As filed with the Securities and Exchange Commission on November 21, 2013

 

File No.  000-55080

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 3 to

 

Form 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

 

ContraVir Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware

 

46-2783806

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification number)

 

 

 

420 Lexington Avenue

Suite 2012

New York, New York

 

10170

(Address of principal executive offices)

 

(Zip Code)

 

212-297-0020

(Registrant’s telephone number, including area code)

 

Securities to be registered pursuant to Section 12(b) of the Act: None.

 

Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filero

 

Accelerated filero

 

 

 

Non-accelerated filero

(Do not check if a smaller reporting company)

 

Smaller reporting companyx

 

The registrant is an “emerging growth company,” as defined in Section 2(a) of the Securities Act. This registration statement complies with the requirements that apply to an issuer that is an emerging growth company.

 

 

 



 

CONTRAVIR PHARMACEUTICALS, INC.

 

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

 

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

 

Item 1.  Business.

 

The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Business” and “Our Relationship with Synergy Following the Distribution.” Those sections are incorporated herein by reference.

 

Item 1A.  Risk Factors.

 

The information required by this item is contained under the section of the information statement entitled “Risk Factors.” That section is incorporated herein by reference.

 

Item 2.  Financial Information.

 

The information required by this item is contained under the sections of the information statement entitled “Selected Historical Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations.” Those sections are incorporated herein by reference.

 

Item 3.  Properties.

 

The information required by this item is contained under the section of the information statement entitled “Business — Properties.” That section is incorporated herein by reference.

 

Item 4.  Security Ownership of Certain Beneficial Owners and Management.

 

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management.” That section is incorporated herein by reference.

 

Item 5.  Directors and Executive Officers.

 

The information required by this item is contained under the section of the information statement entitled “Management.” That section is incorporated herein by reference.

 

Item 6.  Executive Compensation.

 

The information required by this item is contained under the section of the information statement entitled “Compensation Discussion and Analysis” and “Executive Compensation.” Those sections are incorporated herein by reference.

 

Item 7.  Certain Relationships and Related Person Transactions.

 

The information required by this item is contained under the sections of the information statement entitled “Management” and “Certain Relationships and Related Person Transactions.” Those sections are incorporated herein by reference.

 

Item 8.  Legal Proceedings.

 

The information required by this item is contained under the section of the information statement entitled “Business — Legal Proceedings.” That section is incorporated herein by reference.

 

Item 9.  Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.

 

The information required by this item is contained under the sections of the information statement entitled “Dividend Policy” and “Description of Our Capital Stock.” Those sections are incorporated herein by reference.

 

2



 

Item 10.  Recent Sales of Unregistered Securities.

 

The information required by this item is contained under the section of the information statement entitled “Description of Our Capital Stock — Sale of Unregistered Securities.” These sections are incorporated herein by reference.

 

Item 11.  Description of Registrant’s Securities to be Registered.

 

The information required by this item is contained under the section of the information statement entitled “Description of Our Capital Stock.” That section is incorporated herein by reference.

 

Item 12.  Indemnification of Directors and Officers.

 

The information required by this item is contained under the section of the information statement entitled “Description of Our Capital Stock — Limitations on Liability and Indemnification of Officers and Directors.” That section is incorporated herein by reference.

 

Item 13.  Financial Statements and Supplementary Data.

 

The information required by this item is contained under the sections of the information statement entitled “Index to Financial Statements” (and the financial statements referenced therein). That section is incorporated herein by reference.

 

Item 14.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

N/A.

 

Item 15.  Financial Statements and Exhibits.

 

(a)  Financial Statements

 

The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” (and the financial statements referenced therein). That section is incorporated herein by reference.

 

(b)  Exhibits

 

See below.

 

The following documents are filed as exhibits hereto:

 

Exhibit

 

 

Number

 

Exhibit Description

 

 

 

3.1

 

Certificate of Incorporation of ContraVir Pharmaceuticals, Inc. *

3.2

 

By-Laws of ContraVir Pharmaceuticals, Inc.*

4.1

 

Promissory Note, dated June 5, 2013, issued by ContraVir Pharmaceuticals, Inc. to Synergy Pharmaceuticals Inc.*

10.1

 

Amended and Restated Contribution Agreement, dated June 10, 2013, as amended and restated August 5, 2013, by and between Synergy Pharmaceuticals Inc. and ContraVir Pharmaceuticals, Inc.*

10.2

 

Shared Services Agreement, dated July 8, 2013, as amended and restated August 5, 2013, by and between Synergy Pharmaceuticals Inc. and ContraVir Pharmaceuticals, Inc.*

10.3

 

Loan and Security Agreement, dated June 5, 2013, between Synergy Pharmaceuticals Inc. and ContraVir Pharmaceuticals, Inc.*

10.4

 

Asset Purchase Agreement dated August 17, 2012 between Synergy Pharmaceuticals Inc. and Bristol-Myers Squibb Company†

10.5

 

Patent and Technology License Agreement, dated as of February 2, 2005, between Cardiff and Contravir Research Incorporated, an entity with no prior relationship with the Company, as amended March 27, 2007†

10.6

 

Amendment No. 1 to Loan and Security Agreement, dated November 18, 2013, by and between Synergy Pharmaceuticals Inc. and ContraVir Pharmaceuticals, Inc. (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 19, 2013 and incorporated herein by reference).

99.1

 

Information Statement of ContraVir Pharmaceuticals, Inc., preliminary and subject to completion, dated  [*] , 2013

 


* Previously filed as an exhibit to the Company’s registration statement on Form 10 which was filed with the Commission on August 8, 2013.

† Confidential treatment is requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act. In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Commission.

 

3



 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 21, 2013

CONTRAVIR PHARMACEUTICALS, INC.

 

 

 

 

 

By:

/s/ Gary S. Jacob

 

 

Name: Gary S. Jacob

 

 

Title:    Chief Executive Officer

 

4


Exhibit 10.4

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ASSET PURCHASE AGREEMENT

 

between

 

BRISTOL-MYERS SQUIBB COMPANY,

 

and

 

SYNERGY PHARMACEUTICALS, INC.

 

Dated as of August 17, 2012

 



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I Purchase and Sale of Acquired Assets

1

 

 

SECTION 1.01. Purchase and Sale

1

SECTION 1.02. Milestone Consideration

1

SECTION 1.03. Royalty Payments

3

SECTION 1.04. Royalty Records, Reporting and Payments

3

SECTION 1.05. Transfer of Assets

5

SECTION 1.06. Assumed Liabilities

7

SECTION 1.07. Risk of Loss

9

SECTION 1.08. Consents of Third Parties

9

SECTION 1.09. Refunds and Remittances

9

 

 

ARTICLE II Closing

10

 

 

SECTION 2.01. Closing

10

 

 

ARTICLE III Conditions to Closing

11

 

 

SECTION 3.01. Conditions to Obligations of Purchaser

11

SECTION 3.02. Conditions to Obligation of Seller

11

SECTION 3.03. Frustration of Closing Conditions

12

 

 

ARTICLE IV Representations and Warranties of Seller

12

 

 

SECTION 4.01. Authority

12

SECTION 4.02. No Conflicts; Consents

12

SECTION 4.03. Taxes

13

SECTION 4.04. Good and Valid Title

13

SECTION 4.05. Intellectual Property

13

SECTION 4.06. Contracts

14

SECTION 4.07. Transferred Permits

14

SECTION 4.08. Litigation

15

SECTION 4.09. Compliance with Applicable Laws

15

SECTION 4.10. Environmental Matters

15

SECTION 4.11. Absence of Changes or Events

16

SECTION 4.12. DISCLAIMER

16

 

 

ARTICLE V Covenants of Seller

16

 

 

SECTION 5.01. Access

16

SECTION 5.02. Ordinary Conduct

16

SECTION 5.03. Transferred Intellectual Property

17

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ARTICLEVI Representations and Warranties of Purchaser

17

 

 

SECTION 6.01 Authority

17

SECTION 6.02. No Conflicts; Consents

17

SECTION 6.03 Actions and Proceedings

18

SECTION 6.04 Availability of Funds

18

SECTION 6.05 No Knowledge of Misrepresentation or Omission

18

 

 

ARTICLEVII Covenants of Purchaser

18

 

 

SECTION 7.01. Confidentiality

18

SECTION 7.02. No Additional Representations

19

SECTION 7.03. No Use of Certain Names; Transitional License

19

SECTION 7.04. Windfall Profit Sharing

19

SECTION 7.05. Advice to Seller

20

SECTION 7.06. Acknowledgement of Assignment

20

 

 

ARTICLEVIII Mutual Covenants

20

 

 

SECTION 8.01. Consents

20

SECTION 8.02. Cooperation

20

SECTION 8.03. Publicity

21

SECTION 8.04 Bulk Transfer Laws

21

SECTION 8.05. Transfer Taxes; Purchase Price Allocation; Entitlement to Tax Refunds and Credits; Proration of Non-Income Taxes

21

SECTION 8.06. Recordation of Transfer of Intellectual Property

22

SECTION 8.07. Retention of Certain Records

22

 

 

ARTICLE IX Indemnification

22

 

 

SECTION 9.01. Indemnification by Seller

22

SECTION 9.02. Indemnification by Purchaser

22

SECTION 9.03. Limitations on Liability; Cooperation

22

SECTION 9.04. Losses Net of Insurance, etc.

23

SECTION 9.05. Termination of Indemnification

23

SECTION 9.06. Procedures Relating to Indemnification for Third Party Claims

24

SECTION 9.07. Procedures Related to Indemnification for Other Claims

24

SECTION 9.08. Tax Treatment of Indemnification Payments

24

 

 

ARTICLEX Termination

25

 

 

SECTION 10.01. Termination

25

SECTION 10.02. Return of Confidential Information

25

SECTION 10.03. Consequences of Termination

25

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ARTICLEXI Miscellaneous

26

SECTION 11.01. Assignment

26

SECTION 11.02. No Third-Party Beneficiaries

26

SECTION 11.03. Expenses

26

SECTION 11.04. Attorney Fees

26

SECTION 11.05. Amendments

26

SECTION 11.06. Notices

26

SECTION 11.07. Interpretation; Exhibits, Seller Disclosure Schedule and Other Schedules; Certain Definitions

27

SECTION 11.08. Counterparts

35

SECTION 11.09. Entire Agreement

35

SECTION 11.10. Fees

35

SECTION 11.11. Severability

35

SECTION 11.12. Consent to Jurisdiction

35

SECTION 11.13. Waiver of Jury Trial

35

SECTION 11.14. GOVERNING LAW

36

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

ASSET PURCHASE AGREEMENT dated as of August 17, 2012, between BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation (“Seller”), and SYNERGY PHARMACEUTICALS, INC., a Delaware corporation (“Purchaser”).

 

Seller desires to sell, and Purchaser desires to purchase, that certain business of Seller and the Selling Affiliates as conducted on the date hereof consisting of the research, development, product design and related activities of Seller and the Selling Affiliates to the extent related solely to the Product (the “Business”).

 

Certain capitalized terms used in this Agreement are defined in Section 11.07(b). Section 11.07(c) identifies other Sections of this Agreement in which capitalized terms used in this Agreement are defined.

 

Accordingly, the parties hereby agree as follows:

 

ARTICLE I

 

Purchase and Sale of Acquired Assets

 

SECTION 1.01. Purchase and Sale. (a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall, and shall cause the Selling Affiliates to, sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase from Seller and the Selling Affiliates all the right, title and interest of . Seller and the Selling Affiliates in, to and under the Acquired Assets, for (a) a purchase price (the “Purchase Price”) equal to the aggregate amount of (i) One Million Dollars ($1,000,000.00) (the “Base Purchase Price”), payable as set forth in Article II, (ii) the Milestone Consideration, payable in accordance with Section 1.02 and (iii) the Royalty Payments, payable in accordance with Sections 1.03 and 1.04, and (b) the assumption by Purchaser of the Assumed Liabilities. The purchase and sale of the Acquired Assets and the assumption by Purchaser of the Assumed Liabilities are referred to in this Agreement collectively as the “Acquisition”.

 

(b)          Within three (3) business days following receipt by Purchaser from Seller or the Selling Affiliates of the FV-100 active pharmaceutical ingredient and the related invoice, Purchaser shall pay to Seller by wire transfer to the bank account designated in writing by Seller pursuant to Section 2.01(b)(i) in United States Dollars immediately available funds the lesser of (i) amount of such invoice and (ii) Four Hundred Thousand Dollars ($400,000.00).

 

SECTION 1.02. Milestone Consideration.

 

(a)          Milestones. Within five (5) business days after the occurrence of each of the milestone events set forth in the table in this Section 1.02(a) (each a “Milestone Event” and collectively the “Milestone Events”) with respect to FV-100 (the valyl ester pro-drug of Cfl743, a bicyclic nucleoside analogue) (the “Product”), Purchaser shall pay to Seller by wire transfer of immediately available funds the applicable milestone amount set forth opposite each such Milestone Event (each milestone amount with respect to any Milestone Event being hereinafter referred to as a “Milestone Payment”). The milestone amounts are as follows:

 

Milestone Event

 

Milestone Fee

 

 

 

 

 

Marketing Approval

 

$

[*]

 

 

 

 

 

Upon aggregate Net Sales of the Product being equal to or greater than $125 million

 

$

[*]

 

 


[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portion.

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

In no event shall any Milestone Payment be refundable or returnable, or shall it be creditable against any Royalty Payments or any other payments which are or become due and payable by Purchaser to Seller under this Agreement or any of the Other Transaction Documents.

 

For the avoidance of doubt, in accordance with the foregoing, the maximum total Milestone Payments payable by Purchaser to Seller under this Section 1.02 would be Nine Million Dollars ($9,000,000).

 

(b)          Achievement of Milestones. From and after the Closing Date and until the earliest of (i) payment, in full, by Purchaser of all Milestone Payments as required by this Agreement, (ii) Purchaser’s determination using commercially reasonable standards consistent with the exercise of prudent scientific and business judgment and consistent with those standards used by Purchaser for its other therapeutic products at a similar stage of development and with similar commercial potential, to terminate the development of the Product before the corresponding Milestone Event has occurred, in which event Purchaser shall provide notice to Seller within fifteen (15) days after any such determination, and (iii) the tenth (10th) anniversary of the Closing Date, Purchaser shall use its commercially reasonable and diligent efforts (as defined in Section 11.07(b)) to achieve each of the Milestone Events.

