or
willful misconduct by Catalent or (C) any actual or alleged
infringement or violation of any patent, trade secret, copyright,
trademark or other proprietary rights of a third party by the
Catalent IP used in Catalent’s performance of its obligations
under this Agreement, but for the avoidance of doubt not with
respect to any such infringement or violation due to Palatin IP,
API Inventions or Palatin-supplied Materials; in each case except
to the extent that any of the foregoing arises out of or results
from any Palatin Indemnitee’s negligence, willful misconduct
or breach of this Agreement.
13.2 Indemnification
by Palatin. Palatin shall defend, indemnify and hold
harmless Catalent, its Affiliates, and their respective directors,
officers and employees (“Catalent Indemnitees”) from and
against any and all Losses arising out of or resulting from (A) any
breach of its representations, warranties or obligations set out in
this Agreement, (B) any manufacture, packaging, sale, promotion,
distribution or use of or exposure to Product or Palatin-supplied
Materials, including product liability or strict liability, (C)
Palatin’s exercise of control over the Processing, to the
extent that Palatin’s instructions or directions violate
Applicable Laws, (D) the conduct of any clinical trials utilizing
Product or API, (E) any actual or alleged infringement or violation
of any third party patent, trade secret, copyright, trademark or
other proprietary rights by intellectual property or other
information provided by Palatin, including Palatin-supplied
Materials, or (F) any negligence or willful misconduct by Palatin;
in each case except to the extent that any of the foregoing arises
out of or results from any Catalent Indemnitee’s negligence,
willful misconduct or breach of this Agreement.
13.3 Indemnification
Procedures. All indemnification obligations in this
Agreement are conditioned upon the indemnified party (A) promptly
notifying the indemnifying party of any claim or liability of which
the indemnified party becomes aware (including a copy of any
related complaint, summons, notice or other instrument);
provided, that failure to
provide such notice within a reasonable period of time shall not
relieve the indemnifying party of any of its obligations hereunder
except to the extent the indemnifying party is prejudiced by such
failure, (B) cooperating with the indemnifying party in the defense
of any such claim or liability and any related settlement
negotiations (at the indemnifying party’s expense) and (C)
not compromising or settling any claim or liability without prior
written consent of the indemnifying party.
14. LIMITATIONS
OF LIABILITY
14.1 TOTAL
LIABILITY. CATALENT’S TOTAL LIABILITY UNDER THIS
AGREEMENT SHALL IN NO EVENT EXCEED [***] .
14.2 INDIRECT
DAMAGES. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL LOSS
OR DAMAGES, OR FOR LOSS OF REVENUES, PROFITS OR DATA, ARISING OUT
OF PERFORMANCE UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR IN TORT
OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
15. INSURANCE
Each
party shall, at its own cost and expense, obtain and maintain in
full force and effect during the Term the following in US dollars
or foreign currency equivalent: (A) Commercial General Liability
Insurance with a per-occurrence limit of not less than [***] ; (B)
Products and Completed Operations Liability Insurance with a
per-occurrence limit of not less than [***] ; and (C) All Risk
Property Insurance, including transit coverage, in an amount equal
to the full replacement value of its property while in, or in
transit to, a Catalent facility as required under this Agreement.
Each party may self-insure all or any portion of the required
insurance as long as, together with its Affiliates, its US GAAP or
foreign currency equivalent net worth is greater than [***] or its
annual EBITDA (earnings before interest, taxes, depreciation and
amortization) is greater than [***] . Each required insurance
policy, other than self-insurance, shall be obtained from an
insurance carrier with an A.M. Best rating of at least A- VII. If
any of the required policies of insurance are written on a claims
made basis, such policies shall be maintained throughout the Term
and for a period of at least [***] thereafter. Each party shall
obtain a waiver of subrogation clause from its property insurance
carriers in favor of the other party, and such waivers will operate
the same whether insurance is carried through third parties or
self-insured. Upon the other party’s written request from
time to time, each party shall promptly furnish to the other party
a certificate of insurance or other evidence of the required
insurance.
16. TERM
AND TERMINATION
16.1 Term.
This Agreement shall commence on the Effective Date and shall
continue until the end of the fifth Contract Year (the
“Initial Term”),
unless earlier terminated in accordance with Clause 16.3 (the
Initial Term as may be extended in accordance with Clause 16.2, the
“Term”).
16.2 Renewal.
The Initial Term shall automatically be extended for one 24-month
period unless at least [***] prior to the end of the Initial Term
one party gives the other party written notice of its desire to
terminate as of the end of the Initial Term.
