Item 1.01 Entry into a Material Definitive Agreement.
License Agreement
On September 1, 2017, Avadel Specialty Pharmaceuticals, LLC (the "
Avadel Licensee
"), an indirect wholly owned subsidiary of Avadel Pharmaceuticals plc (the "
Company
"), entered into an Exclusive License and Assignment Agreement (the "
License Agreement
") with Serenity Pharmaceuticals, LLC ("
Serenity
"). The License Agreement is subject to review by the U. S. Government under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "
HSR Act
") and will not become effective until the expiration of any applicable waiting period thereunder.
Under the terms of the License Agreement, Serenity granted to the Avadel Licensee an exclusive license, under certain rights of Serenity in and to certain intellectual property (the "
IP Rights
"), to develop and commercialize the drug desmopressin acetate (the "
Drug
") in the United States, Canada, and their respective territories and possessions (the "
Territory
") for the treatment of certain medical conditions characterized by abnormalities or disorders in voiding and other urinary functions of a subject to control urination (the "
Field
"). In addition, under the License Agreement, Serenity granted to the Avadel Licensee certain rights of Serenity in the New Drug Application for the Drug approved by the U.S. Food and Drug Administration (the "
NDA
"), and certain supply agreements relating to the Drug.
The License Agreement further provides that:
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The Avadel Licensee may sublicense the licensed rights in Canada immediately and in the U.S. beginning two years after the effective date of the license, subject to Serenity's prior written consent which may not be unreasonably withheld, conditioned, or delayed.
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The Avadel Licensee will use its commercially reasonable efforts to commercialize the rights licensed to it under the License Agreement. The Avadel Licensee is responsible for the costs associated with all regulatory activities, including development activities undertaken to support obtaining or maintaining regulatory approvals. Within 120 days following the effective date of the License Agreement, the Avadel Licensee will provide Serenity with a plan with respect to the commercialization of the Drug in the Field in the Territory.
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Within 180 days following the effective date of the License Agreement, the Avadel Licensee will notify Serenity of its decision to undertake development of the Drug for the "Nocturia Indication" (
i.e.,
adult night-time non-incontinent urination) in Canada and the "PNE Indication" (
i.e.,
bed-wetting) in the United States and/or Canada. Serenity will have the right to develop and commercialize the Drug for the Nocturia Indication in Canada and the PNE Indication in the Territory if the Avadel Licensee decides not to undertake such development.
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The Avadel Licensee will pay Serenity an up-front payment of $50 million upon the effective date of the License Agreement. Pursuant to the
exclusive right of negotiation agreement (the "
Exclusivity Agreement
"), dated as of August 11, 2017 and amended on September 1, 2017 as described below, the full amount of such up-front payment will be held in escrow pending such effective date. The Avadel Licensee will also pay Serenity $20 million when the Drug first becomes available for commercial sale.
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Serenity is eligible to receive milestone payments as follows: up to $40 million (the "
Cumulative Sales Milestone Payments
") in the aggregate based on achievement of cumulative sales milestones of $50 million to $200 million and up to $180 million in the aggregate based on achievement of 12-month sales milestones of $300 million to $1.5 billion. Upon a change in control, Serenity will be eligible to receive a payment in the low to mid-double digit millions, reduced by portions of any Cumulative Sales Milestone Payments previously paid. In addition, Serenity is eligible to receive royalties in a tiered mid-double digit range, subject to adjustment in certain circumstances.
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The Avadel Licensee will indemnify Serenity for losses arising out of (a) gross negligence or willful misconduct by the Avadel Licensee in connection with its performance or obligations arising under the License Agreement, (b) any material breach of obligations, representations, warranties or covenants by the Avadel Licensee under the License Agreement, (c) development and commercialization activities in respect of the Drug undertaken by the Avadel Licensee, (d) failure by the Avadel Licensee to comply with applicable laws, and (e) any allegation that personal injury or death, or any damage to any property, was caused by a manufacturing defect in the Drug manufactured by the Avadel Licensee or its third-party suppliers.
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Serenity will indemnify the Avadel Licensee for losses arising out of (a) gross negligence or willful misconduct by Serenity in connection with its performance or obligations arising under the License Agreement, (b) any material breach of obligations, representations, warranties or covenants by Serenity under the License Agreement, (c) development and commercialization activities in respect of the Drug undertaken by Serenity, and (d) failure by Serenity to comply with applicable laws.
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The License Agreement includes various other representations, warranties, covenants, indemnities and other provisions customary for similar transactions.
The foregoing summary of the License Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the complete text of the License Agreement. The Company intends to submit a
FOIA Confidential Treatment Request
with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 f
or certain portions of the License Agreement. The License Agreement, in redacted form subject to such confidential treatment request, will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 2017.
Amendment to Exclusivity Agreement
On September 1, 2017,
the Avadel Licensee and Serenity amended
the Exclusivity Agreement. The Exclusivity Agreement was described in Item 1.01 of the Company's Form 8-K filed August 17, 2017. Under the amendment, the $5,000,000 previously deposited into escrow by the Avadel Licensee will continue to be held in escrow and the Avadel Licensee will deposit into escrow an additional $47,000,000. Upon the expiration of the HSR Act waiting period, as certified to the escrow agent by T.R. Winston & Co., LLC (financial advisor to Serenity), and the resulting effectiveness of the License Agreement, $50,000,000 of the aggregate of $52,000,000 in escrow will be used to pay the up-front payment to Serenity due upon such effectiveness (as described above in this current report on Form 8-K) and $2,000,000 will be paid to Serenity as a reimbursement of its costs and expenses of the transaction.
The foregoing summary of the amendment to the Exclusivity Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the complete text of the amendment to the Exclusivity Agreement. The amendment to the Exclusivity Agreement will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 2017.