 

(c)          Access to Information. Within fifteen (15) days after the end of each six (6) month period following the Closing Date, and ending, with respect to any Milestone Event, on the earliest of (i) the date upon which the applicable Milestone Payment has been made, (ii) termination of the development or marketing program relating to such Milestone Event in compliance with Section 1.02(b)(ii), and (iii) except as provided in the parenthetical at the end of this sentence, the tenth (10th) anniversary of the Closing Date, Purchaser shall with respect to the Product furnish Seller with a reasonably detailed written report of its activity and progress toward achievement of the Milestone Events during the previous six month period (it being understood that in the event the reporting obligation under this subsection (c) terminates pursuant to clause (iii)” of this sentence, the report for the final six months of the ten year period following the Closing Date shall be provided within fifteen (15) days after the tenth (10th) anniversary of the Closing Date). Purchaser shall keep data and records concerning the activity and progress related to the Product, including, as applicable, the research and development activities, preclinical studies, clinical trials and regulatory filings and approvals related thereto in reasonably sufficient detail to verify Purchaser’s compliance with this Section 1.02. Subject to confidentiality arrangements reasonably satisfactory to Purchaser and reasonable notice, Seller shall have the right to inspect, during normal business hours, such data and records not more than four (4) times in any twelve (12) calendar month period insofar as they relate to Purchaser’s compliance with this Section 1.02 or the achievement of the Milestone Events.

 

(d) Disputes. Purchaser and Seller shall attempt in good faith to resolve any dispute as to whether a Milestone Event has occurred. If the parties do not reach agreement with respect to any such dispute within thirty (30) days after notice is given by Seller to Purchaser of its belief that a Milestone Event has occurred, the matter shall be referred for arbitration to a disinterested individual who has appropriate scientific, technical and regulatory expertise (as relevant) to resolve any disputes referred to him or her under this Agreement (a “Scientific Expert”) who is mutually agreed to by Purchaser and Seller; provided that such Scientific Expert shall not be or have been at any time within the previous five (5) years an Affiliate, employee, consultant, officer or director of Purchaser or Seller or any of their respective Affiliates. If Purchaser and Seller cannot agree on a mutually acceptable Scientific Expert within thirty (30) calendar days after either party has determined that the parties cannot reach agreement with respect to a dispute, then within five (5) Business Days after the expiration of such thirty calendar day period, each of Purchaser and Seller shall appoint one Scientific Expert who shall jointly select a third Scientific Expert within five (5) Business Days after the last to occur of their respective

 


[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portion.

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

appointments to arbitrate the referred matter. The Scientific Expert mutually agreed by the parties or, if the parties cannot agree, the third Scientific Expert’ selected by the party-appointed Scientific Experts is referred to as the “Selected Scientific Expert”. Purchaser and Seller shall instruct the Selected Scientific Expert to determine, as promptly as practicable but in no event later than thirty (30) days after such person’s appointment (the “Determination Period”) whether the disputed Milestone Event has occurred. The Selected Scientific Expert’s determination shall be made based on the submission of documents by the parties unless the Selected Scientific Expert determines-that an oral hearing is necessary. The Selected Scientific Expert shall determine that which shall be conclusively deemed to be fair and appropriate deadlines within the Determination Period for submitting documents and dates, if any, of oral hearings. Each of Purchaser and Seller shall pay its own expenses of arbitration, and the fees, costs and expenses of the Selected Scientific Expert shall be equally shared between Purchaser and Seller. Any decision rendered by the Selected Scientific Expert shall be final and binding upon the parties. All proceedings conducted by the Selected Scientific Expert shall take place in New York, New York.

 

SECTION 1.03. Royalty Payments. Pursuant to Section 1.01(a)(iii), during the Royalty Term, royalty payments (the “Royalty Payments”) shall be payable by Purchaser to Seller in accordance with this Section 1.03.

 

(a)             Royalty Rates. Purchaser shall pay to Seller Royalty Payments of (i) [*] percent ([*]%) of annual worldwide Net Sales of the Product made directly by Purchaser or its Affiliates and (ii) [*] percent ([*]%) of annual worldwide Net Sales of the Product made directly or indirectly by Purchaser’s Sublicensees.

 

(b)        Royalty Term. The Royalty Payments shall be payable during the period commencing on the date of the First Commercial Sale of the Product in a country until the expiration of the last to expire Valid Claim of a Transferred Patent or any other patent issued after the date hereof covering the use or sale of the applicable Product in such country (the “Product Patent Rights”) (such period being the “Royalty Term” for the Product in such country).

 

(c)        Intercompany Sales. No Royalty Payments shall be due upon the sale or other transfer of the Product among Purchaser, its Affiliates or Sublicensees, but in such cases the Royalty Payments shall be calculated and payable in accordance with this Section 1.03 upon Purchaser’s or its Affiliate’s Net Sales of the Product to the first independent Third Party and upon sales of the Product to an independent Third Party by any Sublicensee of Purchaser.

 

SECTION 1.04. Royalty Records, Reporting and Payments.

 

(a) Royalty Report and Payment. During the Royalty Term, within sixty (60) days after the end of each Calendar Quarter, Purchaser shall pay to Seller the Royalty Payments payable for such Calendar Quarter and provide a royalty report showing, on a country-by-country basis:

 

(i)            the Net Sales of the Product sold by Purchaser and any sale of the Product made by its Sublicensees and their respective Affiliates during such Calendar Quarter reporting period;

 

(ii)           the Royalty Payments in Dollars which shall have accrued hereunder with respect to any sales of the Product;

 


[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portion.

 

(iii)          withholding taxes, if any, required by applicable Law to be deducted with respect to such

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Royalty Payments; and

 

(iv)          the rate of exchange, if applicable, used by Purchaser in determining the amount of Dollars payable hereunder.

 

If no Royalty Payment is due for any period during the Royalty Term, Purchaser shall so report. Purchaser shall keep, and shall require its Sublicensees and their respective Affiliates to keep (all in accordance with GAAP, consistently applied), complete and accurate records in sufficient detail to properly reflect the sales of the Product and each of the deductions to be applied to such sales in the calculation of Net Sales, and to enable the royalties payable hereunder to be determined.

 

(b) Manner of Payment And Exchange Rate. All payments to be made by Purchaser to Seller under Section 1.03 and this Section 1.04 shall be made in Dollars and shall be paid by electronic transfer in immediately available funds to such bank account in the United States designated in writing by Seller. In the case of sales of the Product outside the United States, the rate of exchange to be used in computing the amount of currency equivalent in Dollars payable shall be the rate of exchange used by Purchaser for its own financial reporting purposes in connection with its other products, which shall be consistent with GAAP. Upon request by Seller, Purchaser shall inform Seller regarding Purchaser’s then-current currency exchange policy.

 

(c)        Tax Withholding. Seller shall be liable for any and all taxes, duties and other levies applied by a government of any country of the Territory on payments made by Purchaser to Seller under Section 1.03 and this Section 1.04. In the event that any Royalty Payment or other payments due to Seller are subject to withholding tax required by Applicable Law to be paid to the taxing authority of any foreign country, Purchaser may deduct the amount of such tax paid from the applicable royalties or other payment otherwise payable to Seller. In such event, Purchaser shall, on a timely basis, notify Seller of such obligation, pay the taxes to the proper taxing authority and send evidence of the obligation together with proof of payment thereof to Seller following that payment. Each Party agrees to cooperate with the other Party in claiming exemptions from such deductions or withholdings under any relevant agreement or treaty or convention which is in effect.

 

(d)        Interest Due. Without limiting any other rights or remedies available to Seller, Purchaser shall pay Seller interest on any payments that are not paid on or before the date such payments are due under Section 1.03 and this Section 1.04 at a rate of one-and-one-half-percent (1.5%) per month or the maximum applicable legal rate,, if less, calculated on the total number of days payment is delinquent.

 

(e)        Sales Record Audit. Purchaser shall keep, and shall cause each of its Affiliates and Sublicensees, if any, to keep, full and accurate books of accounting in accordance with GAAP containing all particulars that may be necessary for the purpose of calculating all Royalty Payments payable to Seller. Such books of accounting (including, without limitation, those of Purchaser’s Affiliates and Sublicensees, if any) shall be kept at their principal place of business and, with all necessary supporting data, for the period of three (3) years following the end of the Calendar Year to which each shall pertain, and shall be open for inspection on an annual basis by an independent certified accountant selected by Seller, at its expense, for the purpose of verifying royalty statements for compliance with Section 1.03 and this Section 1.04. Such accountant must have agreed in writing to maintain all information learned in confidence, except as necessary to disclose to Seller such compliance or noncompliance by Purchaser. Seller shall pay for such inspections, except that in the event such accountant correctly determines that there is any upward adjustment in aggregate royalties payable for the Calendar Quarter period of such inspection of more than five percent (5%) of the amount,, paid, Purchaser shall pay for the reasonable out-of-pocket costs of such inspection. Any underpayments shall be paid by Purchaser within thirty (30) days of notification of the results of such inspection. Any overpayments shall be fully creditable by Purchaser against amounts payable in subsequent payment periods or, if no such amounts become payable within ninety (90) days after notification of such results, shall be refunded by Seller to Purchaser.

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SECTION 1.05. Transfer of Assets.

 

(a) The term “Acquired Assets” means all of Seller’s and the Selling Affiliates’ right, title and interest in, to and under those certain assets identified below:

 

(i)             the following (collectively, “Transferred Intellectual Property”):

 

(A)       the patents, patent applications and statutory invention registrations of Seller and the Selling Affiliates identified in ‘ Section 1.05(a)(i)(A) of the Seller Disclosure Schedule, together’ with any reissues, divisions, continuations, continuations-in-part, extensions, provisional or supplemental protection certificates, renewals and reexaminations thereof (the “Transferred Patents”);

 

(B)       the trademark registrations, trademark applications, service mark registrations, service mark applications and domain name registrations of Seller and the Selling Affiliates identified in Section 1.05(a)(i)(B) of the Seller Disclosure Schedule, together. with all extensions and renewals thereof and all goodwill associated therewith;

 

(C)       the copyright registrations of Seller and the Selling Affiliates identified in Section I .05(a)(i)(C) of the Seller Disclosure Schedule, together with all extensions and renewals thereof; and

 

(D)       all Product Formulae and Manufacturing Knowhow of. Seller and the Selling Affiliates (collectively “Technology”) that are exclusively related to the Product, in each case to the extent transferable in light of legal, contractual and practical considerations;

 

provided, however, that Transferred Intellectual Property shall not include any Excluded Intellectual Property;

 

(ii)            all raw materials (including all bulk active pharmaceutical ingredients for the Product), work-in-progress, components, supplies and other inventories (including items in transit, on consignment, or covered by open purchase orders or in the possession of any third party) used or held for use by Seller and the Selling Affiliates solely in, or arise solely out of, the conduct of the Business on the Closing Date, to the extent transferable in light of legal, contractual and practical considerations (collectively, the “Transferred  Inventory”); provided, however, that Transferred Inventory shall not include any Excluded Inventory;

 

(iii)          all contracts, leases, subleases, indentures, licenses, agreements, commitments and all other legally binding arrangements (including binding purchase orders outstanding as of the Closing Date), whether written or oral (“Contracts”), to which Seller or any of the Selling Affiliates is a party or by which any of the Acquired Assets is bound, that are used solely in, or related solely to, the conduct of the Business, including the Contracts set forth in Section 4.06 of the Seller Disclosure Schedule, and in each case to the extent transferable in light of legal, contractual and practical considerations (the “Transferred Contracts”); provided, however, that Transferred Contracts shall not include any Excluded Contract;

 

(iv)              all licenses, permits, authorizations and approvals (including NDAs, BLAs and MAAs, if any) from any Governmental Entity (other than Environmental Permits) (“Permits”) of Seller and the Selling Affiliates that are used solely in the conduct of the Business or related solely to any of the Acquired Assets, including the Permits identified in Section 1.05(a)(iv) of the Seller Disclosure Schedule, to the extent transferable in light of legal, contractual and’ practical considerations (the “Transferred Permits”); provided, however, that Transferred Permits shall not include any Excluded Permit;

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

(v)               all Environmental Permits of Seller and the Selling Affiliates that are used solely in the conduct of the Business, including the Environmental Permits identified in Section 1.05(a)(v) of the Seller Disclosure Schedule (the “Transferred Environmental Permits”); provided, however, that Transferred Environmental Permits shall not include any Excluded Environmental Permits;

 

(vi)              all books and records (or portions of books and records), including laboratory books, and preclinical and clinical studies lists, (in all cases, in any form or medium) (“Records”) of Seller and the Selling Affiliates that relate solely to, or that arise solely out of, the conduct of the Business, in each case in existence on the Closing Date and within the possession and control of Seller and to the extent transferable in light of legal, contractual and practical considerations (the “Transferred Records”); provided, however, that Transferred Records shall not include any Excluded Records;

 

(vii)             all proprietary rights of Seller and the Selling Affiliates to the information, materials, data and work product proprietary to Seller or any of the Selling Affiliates in respect of research and development activities and preclinical and clinical trials conducted or being conducted solely for use in connection with the conduct of the Business, in each case to the extent transferable in light of legal, contractual and practical considerations; and

 

(viii)            all tangible personal property and interests therein, including equipment and furnishings (“Personal Property”), of Seller and the Selling Affiliates listed in Section 1.05(a)(viii) of the Seller Disclosure Schedule (the “Transferred Personal Property”).