16.3 Termination.
This Agreement may be terminated:
A. by either party if
steps are taken by or against the other party for the appointment
of a liquidator, an administrator, a receiver, administrative
receiver, manager, interim receiver, trustee, trustee in
bankruptcy, nominee or supervisor or the other party proposes or
enters into an agreement or arrangement with its creditors
generally or makes an assignment for the benefit of its creditors
generally, or otherwise suffers or permits the taking of any steps
for adjudicating it to be bankrupt or insolvent and any such
process, if reasonably shown to be warranted, frivolous or
vexatious, is not withdrawn, dismissed or discharges within [***] ,
or any equivalent or similar action to the above in consequence of
the insolvency of that party is taken in any jurisdiction and is
not withdrawn, dismissed or discharged in the circumstances
described above;
B. by either party if
the other party materially breaches any of the provisions of this
Agreement and such breach is not cured within [***] after the
giving of written notice requiring the breach to be remedied;
provided, that in the case
of a failure of Palatin to make payments in accordance with the
terms of this Agreement, Catalent may terminate this Agreement if
such payment breach is not cured within [***] of receipt of notice
of non-payment from Catalent;
C. by Palatin pursuant
to Clause 4.7; and
D. by Palatin upon
notice and payment of the termination penalty provided in Clause
16.4D.
16.4 Effect of Termination. Expiry
or termination of this Agreement shall be without prejudice to any
rights or obligations that accrued to the benefit of either party
prior to such expiry or termination. In the event of a termination
of this Agreement:
A. Catalent shall
promptly return to Palatin, at Palatin’s expense and
direction, all remaining inventory of Product and Palatin-supplied
Materials; provided, that
all outstanding undisputed invoices have been paid in
full;
B. Palatin shall pay
Catalent all undisputed invoiced amounts outstanding, plus, upon
receipt of an undisputed invoice(s), amounts for any (i) Product
that has been shipped pursuant to Purchase Orders but not yet
invoiced, (ii) Product Processed pursuant to Purchase Orders that
has been completed but not yet shipped, and (iii) in the event that
this Agreement is terminated for any reason other than by Palatin
pursuant to Clause 16.3A, 16.3B or 16.3C, all Product in process of
being Processed pursuant to Purchase Orders (or, alternatively,
Palatin may instruct Catalent to complete such work in process, and
the resulting completed Product shall be governed by clause (ii));
and
C. In the event that
this Agreement is terminated for any reason other than by Palatin
pursuant to Clause 16.3A, 16.3B or 16.3C, Palatin shall pay
Catalent for all out-of-pocket costs and expenses incurred, and all
noncancellable commitments made, in connection with
Catalent’s performance of this Agreement, so long as such
costs, expenses or commitments were made by Catalent consistent
with Palatin’s then current Firm Commitment and any minimum
purchase obligations required by the vendor; provided, however, that notwithstanding
the foregoing, Palatin shall have no obligation to pay Catalent for
costs, expenses or commitments made with respect to Product in
process of being Processed pursuant to Purchase Orders (it being
understood that the amounts payable pursuant to Clause 16.4B(ii)
shall fully compensate Catalent with respect to such Product in
process).
D. If this Agreement
is terminated by Palatin pursuant to Clause 16.3D or for any reason
other than pursuant to Clause 16.3B or 16.3C, then Palatin shall
pay Catalent a termination penalty in accordance with the following
schedule:
|
|
Date of Termination
|
Amount of Termination Penalty
|
|
|
During
Contract Year 1
|
[***]
|
|
|
During
Contract Year 2
|
[***]
|
|
|
During
Contract Year 3
|
[***]
|
16.5 Survival. The rights and
obligations of the parties shall continue under Sections 11
(Intellectual Property), 13 (Indemnification), 14 (Limitations of
Liability), 17 (Notice), 18 (Miscellaneous); under Clauses 10
(Confidentiality and Non-Use) and 15 (Insurance), in each case to
the extent expressly stated therein; and under Clauses 7.3 (Payment
Terms), 7.4 (Taxes), 7.5 (Palatin and Third Party Expenses), 9.1
(Record Keeping), 9.5 (Recall), 12.4 (Limitations on Warranties),
16.4 (Effect of Termination) and 16.5 (Survival), in each case in
accordance with their respective terms if applicable,
notwithstanding expiry or termination of this
Agreement.
17. NOTICE
All
notices and other communications
hereunder shall be in writing and shall be deemed given: (A) when
delivered personally or by hand; (B) when delivered by facsimile
transmission (receipt verified); (C) when received or refused, if
sent by registered or certified or recorded post (return receipt
requested), postage prepaid; or (D) when delivered by courier
service; in each case, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice; provided, that notices of a change of address shall be
effective only upon receipt thereof):
To
Palatin:
Palatin
Technologies, Inc.
4-B
Cedar Brook Drive
Cranbury, New
Jersey 08512 USA
Attn:
Chief Financial Officer
Facsimile: (609)
495-2202
With a copy
to:
Thompson Hine
LLP
335
Madison Avenue, 12th Floor
New
York, New York 10017 USA
Attn:
Faith Charles, Esq.