 

(b)               The term “Excluded Assets” means:

 

(i)                                all cash and cash equivalents of Seller, and any of its Affiliates;

 

(ii)                               all Accounts Receivable;

 

(iii)              (A) all intellectual property of Seller and any of its Affiliates, other than the Transferred Intellectual Property, including the intellectual property identified in Section 1.05(b)(iii) of the Seller Disclosure Schedule and (B) all Technology of Seller and its Affiliates other than the Technology included in the Transferred Intellectual Property, including all Product Formulae, Manufacturing Knowhow and packaging specifications which are not exclusively related to the Product (collectively, the “Excluded Intellectual Property”);

 

(iv)              all raw materials, work-in-process, finished goods, supplies, part’s, spare parts and other inventories of Seller and its Affiliates other than the Transferred Inventory, including the items identified in Section 1.05(b)(iv) of the Seller Disclosure Schedule (the “Excluded Inventory”);

 

(v)               all credits, deferred charges, and prepaid items of Seller or any of its Affiliates (the “Excluded Miscellaneous Rights”);

 

(vi)              all Contracts, including the Contracts identified in Section 1.05(b)(vi) of the Seller Disclosure Schedule, to which Seller or any of its Affiliates is a party other than the Transferred Contracts described in Section 1.05(a)(iii) (the “Excluded Contracts”);

 

(vii)             all Permits of Seller or any of its Affiliates other than the Transferred Permits (the “Excluded Permits”) and all Environmental Permits of the Seller or any of its Affiliates other than the

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Transferred Environmental Permits (the “Excluded Environmental Permits”);

 

(viii)            all of the following: (A) any and all books and records prepared and maintained by Seller or any of its Affiliates, including financial records, laboratory books, batch records and stability studies, that do not relate exclusively to the Product, (B) any and all Tax records that relate to Taxes that constitute Excluded Tax Liabilities, (C) any and all records to the extent related to any Excluded Assets or Excluded Liability, (D) any and all books and records prepared in connection with the transactions contemplated by this Agreement, including bids received from other parties and analyses relating to the Product, and (E) any and all books and records, files, correspondence or other Records of Seller or its Affiliates other than the Transferred Records, (collectively, the “Excluded Records”);

 

(ix)              all rights, claims and credits of Seller or any of its Affiliates to the extent relating to any Excluded Asset or any Excluded Liability, including any such items arising under insurance policies and all guarantees, warranties, indemnities and similar rights in favor of Seller and its Affiliates in respect of any other Excluded Asset or any Excluded Liability;

 

(x)               any refund or credit of Taxes attributable to any Excluded Tax Liability;

 

(xi)          all insurance policies and insurance contracts insuring the Product or the Acquired Assets, together with any claim, action or other right Seller or any of its Affiliates might have for insurance coverage under any past and present policies and insurance contracts insuring the Product or the Acquired Assets, in each case including any proceeds received from any such policy or contract prior to, on or after the Closing Date;

 

(xii)         all rights of Seller and its Affiliates under this Agreement, the Other Transaction Documents and the other agreements and instruments executed and delivered in connection with this Agreement;

 

(xiii)        all land, buildings, improvements and fixtures thereon owned or leased by Seller or any of its Affiliates, including the leaseholds, sub-leaseholds and other interests in real property listed in Section 1.05(b)(xiii) of the Seller Disclosure Schedule;

 

(xiv)        all tangible personal property and other fixed assets and interests therein, including all equipment, furnishings, furniture and fixtures, owned or leased by Seller or any of its Affiliates, including the tangible personal property and other fixed assets and interests therein, including all equipment, furnishings, furniture and fixtures listed in Section 1.05(b)(xiv) of the Seller Disclosure Schedule, and any warranty rights applicable to such tangible personal property, fixed assets and equipment other than the Transferred Personal Property (the “Excluded Personal Property”);

 

(xv)         the BMS Names; and

 

(xvi)        except to the extent identified in a subsection of Section 1.05(a) of the Seller Disclosure Schedule as included in the Acquired Assets, all other properties, assets, goodwill and rights of Seller, the Selling Affiliates and any of their respective Affiliates of whatever kind and nature, real, personal or mixed, tangible or intangible, that are not used, held for use or intended to be used exclusively in connection with, or that do not arise exclusively out of, the Product or the Acquired Assets.

 

SECTION 1.06. Assumed Liabilities. (a) Upon the terms and subject to the conditions of this Agreement, Purchaser shall assume, effective as of 12:00:01 a.m. on the Closing Date, and from and after the

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Closing Purchaser shall pay, perform and discharge when due, all of the following liabilities, obligations and commitments (“Liabilities”) of Seller and the Selling Affiliates, other than any Excluded Liability (the “Assumed Liabilities”):

 

(i)             all Accounts Payable, accrued expenses and other current liabilities arising out of or relating to the Product, the Acquired Assets or the Business arising on or after the Closing Date;

 

(ii)           all Liabilities in respect of any lawsuits, claims, actions or proceedings arising out of or relating to the manufacture, production, marketing, commercialization, distribution or sale of the Product or the ownership, sale, lease or use of any of the Acquired Assets prior to, on or after the Closing Date;

 

(iii) all Liabilities for warranty claims and product liability or similar claims, including all suits, actions or proceedings relating to any such Liabilities, arising out of or relating to the Product) whether arising prior to, on or after the Closing Date;

 

(iv)            all Liabilities for Taxes arising out of or relating to or in respect of the Product or any Acquired Asset for any Post-Closing Tax Period, other than any Excluded Tax Liabilities;

 

(v)             all Liabilities for transfer, documentary, sales, use, registration, value added and other similar Taxes and related amounts (including any penalties, interest and additions to Tax) incurred in connection with this Agreement, any of the Other Transaction Documents, the Acquisition and the other transactions contemplated hereby and thereby (“Transfer Taxes”);

 

(vi)          all Environmental Liabilities to the extent arising out of or relating to the conduct of the Business or the Acquired Assets or the ownership, sale or lease of any of the Acquired Assets, whether arising prior to, on or after the Closing Date;

 

(vii)         all Liabilities under or otherwise to the extent arising out of or relating to the Transferred Permits, whether arising prior to, on or after the Closing Date; and

 

(viii)        all other Liabilities of Seller and the Selling Affiliates of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, arising out of or relating to the conduct of the Business, the Product or Acquired Assets or the ownership, sale or lease of any of the Acquired Assets, whether arising prior to, on or after the Closing Date, including any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Entity.

 

(b) Notwithstanding any other provision of this Agreement, Purchaser shall not assume any Excluded Liability, each of which shall be retained and paid, performed and discharged when due by Seller and the Selling Affiliates. The term “Excluded Liability” means:

 

(i)            all Liabilities, to the extent related to or arising out of any Excluded Asset;

 

(ii)           any Tax payable with respect to any business, asset, property or operation of Seller or its Affiliates (including any Taxes relating to or arising out of the Acquired Assets) for any Pre-Closing Tax Period, other than any Tax for which Purchaser is responsible pursuant to Section 8.07 (“Excluded Tax Liability”); and

 

(iii)          all Accounts Payable other then the accounts payable, accrued expenses and other

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

current liabilities assumed pursuant to Section 1.06(a)(i).

 

(c)         Each of Purchaser’s and Seller’s obligations under this Section 1.06 will not be subject to offset or reduction by reason of any actual or alleged breach of any representation, warranty, covenant or agreement contained in this Agreement or any Other Transaction Document or any right or alleged right to indemnification hereunder;

 

SECTION 1.07. Risk of Loss. Until the Closing, any loss of or damage to the Acquired Assets from fire, casualty or any other occurrence shall be the sole responsibility of Seller or the Selling Affiliates, as applicable. On the Closing Date, title, to the Acquired Assets shall be transferred to Purchaser and Purchaser shall thereafter bear all risk of loss associated with the Acquired Assets and be solely responsible for procuring adequate insurance to protect the Acquired Assets against any such loss; provided that Purchaser’s responsibility is not contingent on Purchaser’s ability to procure adequate insurance.

 

SECTION 1.08. Consents of Third Parties. (a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any asset (including any Contract or Permit) or any claim, right or benefit arising under or resulting from any such asset (including any Contract or Permit), claim, right or benefit arising under or resulting from such asset (including any Contract or Permit) if the assignment or transfer thereof, without the consent of a third party, would constitute a breach or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such asset (including any Contract or Permit), claim, right or benefit, or, upon assignment or transfer, would in any way adversely affect the rights of Seller or any Selling Affiliate or, upon transfer, Purchaser. If any transfer or assignment by Seller or any Selling Affiliate to, or any assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset (including any Contract or Permit), or any claim, right or benefit requires the consent of a third party, then such transfer or assumption shall be made subject to such consent being obtained.

 

(b)        If any such consent is not obtained prior to the Closing, Seller, the Selling Affiliates and Purchaser shall cooperate (each at their own expense) in any lawful and reasonable arrangement reasonably proposed by Purchaser under which Purchaser shall obtain the economic claims, rights and benefits under the asset (including any Contract or Permit) or related claim, right or benefit with respect to which the consent has not been obtained in accordance with this Agreement. Such reasonable arrangement may include (i) the subcontracting, sublicensing or subleasing to Purchaser of any and all rights of Seller and the Selling Affiliates against the other party to such third-party agreement arising out of a breach or cancellation thereof by the other party and (ii) the enforcement by Seller or the Selling Affiliates of such rights.

 

(c)        Notwithstanding that the laptops, desktops and other computer hardware included as part of the Transferred Personal Property have (and will at closing have) installed on them certain Seller and third party operating systems and software Purchaser hereby acknowledges and agrees that the Acquired Assets do not include ownership of, or any licenses or other rights to use, any such operating systems or software, and that Seller has not and does not intend to complete a software license or other transfer with respect to any such operating systems or software. Purchaser further agrees that it shall be fully responsible for obtaining any and all licenses or other rights required to continue to use such operating systems and software, and to otherwise comply with all applicable laws, in each case from and after the Closing Date.

 

SECTION 1.09. Refunds and Remittances. (a) Received by Seller or the  Selling Affiliates.  After the Closing, if Seller or any of the Selling Affiliates receives (i) any refund or other amount which is an Acquired Asset or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, or (ii) any refund or other amount which is related to claims or other matters for which Purchaser is responsible hereunder, and which amount is not an Excluded Asset, or is otherwise properly due and owing to Purchaser in

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

accordance with the terms of this Agreement, Seller promptly shall remit, or shall cause to be remitted, such amount to Purchaser at the address set forth in Section 11.06(a).

 

(b) Received by Purchaser or its Affiliates.  After the Closing, if Purchaser or any of its Affiliates receives (i) any refund or other amount which is an Excluded Asset or is otherwise properly due and owing to Seller or any of the Selling Affiliates in accordance with the terms of this Agreement, or (ii) any refund or other amount which is related to claims or other matters for which Seller is responsible hereunder, and which amount is not an Acquired Asset, or is otherwise properly due and owing to Seller in accordance with the terms of this Agreement, Purchaser promptly shall remit, or shall cause to be remitted, such amount to Seller at the address set forth in Section 11.06(b).

 

ARTICLE II

 

Closing

 

SECTION 2.01. Closing. (a) The closing of the Acquisition (the “Closing”) shall take place on the date hereof and shall be held at the offices of the Seller, Route 206 & Province Line Road, Princeton, New Jersey. The date on which the Closing shall occur is hereinafter referred to as the “Closing Date”. For purposes of this Agreement, the Closing shall be deemed effective at 12:00:01 a.m. on the Closing Date.

 

(b) At the Closing, Purchaser shall deliver to the Seller:

 

(i)            by wire transfer to a bank account designated in writing by Seller at least two (2) business days prior to the Closing Date in United States Dollars, immediately available funds in an amount equal to the Base Purchase Price;

 

(ii)          the Assumption Agreement and such other instruments of assumption and such other instruments and documents as Seller or the Selling Affiliates may reasonably request to effect or evidence the purchase of the Acquired Assets and the assumption of the Assumed Liabilities;

 

(iii)          an executed counterpart of the IP Assignment Documents with respect to the Transferred. Intellectual Property; and

 

(iv)          the certificate required to be delivered by Purchaser under Section 3.02(a) duly executed by an authorized officer of Purchaser.

 

(c) At the Closing, Seller shall deliver to Purchaser:

 

(i)             a receipt for the Base Purchase Price paid by Purchaser;

 

(ii)           the Bill of Sale and such other instruments and documents as Purchaser may reasonably request to effect or evidence the transfer to Purchaser of the Acquired Assets;

 

(iii)          an executed counterpart of the IP Assignment Documents with respect to the Transferred Intellectual Property; and

 

(iv)          the certificate required to be delivered by Seller under Section 3.02(a) duly executed by an authorized officer of Seller.

 

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ARTICLE III

 

Conditions to Closing

 

SECTION 3.01. Conditions to Obligations of Purchaser. The obligation of Purchaser to effect the transactions contemplated by this Agreement is subject to the satisfaction (or written waiver by Purchaser) as of the Closing of the following conditions:

 

(a)          Representations and Warranties: Covenants. The representations and warranties of Seller made in this Agreement shall be true and correct in all material respects as of the time of the Closing as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case .such representations and warranties shall be true and correct in all material respects as of such earlier date), in each case except for breaches as to matters that, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. Seller shall, have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing. Seller shall have delivered to Purchaser a certificate dated the Closing Date and signed by an authorized officer of Seller confirming the foregoing.

 

(b)          No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Federal, state or local government or any court of competent jurisdiction, administrative or regulatory agency or commission or other governmental authority or instrumentality, including the FDA, the EMEA or any successor agency thereto which has the responsibility over the development and commercialization of the Product (a “Governmental Entity”), or other legal restraint or prohibition shall be in effect preventing the Acquisition.

 

(c) Other Transaction Documents. Seller shall have executed and delivered to Purchaser the Other Transaction Documents to which Seller is a party and each Selling Affiliate shall have executed and delivered to Purchaser the Other Transaction Documents to which such Selling Affiliate is specified to be a party.

 

SECTION 3.02. Conditions to Obligation of Seller. The obligation of Seller to, or to cause the Selling Affiliates to, effect the transactions contemplated by this Agreement is subject to the satisfaction (or written waiver by Seller) as of the Closing of the following conditions:

 

(a)          Representations and Warranties; Covenants. The representations and warranties of Purchaser made in this Agreement shall be true and correct in all material respects as of the time of the Closing as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date), in each case except for breaches as to matters that, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby. Purchaser shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser by the time of the Closing. Purchaser shall have delivered to Seller a certificate dated the Closing Date and signed by an authorized officer of Purchaser confirming the foregoing.

 

(b)          No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental Entity, or other legal restraint or prohibition shall be in effect preventing the Acquisition.

 

(c)          Other Transaction Documents. Purchaser shall have executed and delivered to Seller the

 

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Other Transaction Documents to which Purchaser is a party.

 

SECTION 3.03. Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article III to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its best efforts to cause the Closing to occur, as required by Section 8.04.

 

ARTICLE IV

 

Representations and Warranties of Seller

 

Except as set forth in the Seller Disclosure Schedule attached hereto (the “Seller Disclosure Schedule”), Seller hereby represents and warrants to Purchaser as follows:

 

SECTION 4.01. Authority. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Selling Affiliate is a legal entity, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Seller has all requisite corporate power and authority to enter into this Agreement, and Seller and each of the Selling Affiliates has all requisite corporate power and authority to enter into the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by Seller and each of the Selling Affiliates to authorize the execution, delivery and performance of this Agreement and the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by Seller and, assuming this Agreement has been duly authorized, executed and delivered by Purchaser, constitutes, and the Other Transaction Documents on the Closing Date will be duly executed and delivered by Seller or the Selling Affiliates, as applicable, and upon the due authorization, execution and delivery by each other party to the Other Transaction Documents will constitute, a legal, valid and binding obligation of such person, enforceable against such person in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

 

SECTION 4.02. No Conflicts: Consents. (a) The execution and delivery of this Agreement by Seller do not, and the execution and delivery of the Other Transaction Documents by Seller and the Selling Affiliates specified to be parties thereto will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms and conditions hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) , under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any liens, claims, encumbrances, security interests, options, charges or restrictions of any kind (“Liens”) upon any of the Acquired Assets under, any provision of (i) the certificate of incorporation or by-laws (or the comparable governing instruments) of Seller or any Selling Affiliate, (ii) any Contract, or (iii) any judgment, order or decree, or, subject to the matters referred to in clauses (i) and (ii) of paragraph (b) below, Applicable Law applicable to Seller or any Selling Affiliate or the Acquired Assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect.

 

(b) No material consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Seller or any Selling Affiliate in connection with the execution, delivery and performance of this Agreement, the Other Transaction Documents or the consummation of the transactions contemplated hereby or thereby other than (i) those that may be required solely by reason of Purchaser’s or any Affiliate of Purchaser’s (as opposed to

 

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CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

any other third party’s) participation in the -transactions contemplated hereby or by the Other Transaction Documents and (ii) such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make or obtain which, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect.

 

SECTION 4.03. Taxes. (a) For purposes of this Agreement, (i) “Tax” or “Taxes” shall mean all Federal, state, local and foreign taxes and similar assessments (other than Transfer Taxes), including all interest, penalties and additions imposed with respect to such amounts; (ii) “Pre-Closing Tax Period” shall mean all taxable periods ending on or before the Closing Date and the portion ending on the Closing Date of any taxable period that includes (but does not end on) the Closing Date; (iii) “Post-Closing Tax Period” shall mean all taxable periods beginning and ending after the Closing Date and the portion beginning on the day after the Closing Date of any Straddle Period; and (iv) “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

 

(b) No material Tax liens have been filed and no material claims are being asserted in writing with respect to any Taxes due with respect to the Acquired Assets.

 

SECTION 4.04. Good and Valid Title. Seller and the Selling Affiliates have, or as of the Closing Date will have, good and valid title to all material Acquired Assets (other than Transferred Inventory covered by open purchase orders), in each case free and clear of all Liens, except (i) such as are set forth in Section 4.04 of the Seller Disclosure Schedule; (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and Liens for Taxes and other governmental charges which are not due and payable or which may thereafter be paid without penalty; and (iii) other imperfections of title or encumbrances, if any, which do not, individually \ or in the aggregate, materially impair the continued use and operation of the Acquired Assets to which they relate (the Liens described in clauses (i), (ii) and (iii) above are hereinafter referred to collectively as “Permitted Liens”). This Section 4.04 does not relate to Intellectual Property or Contracts, such items being the subjects of Section 4.06 and Section 4.07, respectively.

 

SECTION 4.05. Intellectual Property. (a) Except as set forth in Section’4.05 of the Seller Disclosure Schedule, Seller or a Selling Affiliate owns, or as of the Closing Date will own, free and clear of all Liens (except to the extent the Transferred N Intellectual Property may be licensed from third parties), the material Transferred Intellectual Property and the consummation of the transactions contemplated hereby will not conflict with, alter or impair any such rights in any material respect. The Transferred Intellectual Property constitutes all of the Intellectual Property owned by or in-licensed by Seller relating solely to the Product. As of the date of this Agreement, no claims are pending or, to the knowledge of Seller, threatened in writing, against Seller or any of its Affiliates by any person with respect to the ownership, validity or enforceability of any material Transferred Intellectual Property.

 

(b) Except as set forth in Section 4.05 of the Seller Disclosure Schedule, none of Seller or the Selling Affiliates has granted any material options, licenses or agreements relating to the Transferred Intellectual Property, except non-exclusive implied licenses to end-users in the ordinary course of business. To the knowledge of Seller, none of Seller or the Selling Affiliates as of the date hereof is bound by or a party to any material options, licenses or agreements of any kind constituting part of the Acquired Assets relating to the intellectual property of any other person, except for agreements relating to computer software licensed to Seller or its Affiliates in the ordinary course of business.

 

(c) To the knowledge of Seller, there are no patents, patent applications or statutory registrations

 

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of Seller or the Selling Affiliates which were owned by Inhibitex as of closing date of the acquisition of Inhibitex by Seller (i.e., February 13, 2012) and relate solely to the Product which are not included as part of the Transferred Patents.

 

SECTION 4.06. Contracts. (a) Section 4.06 of the Disclosure Schedule sets forth each Transferred Contract that is or contains:

 

(i)            a covenant by Seller or a Selling Affiliate not to compete (other than pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar agreement) or other covenant restricting the research, development, manufacture, marketing or distribution of the Product that materially impairs the such activities as the Business is currently conducted;

 

(ii)           an agreement, contract or other arrangement with Seller or any Affiliate of Seller; provided, however, that the foregoing shall be deemed not to include any Other Transaction Document or any agreement, contract or other arrangement that will expire or be terminated at or prior to Closing;

 

(iii)            (A) a continuing contract for the future purchase of materials, supplies or equipment (other than purchase contracts and orders for inventory in the ordinary course of business consistent with past practice); (B) a management, service, consulting or other similar type of contract (other than contracts for services in the ordinary course of business) or (C) an advertising agreement or arrangement, in any such case which has an aggregate future liability to any person in excess of $100,000 and is not terminable by Seller or such Selling Affiliate, as applicable, by notice of not more than one hundred and eighty (180) days for a cost of less than $100,000;

 

(iv)            a material license, option or other agreement relating in whole or in part to the Transferred Intellectual Property (including any license or other agreement under which Seller or a Selling Affiliate is licensee or licensor of any such Transferred Intellectual Property); or

 

(v)             any other agreement, contract, lease, license, commitment or instrument to which Seller or a Selling Affiliate is a party and by or to which any of the Product or the Acquired Assets or business is bound or subject which has an aggregate future liability to any person in excess of $100,000 and is not terminable by Seller or such Selling Affiliate, as applicable, by notice of not more than one hundred and eighty (180) days for a cost of less than $100,000.

 

(b) Except as set forth in Section 4.06 of the Seller Disclosure Schedule, each Transferred Contract set forth in Section 4.06 of the Seller Disclosure Schedule is valid, binding and in full force and effect and, to the knowledge of Seller, is enforceable by Seller or the applicable Selling Affiliate in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally, general principles of equity and the discretion of courts in granting equitable remedies and except to the extent that the failure of a Transferred Contract to be valid, binding and in full force and effect would not be reasonably likely to have a Material Adverse Effect. Seller and the Selling Affiliates have performed in all material respects all material obligations required to be performed by them to date under the Transferred Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the knowledge of Seller, no other party to any of the Transferred Contracts set forth in Section 4.06 of the Seller Disclosure Schedule, as of the date of this Agreement, is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, except to the extent that such breach or default would not be reasonably likely to have a Material Adverse Effect.

 

SECTION 4.07. Transferred Permits. All Transferred Permits are validly held by Seller or the

 

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Selling Affiliates, and Seller or the applicable Selling Affiliate has complied in all material respects with all terms and conditions thereof, except for any such invalidity or non-compliance that would not be reasonably likely to have a Material Adverse Effect. During the past three (3) years, none of Seller or the Selling Affiliates has received written notice of any suit, action or proceeding relating to the revocation or modification of any Transferred Permit the loss of which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.08. Litigation. Section 4.08 of the Seller Disclosure Schedule sets forth a list of all lawsuits or claims pending as of the date of this Agreement, with respect to which Seller or any Selling Affiliate has been contacted in writing by counsel for the plaintiff or claimant, against any Acquired Asset and which (a) involve an uninsured claim of, or which involve an uninsured unspecified amount which would reasonably be expected to result in a liability of, more than $100,000, (b) seek any material injunctive relief or (c) seek any legal restraint on or prohibition against the transactions contemplated by this Agreement. To the knowledge of Seller, as of the date of this Agreement, none of Seller or the Selling Affiliates is a party or subject to or in default under any material judgment, order, injunction or decree of any Governmental Entity or arbitration tribunal applicable to the Product or any material Acquired Asset.

 

SECTION 4.09. Compliance with Applicable Laws. Seller and the Selling Affiliates are in compliance in all material respects with all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity (“Applicable Laws”), including those relating to occupational health and safety, except for instances of noncompliance that, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. None of Seller or any Selling Affiliate has received during the two (2) years prior to the date hereof any written communication from a Governmental Entity that alleges that Seller or any Selling Affiliate is in violation of any Applicable Laws except for any such violations that, individually or in the aggregate; would not be reasonably likely to have a Material Adverse Effect. This Section 4.09 does not relate to matters with respect to Taxes, which are the subject of Section 4.03, or environmental matters, which are the subject of Section 4.10.

 

SECTION 4.10. Environmental Matters. Except as set forth in Section 4.10 of the Seller Disclosure Schedule, and except as would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, (a) Seller and the Selling Affiliates (in each case solely to the extent related to the Business or the Acquired Assets) and the Acquired Assets are in compliance with all applicable Environmental Laws, (b) none of Seller or any Selling Affiliate has received since January 1, 2012, and prior to the date hereof, any written communication from a Governmental Entity that alleges that Seller or any Selling Affiliate is in violation of any applicable Environmental’ Law in connection with the conduct of the Business, the substance of which communication has not been resolved, or that it is a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”) (in each case, solely to the extent related to the Business or Acquired Assets), and (c) there are no pending or, to the knowledge of Seller, threatened lawsuits, actions, arbitrations, claims, complaints or other proceedings against Seller or any Selling Affiliate relating to non-compliance with applicable Environmental Laws, to exposure to Hazardous Materials (including any exposure of any Transferred Employee or independent contractor of the Business to Hazardous Materials) or to a Release of Hazardous Material (in each case, solely to the extent related to the Business or the Acquired Assets). Except as specifically provided in Section 4.02, the representations and warranties made in this Section 4.10 are Seller’s exclusive representations and warranties relating to environmental matters.

 

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SECTION 4.11. Absence of Changes or Events. Subject to the matters set forth in the Seller Disclosure Schedule, including Section 4.11 thereof, since January 1, 2012, there has not been any event, occurrence or development that has resulted in a Material Adverse Effect. Purchaser acknowledges that there has been and will continue. to be a disruption to the conduct of the Business as a result of the announcement by Seller of its intention to sell the Product and the Acquired Assets and as a result of the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and Purchaser agrees that such disruptions do not and shall not constitute a breach of this Section 4.11 or of Section 5.02.

 

SECTION 4.12. DISCLAIMER. PURCHASER ACKNOWLEDGES THAT EXCEPT AS SET FORTH IN THIS ARTICLE IV, NEITHER SELLER NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AS TO THE ACQUIRED ASSETS, THE PRODUCT, ANY OTHER ASPECT OF THE RESPECTIVE BUSINESSES OF SELLER AND THE SELLING AFFILIATES, OR THE ACCURACY AND COMPLETENESS OF ANY INFORMATION REGARDING THE ACQUIRED ASSETS FURNISHED OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES AND PURCHASER HAS NOT RELIED ON ANY REPRESENTATION FROM SELLER OR ANY OTHER PERSON WITH RESPECT TO THE ACQUIRED ASSETS, THE PRODUCT, ANY ASPECT OF THE RESPECTIVE BUSINESSES OF SELLER AND THE SELLING AFFILIATES, OR THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE ACQUIRED ASSETS FURNISHED OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES IN DETERMINING TO ENTER INTO THIS AGREEMENT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV. PURCHASER ACKNOWLEDGES THAT SHOULD THE CLOSING OCCUR, PURCHASER SHALL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY REPRESENTATION AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN AN “AS IS” CONDITION AND ON A “WHERE IS” BASIS AND PURCHASER SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE PURCHASERS GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY LIENS, THAT ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED AND THAT ANY REQUIREMENTS OF APPLICABLE LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE V

 

Covenants of Seller

 

Seller covenants and agrees as follows:

 

SECTION 5.01. Access. From the date hereof to the Closing, Seller shall, and shall cause the Selling Affiliates to, give Purchaser and its representatives, employees, counsel and accountants reasonable access, during normal business hours and upon reasonable advance notice, to the Acquired Assets; provided, however, that such access (i) does not unreasonably disrupt the normal operations of Seller or the Selling Affiliates, (ii) would not be reasonably expected to violate any attorney-client privilege of Seller or the Selling Affiliates or violate any Applicable Law and (iii) would not reasonably be expected to breach any duty of confidentiality owed to any person whether the duty arises contractually, statutorily or otherwise.

 

SECTION 5.02. Ordinary Conduct. (a) Except as set forth in Section 5.02 of the Seller Disclosure Schedule or otherwise contemplated by the terms of this Agreement, from the date hereof until the Closing, Seller shall, and shall cause the Selling Affiliates to, cause the distribution and sale of the Product to be conducted in all material respects in the ordinary course in substantially the same manner as conducted as of the date hereof and shall make all reasonable efforts consistent with current practices to preserve the relationships with customers, suppliers, distributors and others with whom the Seller or Selling Affiliates has a material business relationship with respect to the Product.

 

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(b) Except as set forth on Section 5.02 of the Seller Disclosure Schedule or otherwise contemplated by the terms of this Agreement, Seller shall not, and shall not permit any Selling Affiliate to, do any of the following in connection with the Acquired Assets without the prior written consent of Purchaser:

 

(i)            permit, allow or suffer any Acquired Asset to become subjected to any Lien of any nature whatsoever which would have been required to be set forth in Section 4.04 or 4.06 of the Seller Disclosure Schedule if it existed on the date of this Agreement;

 

(ii)           sell, lease or otherwise dispose of any Acquired Assets which are material, individually or in the aggregate, to the Product, except for sales of raw materials, work-in-process, finished goods, supplies and other inventories in the ordinary course of business;

 

(iii)          terminate, modify or amend in any material respect any Transferred Contract or Transferred Permit; or

 

(iv)          agree, whether in writing or otherwise, to do any of the foregoing.,

 

SECTION 5.03. Transferred Intellectual Property. Except as otherwise contemplated by Section 8.02, from and after the Closing, none of Seller nor the Selling Affiliates shall make any filings with any Governmental Entity relating to the Transferred Intellectual Property, nor grant or attempt to grant any material options, licenses or agreements relating to the Transferred Intellectual Property.