Facsimile: (212)
344-6101
To
Catalent:
Catalent Belgium
S.A.
Rue
Font St. Landry
10 Parc
Mercator B-1120
Neder
over Heembeek, Belgium
Attn:
General Manager
Facsimile:
32-2-788-39-59
With a copy
to:
Catalent Pharma
Solutions
14
Schoolhouse Road
Somerset, NJ 08873
USA
Attn:
General Counsel (Legal Department)
Facsimile: +1 (732)
537-6491
18. MISCELLANEOUS
18.1 Entire
Agreement; Amendments. This Agreement, together with the
Quality Agreement and each Purchase Order and Statement of Work,
constitutes the entire understanding between the parties, and
supersedes any contracts, agreements or understandings (oral or
written) of the parties, with respect to the subject matter hereof.
For the avoidance of doubt, this Agreement does not supersede any
existing generally applicable confidentiality agreement between the
parties as it relates to time periods prior to the date hereof or
to business dealings not covered by this Agreement. No term of this
Agreement may be amended except upon written agreement of both
parties, unless otherwise expressly provided in this
Agreement.
18.2 Captions;
Certain Conventions. The headings used in this Agreement are
for convenience only and are not to be interpreted or construed as
a substantive part of this Agreement. Unless otherwise expressly
provided herein or the context of this Agreement otherwise
requires, (A) words of any gender include each other gender, (B)
words such as “herein”, “hereof”, and
“hereunder” refer to this Agreement as a whole and not
merely to the particular provision in which such words appear, (C)
words using the singular shall include the plural, and vice versa,
(D) the words “include(s)” and “including”
shall be deemed to be followed by the phrase “but not limited
to”, “without limitation” or words of similar
import, (E) the word “or” shall be deemed to include
the word “and” (e.g., “and/or”) and (F)
references to “Clause” or other subdivision, or to an
Attachment or other appendix, without reference to a document are
to the specified provision or Attachment of this Agreement. This
Agreement shall be construed as if it were drafted jointly by the
parties.
18.3 Further
Assurances. The parties agree to execute such further
instruments and to undertake such other acts as may be reasonably
necessary or appropriate to give full effect to the terms of this
Agreement.
18.4 No
Waiver. In no event shall any delay, failure or omission (in
whole or in part) in enforcing, exercising or pursuing any right,
power, privilege, claim or remedy conferred by or arising under
this Agreement or by law, be deemed to be or construed as a waiver
of that or any other right, power, privilege, claim or remedy in
respect of the circumstances in question, or operate so as to bar
the enforcement of that, or any other right, power, privilege,
claim or remedy, in any other instance at any time or times
subsequently.
18.5 Severability.
If any term of this Agreement is declared invalid or unenforceable
by a court or other body of competent jurisdiction, the remaining
terms of this Agreement will continue in full force and
effect.
18.6 Independent
Contractors. The relationship of the parties is that of
independent contractors, and nothing in this Agreement is intended
to create or will be construed as creating between the parties the
relationship of joint venture, co-partners, employer/employee or
principal/agent.
18.7 Successors
and Assigns. Neither party may assign this Agreement, in
whole or in part, without the prior written consent of the other
party; provided,
however, that either party
may, without the other party’s consent, assign this Agreement
in its entirety to an Affiliate or to a successor to substantially
all of the business or assets of the assigning party or the
assigning party’s business unit responsible for performance
under this Agreement.
18.8 Third
Party Rights. This Agreement shall not confer any rights or
remedies upon any person or entity other than the parties to this
Agreement and their respective successors and permitted assigns,
and a person or entity who is not a party to this Agreement has no
rights to enforce any term of this Agreement.
18.9 Governing
Law. This Agreement and the legal relations between the
parties in connection herewith shall be governed by, and construed
in accordance with, the laws of the State of New Jersey, USA,
without regard to the conflict of law principles thereof. The
United Nations Convention on Contracts for the International Sale
of Goods shall not apply to this Agreement.
18.10 Alternative
Dispute Resolution. Any dispute that arises between the
parties in connection with this Agreement shall first be presented
to the senior executives of the parties for consideration and
resolution. If such executives cannot reach a resolution of the
dispute within a reasonable time, not to exceed 30 days unless
otherwise agreed by the parties in writing, then such dispute shall
be submitted to arbitration by the International Institute for
Conflict Prevention and Resolution, 575 Lexington Avenue, 21st
Floor, New York, NY 10022 (“CPR”) by one arbitrator mutually
agreed upon by the Parties. If no agreement can be reached within
30 days after names of potential arbitrators have been proposed by
the CPR, then the CPR will choose one arbitrator having reasonable
experience in commercial transactions of the type provided for in
this Agreement. The arbitration shall take place in the English
language in New York City, New York, in accordance with the CPR
administered arbitration rules then in effect, and judgment upon
any award rendered in such arbitration will be binding and may be
entered in any court having jurisdiction thereof. Unless otherwise
agreed to by the parties in writing, the arbitration shall commence
within 60 days of the date on which a written demand for
arbitration is filed. The arbitrator’s decision shall set
forth a reasoned basis for any award of damages or finding of
liability. The arbitrator shall not have power to award damages in
excess of actual compensatory damages and shall not multiply actual
damages or award punitive damages.