 

ARTICLE VI

 

Representations and Warranties of Purchaser

 

Purchaser hereby represents and warrants to Seller as follows:

 

SECTION 6.01. Authority. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchaser has all requisite corporate power and authority to enter into this Agreement and the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by Purchaser to authorize the execution, delivery and performance of this Agreement and the Other Transaction Documents to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by Purchaser and, assuming this Agreement has been duly authorized, executed and delivered by Seller, constitutes, and the Other Transaction on the Closing Date will be duly executed by Purchaser, and upon the due authorization, execution and delivery by each other party to the Other Transaction Documents, will constitute a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject, as to enforcement to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

 

SECTION 6.02. No Conflicts; Consents. (a) The execution and delivery of this Agreement by Purchaser does not, and the execution and delivery by Purchaser of each Other Transaction Document to which it is, or is specified to be, a party will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties, or assets of Purchaser under, any provision of (i) its certificate of incorporation or by-laws, (ii) any Contract to which Purchaser is a party or by which any of its properties or assets are bound or (iii) any

 

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judgment, order, or decree, or, subject to the matters referred to in paragraph (b) below, statute, law, ordinance, rule or regulation applicable to Purchaser on its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition.

 

(b) No consent, approval, license, permit, order or authorization of or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Purchaser in connection with the execution, delivery and performance of this Agreement, the Other Transaction Documents or the consummation of the transactions contemplated hereby or thereby, other than (i) those that may be required solely by reason of Seller’s or any Selling Affiliates’ (as opposed to any other third party’s) participation in the transactions contemplated hereby or by the Other Transaction Documents and (ii) such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make which, individually or in the aggregate, would not be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition.

 

SECTION 6.03. Actions and Proceedings. There are no (a) outstanding judgments, orders, injunctions or decrees of any Governmental Entity or arbitration tribunal against Purchaser, (b) lawsuits, actions or proceedings pending or, to the knowledge of Purchaser, threatened against Purchaser, or (c) investigations by any Governmental Entity which are pending or, to the knowledge of Purchaser, threatened against Purchaser, which, in the case of each of clauses (a), (b) and (c), have had or , would be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition.

 

SECTION 6.04. Availability of Funds. Purchaser has cash available or N has existing borrowing facilities which together are sufficient to enable it to consummate the Acquisition.

 

SECTION 6.05. No Knowledge of Misrepresentation or Omission. Purchaser has no knowledge that any of the representations and warranties of Seller made in this Agreement or any Other Transaction Document qualified as to materiality are not true and correct, or that those not so qualified are not true and correct in all material ‘ respects, and Purchaser has no knowledge of any material errors in, or material omissions from, any Section of the Seller Disclosure Schedule.

 

ARTICLE VII

 

Covenants of Purchaser

 

Purchaser covenants and agrees as follows:

 

SECTION 7.01. Confidentiality. Purchaser acknowledges that the information being provided to it in connection with the Acquisition and the consummation of the other transactions contemplated hereby and by the Other Transaction Documents (including the terms and conditions of this Agreement and the Other Transaction Documents) is subject to the terms of a confidentiality agreement between Purchaser and Seller dated as of May 9, 2012 (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only upon, the Closing, the confidentiality provisions of the Confidentiality Agreement shall terminate with respect to information relating solely to the Product and the Acquired Assets; provided, however, that Purchaser acknowledges that any and all other information provided to it by or on behalf of Seller, any Selling Affiliate or Seller’s representatives concerning Seller, the Selling Affiliates or any other Affiliate of Seller and the terms and conditions of this Agreement and the Other Transaction Documents shall remain subject to the terms and conditions of the Confidentiality Agreement after the Closing Date.

 

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SECTION 7.02. No Additional Representations. Purchaser acknowledges that it and its representatives have received or been afforded the opportunity to review prior to the date hereof all written materials which Seller was required to deliver or make.,, available, as the case may be, to Purchaser pursuant to this Agreement on or prior to the date hereof Purchaser acknowledges that it and its representatives have been permitted full and complete access to the books and records, facilities, equipment, Contracts and other properties and assets of Seller and the Selling Affiliates to the extent relating to the Product or the Acquired Assets that it and its representatives have desired or requested to see and/or review, and that it and its representatives have had a full opportunity to meet with the officers and employees of Seller and the Selling Affiliates to discuss the Product, the Acquired Assets and the Assumed Liabilities. Purchaser acknowledges that none of Seller, any Selling Affiliate or any other person has made any representation or warranty: expressed or implied, as to the accuracy or completeness of any information regarding the Acquired Assets or the Assumed Liabilities furnished or made available to Purchaser and its representatives, except as expressly set forth in this Agreement or the Seller Disclosure Schedule, and none of Seller, any Selling Affiliate or any other person shall have or be subject to any liability to Purchaser or any other person resulting from the distribution to Purchaser, or Purchaser’s use of, any such information, including the · management presentation material entitled “Project ISIS, Treating and Preventing Infectious Disease” and Project Isis, Supplement to Management Presentation”, and any , information, documents or material made available to Purchaser and its representatives in certain virtual or physical “data rooms”, visits to physical premises including those of third party manufacturers, or in any other form in expectation of the Acquisition and the other transactions contemplated hereby.

 

SECTION 7.03. No Use of Certain Names; Transitional License. Purchaser shall promptly, and in any event within ninety (90) days after Closing, (a) revise any and all product literature and labeling to delete all references to the BMS Names and (b) delete all references to Seller’s or any Selling Affiliates’ customer service address or telephone number. In no event shall Purchaser use any BMS Names, addresses or telephone numbers after the Closing in any manner or for any purpose different from the use of such BMS Names, addresses or telephone numbers by the Seller or any Selling Affiliate with respect to the Product, the Acquired Assets or the conduct of the Business during the 90-day period preceding the Closing. `BMS Names” means “Bristol-Myers”, “Bristol-Myers Squibb”, “Bristol-Myers Squibb Company”, “E.R. Squibb & Sons”, “E.R. Squibb”, “Westwood”, “Westwood-Squibb”, “Westwood Squibb Pharmaceuticals Inc.”, “Inhibitex, Inc.” and “Inhibitex”, and any variations and derivatives thereof and any other logos or trademarks of Seller or its Affiliates not included in the Transferred Intellectual Property.

 

SECTION 7.04. Windfall Profit Sharing. (a) Subject to the rights of Seller under Section 7.04(c), if, at any time prior to the date which is nine (9) months after the Closing Date, Purchaser, directly or indirectly (including through a change of control of Purchaser), (a) sells, transfers, conveys, assigns, licenses, exchanges, leases or otherwise disposes of (including, without limitation, by means of a joint venture or secured financing transaction) (a “Post-Closing Transfer”) all or any portion of the Purchased Assets (the “Post-Closing Transferred Assets”) or (b) enters into any agreement with any third party which has the effect of a Post-Closing Transfer or which subsequently results in a Post-Closing Transfer, then such Post-Closing Transfer shall be of no force or effect unless and until Purchaser shall have delivered to Seller fifty percent (50%) of (i) the remainder of (A) the Post-Closing Transfer Consideration (including all future milestone and other forms of contingent consideration) minus (B) the Purchase Price (or that portion of the Purchase Price attributable to the Post-Closing Transferred Assets based on the purchase price allocation contemplated by Section 8.05(b)) multiplied by (ii) the percentage interest in the Post-Closing Transferred Assets transferred in connection with the Post-Closing Transfer (or, in the event of Post-Closing Transfer Consideration (as defined below) not yet then received by Purchaser, evidence of a binding and enforceable agreement pursuant to which Seller will receive such Post-Closing Transfer Consideration from Purchaser upon receipt).

 

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(b)           For purposes of this Section 7.04, “Post-Closing Transfer Consideration” shall mean the total consideration received or to be received by Purchaser or by the stockholders or other affiliates of Purchaser in connection with a Post-Closing Transfer..

 

(c)           Notwithstanding anything in this Agreement to the contrary, Purchaser agrees that it shall not consummate any Post-Closing Transfer unless and until the transferee in such transaction assumes in writing (a copy of which must be provided to Seller) the restrictions on and obligations of Purchaser under this Section 7.04.

 

SECTION 7.05. Advice to Seller. Purchaser shall promptly advise Seller orally and in writing of any change or event occurring between the date of this Agreement and the Closing Date which Purchaser believes would be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition and the other transactions contemplated hereby

 

SECTION 7.06. Acknowledgement of Assignment. The execution and delivery of this Agreement by Purchaser constitutes an agreement by Purchaser to be bound by the terms and conditions of that certain Patent and Technology License Agreement, dated as of February 2, 2005, between University College Cardiff Consultants Limited and Contravir Research Incorporated (FV-100), as amended March 27, 2007, in accordance with Section 12.1 thereof.

 

ARTICLE VIII

 

Mutual Covenants

 

SECTION 8.01. Consents. Purchaser acknowledges that certain consents and waivers with respect to the transactions contemplated by this Agreement may be ‘ required from parties to the Transferred Contracts and issuers of the Transferred Permits in order to transfer such Transferred Contracts or Transferred Permits to Purchaser and that such consents and waivers have not been obtained. Purchaser agrees that, except for the provision of Section 1.05(b), Seller and its Affiliates shall not have any liability or obligation whatsoever to Purchaser arising out of or relating to the failure to obtain any consents or waivers that may be required in connection with the transactions contemplated by this Agreement or because of the termination of any Transferred Contract or Transferred Permit as a result thereof. Purchaser further agrees that no representation, warranty, covenant or agreement of Seller contained herein shall be breached or deemed breached, and no condition shall be deemed not satisfied, as a result of (a) the failure to obtain any such consent or waiver, (b) any such termination or (c) any lawsuit, action, proceeding or investigation commenced or threatened by or on behalf of any person arising out of or relating to the failure to obtain any such consent or waiver or any such termination. Prior to the Closing, Seller shall, and shall cause the Selling Affiliates to, cooperate with Purchaser, upon the request of Purchaser, in any reasonable manner in connection with Purchaser obtaining any such consents and waivers; provided, however, that such cooperation shall not include any requirement of Seller or any of its. Affiliates (including the Selling Affiliates) to expend money, commence, defend or participate in any litigation, incur any obligation in favor of, or offer or grant any accommodation (financial or otherwise) to, any third party.

 

SECTION 8.02. Cooperation. (a) Purchaser and Seller shall cooperate with each other, and shall cause their respective officers, employees, agents, auditors and representatives to cooperate with each other, for a period of sixty (60) days after the . Closing to ensure the orderly transition of the Product and the Acquired Assets from’ Seller to Purchaser and to minimize any disruption to the respective businesses of Seller, the Selling Affiliates and Purchaser that might result from the transactions contemplated hereby. After the Closing, upon reasonable written notice, Purchaser and Seller shall furnish or cause to be furnished to each other and their employees, counsel, auditors and representatives reasonable access, during normal business hours, to such information and assistance relating to the Product and the Acquired Assets as is reasonably necessary for financial

 

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reporting and accounting matters, the preparation and filing of any Tax returns, reports or forms or the defense of any Tax claim or assessment. The obligation to cooperate pursuant to the preceding sentence insofar as it concerns Taxes shall terminate at the time the relevant applicable statute of limitations expires (giving effect to any extension thereof). Each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 8.02. Neither =. party shall be required by this Section 8.02 to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations.

 

(b) From time to time, as and when requested by either party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions (subject to the provisions of Sections 8.01 and 8.05), as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement.

 

SECTION 8.03. Publicity. Seller and Purchaser agree that no public release or announcement concerning the transactions contemplated hereby shall be issued by either party or its Affiliates without the prior written consent of the other party (which consent shall not be unreasonably withheld), except as such release or announcement’ may be required by Applicable Law or the rules or regulations of any United States or foreign securities exchange to which such party is subject, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance.

 

SECTION 8.04. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller and its Affiliates with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Acquired Assets to Purchaser.

 

SECTION 8.05. Transfer Taxes; Purchase Price Allocation; Entitlement to Tax Refunds and Credits; Proration of Non-Income Taxes.

 

(a)      All Transfer Taxes and any filing or recording fees applicable to the Acquisition shall be paid by Purchaser. Each party shall use reasonable efforts to avail itself of any available exemptions from any such Taxes or fees, and to cooperate with the other party in providing any information and documentation that may be necessary to obtain such exemptions.

 

(b)          Seller shall allocate the Purchase Price among the Acquired Assets, subject to Purchaser’s consent, such consent not to be unreasonably withheld. Such allocation will comply with the requirements of Section 1060 of the Code. Each of Seller and Purchaser agrees that it shall (i) report the sale and purchase of the Acquired Assets for United States Tax purposes in accordance with such allocations and (ii) not take any position inconsistent with such allocations on any of their respective United States Tax Returns.

 

(c)          Seller shall be entitled to any refunds or credits of Taxes relating to any Excluded Tax Liability. Purchaser shall be entitled to any refunds or credits of Taxes relating to the Acquired Assets, other than any such refunds or credits of Taxes relating to any Excluded Tax Liability.

 

(d)          Any value-added, goods and services, stamp duties, ad valorem and similar Taxes shall be allocated between portions of a tax period that includes (but does not end on) the Closing Date (a “Straddle Period”) in the following manner: (i) in the’ case of a Tax imposed in respect of property and that applies ratably to a Straddle Period, the amount of Tax allocable to a portion of the Straddle Period shall be the total amount of such Tax for the period in question multiplied by a fraction, the numerator of which is, the total number of days in such portion of such Straddle Period and the denominator of which is the total number of days in such Straddle Period, and (ii) in the case of sales, value added and similar transaction-based Taxes (other than Transfer Taxes), such Taxes shall be allocated to the portion of the Straddle Period in which the relevant transaction. occurred.

 

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SECTION 8.06. Recordation of Transfer of Intellectual Property. Purchaser shall be responsible, at its sole cost and expense, for all applicable recordations of the assignment of the Transferred Intellectual Property.

 

SECTION 8.07. Retention of Certain Records. Seller may retain all Records prepared in connection with the transactions contemplated by this Agreement, including bids received from other parties and analyses relating to the Product and such Records shall be Excluded Records for all purposes hereunder.

 

ARTICLE IX

 

Indemnification

 

SECTION 9.01. Indemnification by Seller. From and after the Closing, Seller shall indemnify Purchaser and its Affiliates and each of their respective officers, directors, employees, agents and representatives against and hold them harmless from any loss, liability, claim, damage or expense (including reasonable legal fees and expenses) (“Losses”) suffered or incurred by any such indemnified party to the extent arising from (i) any breach of any representation or warranty of Seller contained in Sections 4.01, 4.02, 4.04 or 4.05 of this Agreement which survives the Closing, and (ii) any breach of any covenant of Seller contained in this Agreement requiring performance after the Closing Date. Notwithstanding the forgoing, (a) Seller shall not have any liability under clause (i) of this Section 9.01 unless the aggregate of all Losses for which Seller would be liable, but for this clause (a), exceeds on a cumulative basis an amount equal to $50,000.00, and then only to the extent of any such excess; (b) Seller shall not have any liability under clause (i) of this Section 9.01 for any individual item (or series of related items) where the Loss relating thereto is less than $10,000.00 and such` items shall not be aggregated for purposes of the foregoing clause (a) of this Section 9.01; (c) Seller shall not have any liability under clause (i) of this Section 9.01 for any breach of a representation or warranty if Purchaser had knowledge of such breach at the time of the Closing and such breach would have given rise to a failure to be satisfied of the condition to Purchaser’s obligations set forth in Section 3.01(a); (d) Seller’s liability under clause (i) of this Section 9.01 shall in no event exceed ten percent (10%) of the Base Purchase Price; and (e) Seller shall not have any liability under this Section 9.01 to the extent the liability or obligation arises as a result of (x) any action taken or omitted to be taken by Purchaser or any of its Affiliates or (y) any breach of a representation or warranty that is covered by a certificate delivered pursuant to Section 3.02(a) except to the extent Seller had knowledge that such representation or warranty was not true and correct in all material respects when made.

 

SECTION 9.02. Indemnification by Purchaser. From and after the Closing, Purchaser shall indemnify Seller and its Affiliates and each of their respective officers, directors, employees, agents and representatives against and hold them harmless from any Loss suffered or incurred by any such indemnified party to the extent arising from (i) any breach of any representation or warranty of Purchaser which survives the Closing contained in this Agreement, (ii) any breach of any covenant of Purchaser contained in this Agreement requiring performance after the Closing Date and (iii) any Assumed Liability.

 

SECTION 9.03. Limitations on Liability: Cooperation. (a) Notwithstanding any provision herein, neither Seller nor Purchaser shall in any event be liable to the other party or its Affiliates, officers, directors, employees, agents or representatives on account of any indemnity obligation set forth in Section 9.01 or Section 9.02 for any indirect, consequential, special, incidental or punitive damages (including lost profits, loss of use, damage to goodwill or loss of business).

 

(b)        Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder including by making commercially reasonable efforts to mitigate or resolve any such claim or liability.

 

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(c)        Purchaser acknowledges and agrees that, (i) other than the representations and warranties of Seller specifically contained in this Agreement, there are no representations or warranties of Seller, any Selling Affiliate or any other person either expressed or implied with respect to the Acquisition or the other transactions contemplated hereby, the Product, the Acquired Assets or the Assumed Liabilities and (ii) it shall have no claim or right to indemnification pursuant to Section 9.01 with respect to any information, documents or materials (other than this Agreement and the Seller Disclosure Schedule) furnished by Seller, any Selling Affiliate or any of their respective officers, directors, employees, agents or advisors to Purchaser and its representatives, including the management presentation material entitled “Project ISIS, Treating and Preventing Infectious Disease” and Project Isis, Supplement to Management Presentation”, and any information, documents or material made available to Purchaser and its representatives in certain virtual or physical “data rooms”, visits to physical premises including those of third party manufacturers, or in any other form in expectation of the transactions contemplated hereby.

 

(d) Purchaser further acknowledges and agrees that, should the Closing occur, its sole and exclusive remedy with respect to any and all claims relating to this Agreement, any Other Transaction Document, the Acquisition, any document or certificate delivered in connection herewith, the Product, the Acquired Assets and the Assumed Liabilities or any Federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise (other than claims of, or causes of action arising from, fraud) shall be pursuant to the indemnification provisions set forth in this Article IX. In furtherance of the foregoing, Purchaser hereby waives, from and after the Closing, to the fullest extent permitted under Applicable Law, any and all rights, claims and causes Of action (other than claims of, or causes of action arising from, fraud) it or any of its Affiliates may have against Seller and its Affiliates arising under or based upon this Agreement, any Other Transaction Document, the Acquisition, any document or certificate delivered in connection herewith, the Product, the Acquired Assets and the Assumed Liabilities or any Federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise (except pursuant to the indemnification provisions set forth in this Article IX).

 

SECTION 9.04. Losses Net of Insurance, etc. The amount of any Loss for which indemnification is provided under this Article IX shall be net of any amounts recovered or recoverable by the indemnified party under insurance policies with respect to such Loss and shall be reduced to take account of any net Tax benefit (including as a result of any basis adjustment) actually realized by the indemnified party arising from the incurrence or payment of any such Loss. In computing the amount of any such Tax benefit, the indemnified party shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the incurrence or payment of any indemnified Loss.

 

SECTION 9.05. Termination of Indemnification. (a) The obligations to indemnify and hold harmless a party hereto pursuant to (i) Sections 9.01(i) and 9.020), shall terminate when the applicable representation or warranty terminates pursuant to paragraph (b) below and (ii) the other clauses of Sections 9.01 and 9.02 shall not terminate; provided, however, that as to clause (i) of this sentence such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the person to be indemnified or the related party thereto shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) to the indemnifying party.

 

(b) The representations and warranties in this Agreement shall survive the Closing solely for purposes of Sections 9.01 and 9.02 and shall terminate at the close of business on the first year anniversary of the Closing Date.

 

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SECTION 9.06. Procedures Relating to Indemnification for Third Party  Claims. (a) In order for a party (the “indemnified party”) to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any person against the indemnified party (a “Third Party Claim”), such indemnified party must notify the indemnifying party in writing, and in reasonable detail, of the Third Party Claim within ten (10) business days after receipt by such indemnified party of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been prejudiced as a result of such failure (except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, promptly after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim.

 

(b)        If a Third Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, however, that such counsel is not reasonably objected to by the indemnified party. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel (not reasonably objected to by the indemnifying party), at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has failed to assume the defense thereof (other than during the period prior to the time the indemnified party shall have given notice of the Third Party Claim as provided above).

 

(c)        If the indemnifying party so elects to assume the defense of any Third Party Claim, all of the indemnified parties shall cooperate with the indemnifying party in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s request) the provision to the indemnifying party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld).

 

SECTION 9.07. Procedures Related to Indemnification for Other Claims. In the event any indemnified party should have a claim against any indemnifying party under Section 9.01 or 9.02 that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. The  failure by any indemnified party to so notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to such indemnified party under Section 9.01 or 9.02, except to the extent that the indemnifying party demonstrates that it has been materially prejudiced by such failure. If the indemnifying party disputes its liability with respect to such claim, the indemnifying party and the indemnified party, shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of competent jurisdiction.

 

SECTION 9.08. Tax Treatment of Indemnification Payments. For all Tax purposes, Purchaser, Seller and each of their respective Affiliates agree to treat any indemnity payment under this Agreement as an adjustment to the Purchase Price received by the Seller for the transactions contemplated by this Agreement unless a final determination (as defined in Section 1313 of the Code) provides otherwise.

 

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ARTICLE X

 

Termination

 

SECTION 10.01. Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing by:

 

(a)        mutual written consent of Seller and Purchaser;

 

(b)        Seller if any of the conditions set forth in Section 3.02 shall have become incapable of fulfillment, and shall not have been waived by Seller;

 

(c)        Purchaser if any of the conditions set forth in Section 3.01 shall have become incapable of fulfillment, and shall not have been waived by Purchaser; or

 

(d)        either party hereto, if the Closing does not occur on or prior to August 31, 2012;

 

(e)        Purchaser or Seller in the event of the institution against the other party of any proceeding under the United States Bankruptcy Code or any other federal or, state bankruptcy, reorganization, receivership, insolvency or other similar Law affecting the rights of creditors generally, which proceeding is not dismissed within thirty (30) days of filing, or the institution by the other party of any proceeding under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar Law affecting the rights of creditors generally or the making by the other party of a composition or an assignment or trust mortgage f6r the benefit of creditors;

 

provided, however, that the party seeking termination pursuant to clause (b), (c) or (d) is not in breach in any material respect of any of its representations, warranties, covenants or agreements contained in this Agreement.

 

SECTION 10.02. Return of Confidential Information. If the transactions contemplated by this Agreement are terminated as provided herein:

 

(a)        Purchaser shall return to Seller all documents and other material received by Purchaser, its Affiliates and their respective representatives from Seller, any Selling Affiliate or any of their respective Affiliates or representatives relating to the transactions contemplated hereby and by the Other Transaction Documents, whether so, obtained before or after the execution hereof; and

 

(b)        all confidential information received by Purchaser, its Affiliates and their respective representatives with respect to Seller, any Selling Affiliate or any of their respective Affiliates, the Product and the Acquired Assets shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement.

 

SECTION 10.03. Consequences of Termination. In the event of termination of this Agreement by Seller or Purchaser pursuant to this Article X, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action by either party. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Article X, this Agreement shall become void and of no further force or effect, except for the provisions of (a) Section 7.01 relating to the obligation of Purchaser to keep confidential certain information and data obtained by it, (b) Section 11.03 relating to certain expenses, (c) Section 11.04 relating to attorney fees and expenses, (d) Section 8.03 relating to publicity, (e) Section 11.10 relating to finder’s fees and broker’s fees and (f) this Article X. Nothing in this Article X shall be deemed to release either party from any liability for any intentional and material breach by such party of the terms and provisions of this Agreement prior to such termination or to

 

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impair the right of either party to compel specific performance by the other party of its obligations under this Agreement.

 

ARTICLE XI

 

Miscellaneous

 

SECTION 11.01. Assignment. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by Purchaser or Seller (including by operation of law in connection with a merger, consolidation or sale of substantially all the assets of Purchaser or Seller) without the prior written consent of the other party hereto; provided, that Seller may assign its rights and obligations hereunder (a) to any direct or indirect wholly owned subsidiary of Seller or (b) to any transferee of all or substantially all of the assets of Seller, and provided, further, that, subject to Purchaser’s obligations under Section 7.04, Purchaser may assign its rights and obligations hereunder to any transferee of all or substantially all of the assets of Purchaser that relate to the Product pursuant to a merger, consolidation or otherwise, to the extent that the transferee assumes in writing all of the obligations of Purchaser that relate to the Product under this Agreement, in either case without the consent of Purchaser. Any attempted assignment in violation of this Section 11.01 shall be void.

 

SECTION 11.02. No Third-Party Beneficiaries. Except as provided in Article X, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.

 

SECTION 11.03. Expenses. Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.

 

SECTION 11.04. Attorney Fees. A party in breach of this Agreement shall, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled.

 

SECTION 11.05. Amendments. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing Purchaser, on the one hand, or Seller, on the other hand, may waive compliance by the other with any term or provision of this Agreement that such other party was or is obligated to comply with or perform.

 

SECTION 11.06. Notices. All notices or other communications required’ or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of overnight mail or overnight courier service), as follows:

 

 

(a)    if to Purchaser,

 

 

 

 

 

 

 

Synergy Pharmaceuticals, Inc.

 

 

420 Lexington Avenue, Suite 1609

 

 

New York, New York 10170

 

 

Telephone: (212) 297-0020

 

 

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Telefax: (212) 297-0019

 

 

Attention: Gary Jacob

 

 

 

 

 

with a copy to:

 

 

 

 

 

 

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

 

 

666 Third Avenue

 

 

New York, New York 10017

 

 

Telephone: (212) 935-3000

 

 

Telefax: (212) 983-3115

 

 

Attention: Ivor Elrifi, Esq.

 

 

 

 

 

 

(b)    if to Seller,

 

 

 

 

 

 

 

Bristol-Myers Squibb Company

 

 

 

345 Park Avenue

 

 

 

New York, New York 10154-0037

 

 

 

Attention:

General Counsel

 

 

 

 

with a copy to:

 

 

 

 

 

 

 

Bristol-Myers Squibb Pharmaceutical Group

 

 

Route 206 & Province Line Road

 

 

Princeton, New Jersey 08540

 

 

Attention:

Vice President and Associate General Counsel,

 

 

 

Transactional Practice Group

 

 

SECTION 11.07. Interpretation; Exhibits, Seller Disclosure Schedule and Other Schedules; Certain Definitions. (a) The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such. amendments, supplements or modifications set forth therein), (ii) the words “herein”,. “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iii) all references herein to Articles, Sections, Appendices, Exhibits or Schedules shall be construed to refer to Articles, Sections, Appendices, Exhibits and Schedules of this Agreement and (iv) the headings contained in this Agreement, the Seller Disclosure Schedule, other Schedules or any Appendix or Exhibit and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any matter set forth in any provision, subprovision, section or subsection of the Seller Disclosure Schedule shall be deemed set forth for all purposes of the Seller” Disclosure Schedule to the extent relevant and reasonably apparent. The Seller Disclosure Schedule, all other Schedules and all Appendices and Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in MI herein. Any capitalized terms used in the Seller Disclosure Schedule, any other Schedule or any Appendix or Exhibit annexed hereto but not otherwise defined therein, shall have the meaning as defined in this Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

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(b)         For all purposes hereof:

 

“Accounts Payable” means all accounts payable and liabilities, obligations and commitments, regardless of when asserted, billed or imposed, of Seller or the Selling Affiliates as of the end of the day immediately prior to the Closing Date.

 

“Accounts Receivable” means all accounts receivable, notes receivable and other indebtedness due and owed by any third party to Seller or the Selling Affiliates as of the end of the day immediately prior to the Closing Date, including all trade accounts receivable representing amounts receivable in respect of goods shipped, products sold or services rendered prior to the day immediately prior to the Closing Date and the full benefit of any security for such accounts or debts.

 

“Affiliate” means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person; and for the purposes of this definition, “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have ‘ meanings correlative to the foregoing.

 

“Assumption Agreement” means the assumption agreement to be executed by Purchaser to evidence its assumption of the Assumed Liabilities.

 

“Bill of Sale” means a bill of sale and assignment with respect to the Acquired Assets.

 

“BLA” means a Biologic License Application, as defined in the United States Federal Food, Drug and Cosmetics Act and the regulations promulgated thereunder.