18.11 Prevailing
Party. In any dispute resolution proceeding between the
parties in connection with this Agreement, the prevailing party
will be entitled to recover its reasonable attorney’s fees
and costs in such proceeding from the other party.
18.12 Publicity.
Neither party will make any press release or other public
disclosure regarding this Agreement or the transactions
contemplated hereby without the other party’s express prior
written consent, except as required under Applicable Laws, by any
governmental agency or by the rules of any stock exchange on which
the securities of the disclosing party are listed, in which case
the party required to make the press release or public disclosure
shall use commercially reasonable efforts to obtain the approval of
the other party as to the form, nature and extent of the press
release or public disclosure prior to issuing the press release or
making the public disclosure. Notwithstanding the foregoing, the
parties hereto intend to make a jointly agreed press release with
respect to the Agreement within 60 days after the Effective Date or
at such other time as mutually agreed by the parties.
18.13 Right
to Dispose. If Catalent requests in writing from Palatin
direction with respect to disposal of any inventories of Product,
Palatin-supplied Materials, Palatin Equipment, other equipment,
samples or other items belonging to Palatin and is unable to obtain
a response from Palatin within 90 days after making such request,
Catalent shall be entitled in its sole discretion to dispose of all
such items.
18.14 Force
Majeure. Except as to payments required under this
Agreement, neither party shall be liable in damages for, nor shall
this Agreement be capable of termination by reason of, any delay in
such party’s performance, or breach of its obligations,
hereunder if such delay or breach is caused by events beyond such
party’s reasonable control, including acts of God, law or
regulation or other action or failure to act of any government or
agency thereof, war or insurrection, civil commotion, destruction
of production facilities or materials by earthquake, fire, flood or
weather, labor disturbances, epidemic or failure of suppliers,
public utilities or common carriers. If the events shall continue
unabated for 90 days, then both parties shall meet to discuss and
negotiate in good faith what modifications to this Agreement should
result from such events.
18.15 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will
constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by fax or e-mail in an image format
(e.g., .pdf file) shall be as effective as delivery of a manually
executed counterpart of this Agreement.
(signature page follows)
IN WITNESS WHEREOF, the parties have
caused their respective duly authorized representatives to execute
this Agreement effective as of the Effective Date.
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CATALENT BELGIUM S.A.
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PALATIN TECHNOLOGIES, INC.
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By:
/s/ Wim Blendeman
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By:
/s/ Stephen T. Wills
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Name: Wim Blendeman
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Name:
Stephen T. Wills
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Title:
General Manager
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Title:
CFO
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ATTACHMENT A
VALIDATION SERVICES
[To be agreed by the parties within ninety (90) days following the
Effective Date and, when agreed to, to form a part of this
Agreement.
Attachment to reflect standard Catalent quotation format, including
pricing.
If no validation services are desired, state “N/A” on
this page.]
ATTACHMENT B
PRODUCT MAINTENANCE SERVICES
[***]
ATTACHMENT C
SPECIFICATIONS
[***]
ATTACHMENT D
PRICING, FEES AND MINIMUM REQUIREMENT
[***]
ATTACHMENT E
COUNTRIES INCLUDED IN TERRITORY
Canada
Kosovo
Former
Yugoslav Republic of Macedonia
Turkey
Albania
Andorra
Bosnia
and Herzegovina
Iceland
Liechtenstein
Monaco
Montenegro
Norway
San
Marino
Serbia
Switzerland
Vatican
City State
Armenia
Azerbaijan
Belarus
Georgia
Kazakhstan
Kyrgyzstan
Moldova
Russia
Tajikistan
Ukraine
Uzbekistan
Turkmenistan
Mongolia
Vietnam
People’s
Republic of China
Taiwan
Hong
Kong S.A.R.
Macau
S.A.R.
Republic
of Korea
ATTACHMENT E
FORM STATEMENT OF WORK
[***]
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.;
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;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly presents 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;
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;
(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;
(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
(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:
(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
(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:
November 16, 2020
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/s/
Carl Spana
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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.;
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;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly presents 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;
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;
(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;
(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
(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:
(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
(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:
November 16, 2020
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/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 September 30,
2020 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:
November 16, 2020
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/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 September 30, 2020 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:
November 16, 2020
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/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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