 

“BMS Prior Manufacturing Costs” means $400,000.00 of manufacturing costs to which the Seller has committed for the month of June, 2012.

 

“business day” means any day, other than a Saturday or Sunday, on which commercial banks are not required or authorized to close in the City of New York.

 

“Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending March 31, June 30, September 30 and December 31.

 

“Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31.

 

“Commencement of a Phase lib Clinical Trial” means the first dosing of the Product in a human patient in a Phase II Clinical Trial, designed to support and immediately precede the initiation of a Phase III Clinical Trial program without any , further Phase II Clinical Trials, to evaluate the dose-dependent effectiveness of a pharmaceutical product for a particular indication or indications in patients with the disease or condition under study and to determine the common side effects and risks associated with the pharmaceutical product. For purposes of this Agreement, in cases where a Phase IIb/III Clinical Trial precedes any Phase IIb Clinical Trial for the Product, the first dosing of the Product in a human patient in a Phase IIb/III Clinical Trial shall be deemed to be the “Commencement of a Phase IIb Clinical Trial” for the Product.

 

“Commencement of a Phase III Clinical Trial” means the first dosing of the Product in a human patient in human clinical trial of the Product on a sufficient number of subjects that is designed to establish that a pharmaceutical product is safe and efficacious for its intended use, and to determine warnings, precautions and

 

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adverse reactions that are associated with such pharmaceutical product in the dosage range to be prescribed, which trial is intended to support Approval of the Product, as described in 21 C.F.R. 312.21(c) for the United States, or a similar clinical study prescribed by the applicable Governmental Entity in a foreign country. For purposes of this Agreement, in the case where a Phase IIb/III Clinical Trial precedes any Phase III Clinical Trial for the Product, the first dosing of the Product in a human patient following the review of interim data and decision to extend the period of such Phase IIb/III Clinical Trial in order to provide sufficient evidence of safety and efficacy to be included as a Phase III Clinical Trial in filings with the applicable Governmental Entity shall be deemed to be the “Commencement of a Phase III Clinical Trial” for the Product.

 

“commercially reasonable and diligent efforts” means that level of effort which, consistent with the exercise of prudent scientific and business judgment, is applied by Purchaser to its other therapeutic products at a similar stage of development and With similar commercial potential.

 

“Dollars” or “$” means lawful money of the United States of America.

 

“Environmental Law” means any notice of liability, inquiry or violation, Law or Injunction issued by or entered into with any Governmental Entity, relating to pollution, protection of the environment or human health or the preservation or restoration of natural resources.

 

“Environmental Liability” means any Liability, loss, demand, claim or cost, contingent or otherwise (including any Liability for judgments, orders, damages, costs of investigation, remediation or monitoring, medical monitoring, natural resources damages, fines, penalties, professional fees, or settlements), and relating to, arising under or resulting from (a) any actual or alleged (i) compliance or noncompliance with any Environmental Law or Environmental Permit, (ii) generation, use, storage, management, treatment, transportation or disposal of any Hazardous Material or (iii) presence, Release or threatened Release of, or exposure to, any Hazardous Material (including any exposure of any Business Employee, Former Business Employee, Transferred Employee or foriner employee or independent contractor of the Transferred Entities or the Business to Hazardous Materials) or (b) any contract, agreement, or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

Environmental Permit” means any certificate, consent, permit, license, registration, approval or other authorization issued under or pursuant to Environmental Laws or otherwise relating to the use, emission or discharge of Hazardous Materials.

 

First Commercial Sale” means, with respect to the Product, the first sale for use or consumption by the general public of the Product in any country in the Territory after Approval of the Product has been granted, or such marketing and sale is otherwise permitted, by the applicable Governmental Entity of such country.

 

GAAP” means generally accepted accounting principles in the United States.

 

Hazardous Material” means any hazardous, toxic or deleterious chemical, material, substance or waste, including radioactive, explosive, medical or biohazardous materials or wastes, petroleum and its byproducts and distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, or urea formaldehyde foam insulation.

 

including” means including, without limitation.

 

29



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

IP Assignment Documents” means with respect to any Transferred Intellectual Property, intellectual property (patent, trademark, copyright and domain name assignments, as applicable) assignments of such Transferred Intellectual Property.

 

knowledge of Seller” means the current actual knowledge of (i) Maureen Gibbons, Senior Corporate Counsel, Intellectual Property — Patents, of Seller, (ii) Brian Heaphy, Director, Strategic Transactions, of Seller, and (iii) Joseph M. Patti, General Manager, Chief Scientific Officer, and Senior Vice President, Research & Development, Inhibitex, Inc.

 

Manufacturing Knowhow” means knowhow, technology, data, designs, process and methods relating to the manufacture and production of products.

 

Marketing Approval” means, with respect to any Product in any regulatory jurisdiction, approval from the applicable Governmental Entity sufficient.for the manufacture, distribution, use and sale of the Product in such jurisdiction in accordance with applicable Laws.

 

Material Adverse Effect” means any change, effect, event or occurrence or state of facts that individually or taken together with other changes, effects, events or occurrences or state of facts, (i) is, or would reasonably be expected to be, materially adverse to the Business, the Product and the Acquired Assets, taken as a whole or (ii) would prevent or materially impede, interfere with, hinder or delay the consummation by Seller of transactions contemplated by this Agreement, other than, with respect to any’ change, effect, event or occurrence or state of facts having the results described in the foregoing clause (i), any change, effect, event or occurrence or state of facts relating to (A) economic, financial market or geographical conditions in general (including national or international conditions), (B) changes in Applicable Law or GAAP or other applicable accounting regulations or principles or interpretations thereof, (C) changes in conditions generally affecting the pharmaceutical or biotechnology industries, (D) the announcement of this Agreement and the transactions contemplated hereby and performance of and compliance with the terms of this Agreement, (E) any acts or omissions of Seller or any of its Affiliates taken after the date of this Agreement with the prior written consent of Purchaser pursuant to Section 5.02, (F) any changes in global or national political conditions, (G) any outbreak or escalation of hostilities, any occurrence or threat of acts commonly referred to as terrorist attacks or any armed hostilities associated therewith and any national or international calamity or emergency or any escalation thereof or (H) any of the matters described in Section 4.11 of the Seller Disclosure Schedule.

 

“NDA” means a new drug application for a drug filed in accordance with 21 C.F.R. Part 314, and all supplements filed pursuant to the requirements of the FDA, including all documents, data and other information concerning the applicable drug which are necessary for FDA approval to market such drug in the United States, and any equivalent application submitted to any other health authority.

 

“Net Sales” means, with respect to the Product, the amount billed by Purchaser or an Affiliate of Purchaser for sales of Product in arm’s length transactions to Third Parties, after deduction (if not already deducted in the amount invoiced) of the following items with respect to sales of the Product:

 

(a)        trade, cash, and/or quantity discounts, charge-back payments and rebates actually taken and allowed (including, without limitation, cash discounts and quantity discounts), charge-back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to trade customers, including but not limited to wholesalers, chains and pharmacy buying groups (a “Discount”);. provided however, that where any such Discount is based on sales of a bundled set of products in which the Product is included, and in which the individual Discount for the Product is not itemized or otherwise determinable, the Discount shall be allocated to the Product on a pro rata basis based on the sales value (i.e., the unit average selling price multiplied by the

 

30



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

unit volume) of the Product relative to the sales value contributed by the other constituent products in the relevant bundled set, with respect to such sale;

 

(b)        credits or allowances given or recorded for rejection or return of · previously sold Product (including, without limitation, returns of the Product in connection with recalls or withdrawals);

 

(c)        any tax, tariff, duty, surcharges or government charge (including any tax such as a value added or similar tax or government charge other than an income tax) levied on the exportation, sale, transportation or delivery of the Product to the extent not paid by a Third Party;

 

(d)        freight out, postage, shipping and insurance charges for delivery of the Product if separately set out on the invoice; and

 

(e)        amounts written off by reason of uncollectible debt

 

Net Sales and all of the foregoing deductions from the gross invoiced sales prices of the Product shall be determined in accordance with Purchaser’s standard accounting procedures and in accordance with GAAP in each case consistently applied. In the event Purchaser or its Affiliates make any adjustments to such deductions after the associated Net Sales have been reported pursuant to this Agreement, the adjustments shall be reported and reconciled with the next report and payment of any royalties due under Article 5. The Product shall be considered “sold” when it is invoiced, shipped or paid for, whichever shall occur first.

 

Net Sales shall not include any payments among a Party, its Affiliates and Sublicensees. For sake of clarity and avoidance of doubt, sales by Purchaser, its Affiliates or Sublicensees of the Product to a Third Party distributor or wholesaler shall be considered a sale to a Third Party customer.

 

Other Transaction Documents” means (i) the Bill of Sale, (ii) the Assumption Agreement and (iii) the IP Assignment Documents.

 

“person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

 

Phase II Clinical Trial” means a human clinical trial of the Product, the principal purpose of which is a determination of preliminary short-term safety and efficacy in the target patient population, as described in 21 C.F.R. 312.21(b) for the United States, or a similar clinical study prescribed by the applicable Governmental Entity in a foreign country.

 

Phase IIb/III Clinical Trial” means a human clinical trial of a compound or product, the principal purpose of which is a further determination of efficacy and safety, in the target population, at the intended clinical dose or ranges of doses, on a sufficient number of subjects and for a sufficient period of time to confirm the optimal manner of use of the Product (dose and dose regimen) prior to the initiation of the pivotal Phase III Trials, and which itself provides sufficient evidence of safety and efficacy to be included as a Phase III Trial in filings with Governmental Entities.

 

Prime Rate” means the rate of interest from time to time publicly announced by Citibank, N.A. in its New York City office as its prime or base rate, calculated on the basis of the actual number of days elapsed over three hundred sixty five (365).

 

31



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

“Product Formulae” means the specific percentages and specifications for the mixing and preparation of the ingredients used in the manufacture of the Product, taken as a whole and not in part. For the avoidance of doubt, (a) the Product Formulae does not include Manufacturing Knowhow associated with the manufacture of the Product to which such Product Formulae relates and (b) does not refer separately to a particular ingredient or specification or combination of ingredients and/or specifications that do not comprise the entire, specific Product Formulae.

 

“Regulatory Filing” means the acceptance by the FDA of the filing of a BLA or an NDA for the Product, the filing with the European Agency for the Evaluation of Medicinal Product, or any successor agency thereto (the “EMEA”), of a marketing authorization application (“MAA”) for the Product under the centralized European procedure or if the centralized EMEA filing procedure is not used, a filing of the MAA for the Product in any European country, or any similar filing in any other country as prescribed by the applicable Governmental Entity in such country.

 

“Selling Affiliate” means each Affiliate of the Seller identified in Section 1(a)(i) of the Seller Disclosure Schedule.

 

“Sublicensee” means any person to whom or which the Product is licensed from Purchaser.

 

“subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such person.

 

“United States” means the United States of America, including its territories and possessions (excluding all military bases and other military installations outside of the continental United States, Alaska, Hawaii and Washington, D.C.).

 

“Valid Claim” means a claim of an issued and unexpired patent which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal and that is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise (i.e., only to the extent the subject matter is disclaimed or is sought to be deleted or amended through reissue).

 

(f) The following terms have the meanings given such terms in the Sections set forth below:

 

Term

 

Section

Accounting Firm

 

2.02(b)

Accounts Payable

 

11.07(b)

Accounts Receivable

 

11.07(b)

Acquired Assets

 

1.05(a)

Acquisition

 

1.01

Affiliate

 

11.07(b)

Applicable Laws

 

4.09

Assumed Liabilities

 

1.06(a)

Base Purchase Price

 

1.01

Benefit Plan

 

4.12(a)

BMS Names

 

7.03

 

32



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Term

 

Section

business day

 

11.07(b)

Calendar Quarter

 

11.07(b)

Calendar Year

 

11.07(b)

Closing

 

2.01

Closing Date

 

2.01

Code

 

4.03(a)

Commencement of a Phase IIb Clinical Trial

 

11.07(b)

Commencement of a Phase III Clinical Trial

 

11.07(b)

commercially reasonable and diligent efforts

 

11.07(b)

Confidentiality Agreement

 

7.01

Contracts

 

1.05(a)(iii)

Control

 

11.07(b)

Determination Period

 

1.02(d)

DOJ

 

8.05

Dollars

 

11.07(b)

Employee Benefit Plan

 

4.12(a)

Environmental Law

 

11.07(b)

Environmental Liabilities

 

11.07(b)

Environmental Permit

 

11.07(b)

Excluded Assets

 

1.05(b)

Excluded Contracts

 

1.05(b)(vi)

Excluded Environmental Permits

 

1.05(b)(vii)

Excluded Intellectual Property

 

1.05(b)(iii)

Excluded Inventory

 

1.05(b)(iv)

Excluded Liabilities

 

1.06(b)

Excluded Miscellaneous Rights

 

1.05(b)(v)

Excluded Permits

 

1.05(b)(vii)

Excluded Records

 

1.05(b)(viii)

Excluded Tax Liability

 

1.06(b)(ii)

FDA

 

7.04

GAAP

 

11.07(b)

Governmental Entity

 

3.0 1 b

Hazardous Material

 

11.07(b)

including

 

11.07(a)

indemnified part

 

9.06

Knowledge of Seller

 

11.07(b)

Liabilities

 

1.03(a)

Liens

 

4.02(a)

Losses

 

9.01

Manufacturing Knowhow

 

11.07(b)

Marketing Approval

 

11.07(b)

Material Adverse Effect

 

11.07(b)

Milestone Event

 

1.02(a)

Milestone Payment

 

1.02(a)

NDA

 

11.07(b)

 

33



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Term

 

Section

Net Sales

 

11.07(b)

Notice of Disagreement

 

2.02(b)

Other Transaction Documents

 

11.07(b)

Permits

 

1.05(a)(iv)

Permitted Liens

 

4.04

Person

 

11.07(b)

Personal Property

 

1.05(a)(viii)

Phase II Clinical Trial

 

11.07(b)

Phase IIMII Clinical Trial

 

11.07(b)

Post-Closing Tax Period

 

4.03(a)

Pre-Closing Tax Period

 

4.03(a)

Prime Rate

 

11.07(b)

Product Formulae

 

11.07(b)

Product Patent Rights

 

1.03(c)

Product

 

1.02(a)

Purchase Price

 

1.01

Purchaser

 

Preamble

Records

 

1.05(a)(v)

Regulatory Filing

 

11.07(b)

Royalty Payment

 

1.03

Royalty Term

 

1.03(c)

Term

 

Section

Scientific Expert

 

1.02(d)

Selected Scientific Expert

 

1.02(d)

Seller

 

Preamble

Seller Disclosure Schedule

 

Article IV

Selling Affiliate

 

11.07(b)

Statement

 

2.02(a)

Straddle Period

 

8.06(d)

Sublicensee

 

11.07(b)

Tax

 

4.03(a)

Taxes

 

4.03(a)

Technology

 

1.05(a)(i)(D)

Third Party Claim

 

9.06

Transfer Taxes

 

1.06(a)(v) .

Transferred Contracts

 

1.05(a)(iii)

Transferred Environmental Permits

 

1.05(a)(v)

Transferred Intellectual Property

 

l.05(a)(i)

Transferred Invento

 

  .05(a)(ii) 1

Transferred Patents

 

1.05(a)(i)(A)

Transferred Permits

 

1.05(a)(iv)

Transferred Personal Property

 

  .05(a)(viii) 1

Transferred Records

 

1.05(a)(vi)

United States

 

11.07(b)

Valid Claims

 

11.07(b)

 

34



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SECTION 11.08. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party.

 

SECTION 11.09. Entire Agreement. This Agreement, the Technology License Agreement and the Confidentiality Agreement contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein, in the Technology License Agreement or in the Confidentiality Agreement.

 

SECTION 11.10. Fees. Purchaser hereto hereby represents and warrants that no brokers or finders that have acted for Purchaser in connection with this Agreement or the transactions contemplated hereby or that may be entitled to any brokerage fee, finder’s fee or commission in respect thereof.

 

SECTION 11.11. Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to. any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.

 

SECTION 11.12. Consent to Jurisdiction. Each of Purchaser and Seller irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Technology License Agreement or any transaction contemplated hereby or thereby. Each of Purchaser and Seller agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of Purchaser and Seller further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address(es) set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 12.12. Each of Purchaser and Seller irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Technology License Agreement or the transactions contemplated hereby or thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

 

SECTION 11.13. Waiver of Jury Trial. Each party hereto hereby waives to the fullest extent permitted by Applicable Law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement, the Technology License Agreement or any transaction contemplated hereby or thereby. Each party hereto (a) certifies that no representative, \ agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the Technology License Agreement, as applicable, by, among other things, the mutual waivers and certifications in this Section 12.13.

 

35



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

SECTION 11.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.

 

[Remainder of page intentionally left blank; signature page follows.]

 

36



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Agreement as of the date first written above.

 

 

 

BRISTOL-MYERS SQUIBB COMPANY

 

 

 

 

 

By:

/s/ Demetrios Kydonieus

 

 

Name:

Demetrios Kydonieus

 

 

Title:

Vice President, Strategy, Alliances & Transactions

 

 

 

 

 

SYNERGY PHARMACEUTICALS, INC.

 

 

 

 

 

By:

/s/ Gary S. Jacob

 

 

Name:

Gary S. Jacob

 

 

Title:

President and Chief Executive Officer

 

37


Exhibit 10.5

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS *. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

PATENT AND TECHNOLOGY LICENSE AGREEMENT

 

This AGREEMENT (“AGREEMENT”) is made on this 2nd day of February 2005 by and among

 

(1)                   UNIVERSITY COLLEGE CARDIFF CONSULTANTS LIMITED (“LICENSOR”), a company incorporated under the laws of England and Wales whose address is 30-36 Newport Road, Cardiff, CF24 0DE, United Kingdom and

 

(2)                   CONTRAVIR RESEARCH INCORPORATED a Delaware limited liability company having a principal place of business located at 595 Stewart Avenue, Garden City, New York 11530 {“LICENSEE”)

 

RECITALS

 

A.                      LICENSOR was established, amongst other things, to hold, to manage and to exploit intellectual property generated by CARDIFF.

B.                      LICENSOR and REGA are the joint owners of the PATENT RIGHTS and the TECHNOLOGY RIGHTS.

C.                      Pursuant to the terms of an agreement dated 24 September 1998 as amended by a deed of variation dated 23 December 2004 LICENSOR has an irrevocable, exclusive worldwide right and licence under the PATENT RIGHTS and the TECHNOLOGY RIGHTS to manufacture, use, sell or otherwise deal in or with products utilising the PATENT RIGHTS and/or the TECHNOLOGY RIGHTS and/or incorporating the LICENSED SUBJECT MATTER together with the right to grant sublicenses thereunder.

D.                      LICENSOR desires to have the LICENSED SUBJECT MATTER developed in the LICENSED FIELD.

E.                       LICENSEE wishes to obtain a sublicense from LICENSOR to practice LICENSED SUBJECT MATTER in LICENSED TERRITORY in LICENSED FIELD.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties agree as follows:

 

1



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

TABLE OF CONTENTS

 

RECITALS

Page 1

I. EFFECTIVE DATE

Page 3

II. DEFINITIONS

Page 3

III. SUBLICENSE

Page 4

IV. CONSIDERATION, PAYMENTS AND REPORTS

Page 5

V. SPONSORED RESEARCH

Page 7

VI. PATENTS AND INVENTIONS

Page 7

VII. INFRINGEMENT BY THIRD PARTIES

Page 8

VIII. PATENT MARKING

Page 9

IX. INDEMNIFICATION AND INSURANCE

Page 9

X. USE OF NAMES OF LICENSOR, CARDLFF, REGA AND KUL

Page 10

XI. CONFIDENTIAL INFORMATION AND PUBLICATION

Page 10

XII. ASSIGNMENT

Page 11

XIII. TERM AND TERMINATION

Page 12

XIV. WARRANTY: SUPERIOR-RIGHTS

Page 14

XV. PARENT COMPANY GUARANTEE

Page 15

XVI. GENERAL

Page 15

SIGNATURES

Page 17

EXHIBIT 1

Page 18

EXHIBIT II

Page 20

 

2



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

I.     EFFECTIVE DATE

 

1                                         This AGREEMENT is effective as of the date written above (“EFFECTIVE DATE”).

 

II.     DEFINITIONS

 

As used in this AGREEMENT, the following terms have the meanings indicated:

 

2.1                               AFFILIATE means any business entity more than fifty percent (50%) owned by LICENSEE, any business entity which owns more than fifly percent (50%) of LICENSEE, or any business entity that is more than fifty percent (50%) owned by a business entity that owns more than fifty percent (50%) of LICENSEE.

 

2.2                               CARDIFF means Cardiff University (the public name of the University of Wales, Cardiff) which has an administrative address at 30-36 Newport Road, Cardiff, United Kingdom, CF24 0DE,

 

2.3                               KUL means Katholieke Universiteit Leuven which has administrative offices at Oude Markt 13, B-3000 Leuven, Belgium and is represented by its technology transfer office, KU Leuven Research and Development of Groot Beginjnhop 58-59, B-3000 Leuven, Belgium.

 

2.4                               LICENSED FIELD with respect to LICENSED SUBJECT MATTER shall mean all fields of use.

 

2.5                               LICENSED PRODUCTS means any product or service (a) comprising or derived from LICENSED SUBJECT MATTER and that is covered by: (i) a claim in a pending patent application which claim has not been finally disallowed without the possibility of appeal or refiling; or (ii) a claim in an issued, unexpired patent that has not been held invalid by a non-appealed or unappealable decision by a court or other appropriate body of competent jurisdiction; and/or (b) which uses or incorporates TECHNOLOGY RIGHTS unless LICENSEE can demonstrate to LICENSOR’s reasonable satisfaction that such TECHNOLOGY RIGHTS as are used or incorporated are not of a confidential nature and in assessing whether or not such TECHNOLOGY RIGHTS are of a confidential nature any such TECHNOLOGY RIGHTS that are in the public domain as a result of any act or omission by LICENSEE (other than the inclusion or reference to such TECHNOLOGY RIGHTS in a published application or issued patent) shall be deemed to be of a confidential nature.

 

2.6                               LICENSED SUBJECT MATTER means inventions and discoveries covered by PATENT RIGHTS or TECHNOLOGY RIGHTS.

 

2.7                               LICENSED TERRITORY means the whole world.

 

2.8                               NET SALES means, in the case of SALES on arm’s length terms, the annual gross revenues received from such SALES or, in the case of SALES not on arm’s length terms, the annual gross revenues that would have been received from such SALES had they been on arm’s length terms less, in each case, reasonable sales discounts actually granted, sales and/or use taxes actually paid, import and/or export duties actually paid, reasonable outbound transportation actually prepaid or allowed, and reasonable amounts actually allowed or credited due to returns (not exceeding the original billing or invoice amount).

 

3



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

2.9                               PARTIES shall mean LICENSOR and/or LICENSEE as the context requires; and parties shall mean LICENSOR and/or LICENSEE and/or GUARANTOR as the context requires,

 

2.10                        PATENT RIGHTS means LICENSOR and REGA’s rights in any patents, and/or patent applications, whether domestic or foreign, and all divisionals, continuations, continuations-in-part, reissues, reexaminations or extensions thereof, including but not limited to supplementary protection certificates and any letters patent that issue thereon as defined in Exhibit 1 attached hereto,

 

2.11                        REGA means Rega Foundation whose address is Minderbroedersstraat 10, B-3000 Leuven, Belgium. Rega Foundation is a constituent of KUL.

 

2.12                        SALE or SOLD means the transfer or disposition of a LICENSED PRODUCT by LICENSEE or any AFFILIATE for value to a person, firm, company or organisation other than LICENSEE.

 

2.13                        TECHNOLOGY RIGHTS means LICENSOR’s and REGA’s rights in any technical information, know-how, processes, procedures, compositions, devices, methods, formulae, protocols, techniques, or data in existence at the EFFECTIVE DATE, which are not claimed in PATENT RIGHTS but that are necessary for practicing PATENT RIGHTS.

 

III.     SUBLICENSE

 

3.1                               LICENSOR hereby grants to LICENSEE a royalty-bearing, and, subject to the provisions of sections 3.5 and 6.2 hereinbelow, exclusive sublicense under PATENT RIGHTS and ‘TECHNOLOGY RIGHTS to manufacture, have manufactured, use, import, offer to sell and/or sell LICENSED PRODUCTS within LICENSED TERRITORY for use within LICENSED FIELD. This grant is subject to Sections 14.2, and 14.3 hereinbelow, the payment by LICENSEE to LICENSOR of all consideration as provided herein and the timely payment of all amounts due under any related sponsored research agreement between CARDIFF and LICENSEE or between KUL and LICENSEE or between CARDIFF, KUL and LICENSEE in effect during this AGREEMENT.

 

3.2                               LICENSEE may grant sublicenses under LICENSED SUBJECT MATTER consistent with the terms of this AGREEMENT provided that LICENSEE is responsible for such sublicensees, and for diligently collecting all amounts due to LICENSEE from such sublicensees. If any such sublicensee becomes bankrupt, insolvent or is placed in the hands of a receiver or trustee, LICENSEE, acting under applicable law and in a timely manner, agrees to use its best reasonable efforts to collect all consideration owed to LICENSEE, including having the sublicense agreement confirmed or rejected in a court of proper jurisdiction, if commercially reasonable.

 

3.3                               LICENSEE must deliver to LICENSOR a true and correct copy of each sublicense granted by LICENSEE and any modification or termination thereof, within thirty (30) calendar days after execution, modification, or termination.

 

3.4                               If this AGREEMENT is terminated pursuant to Article XIII-Term and Termination, LICENSOR agrees to accept as successors to LICENSEE, existing sublicensees in good standing at the date of termination provided that each such sublicensee consents in

 

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writing to be bound by such of the terms and conditions of this AGREEMENT as LICENSOR requires.

 

3.5                               Nothing contained in this AGREEMENT shall be interpreted or construed in any way as preventing LICENSOR from permitting CARDIFF and/or KUL and/or RIGA to undertake or to Continue with any non-commercial research utilising PATENT RIGHTS, TECHNOLOGY RIGHTS and/or LICENSED SUBJECT MATTER.

 

IV.     CONSIDERATION, PAYMENTS AND REPORTS

 

4.1                               In consideration of rights granted by LICENSOR to LICENSEE under this AGREEMENT, LICENSEE agrees to pay to LICENSOR the following:

 

(a)                   A license fee in the amount of two hundred and seventy thousand dollars (US$270,000) which shall include all out-of-pocket expenses incurred by LICENSOR prior to the EFFECTIVE DATE in filing, prosecuting, enforcing and maintaining PATENT RIGHTS. This fee will not reduce the amount of any other payment provided for in this Article IV. The license fee shall be paid in two (2) installments, after the LICENSEE has received an invoice for the amount from LICENSOR and, in the case of the installment referred to in (ii) below, after LICENSEE has received from LICENSOR written documentation confirming that such sum has been paid or is owing by LICENSOR, as follows:

 

(i)                      one hundred and five thousand dollars (US$105,000) shall be paid within thirty (30) calendar days of the Effective Date; and

 

(ii)                   one hundred and sixty five thousand dollars (US$165,000) shall be paid within ninety (90) calendar days of the Effective Date;

 

(b)                   A running royalty equal to [*] percent ([*]%) of NET SALES for NET SALES up to and including [*] dollars (US$[*]), a running royalty equal to [*] percent ([*]%) of NET SALES for NET SALES in excess of  [*] dollars (US$[*]) and up to and including [*] dollars (US$[*]), and a running royalty equal to [*] percent ([*]%) of NET SALES for NET SALES in excess of [*] dollars (US$[*]);

 

(c)                    Milestone payments upon occurrence of the following milestone events:

 

(i)                      upon initiation of a Phase I clinical trial for a LICENSED PRODUCT, twenty five thousand dollars (US$25,000);

 

(ii)                   upon initiation of a Phase II clinical trial for a LICENSED PRODUCT, one hundred and twenty five thousand dollars (US$125,000);

 

(iii)                upon initiation of a Phase III clinical trial for a LICENSED PRODUCT, one hundred fifty thousand dollars (US$150,000):, and

 


[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portion.

 

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(iv)                upon approval of the first NDA for any LICENSED PRODUCT, two hundred fifty thousand dollars (US$250,000);

 

LICENSEE will notify LICENSOR within thirty (30) calendar days of each and any such milestone event being reached. LICENSEE will pay the above milestone payments to LLCENSOR in respect of each and every LICENSED PRODUCT that reaches such milestone event to which such payment relates and irrespective of whether it is LICENSEE or an AFFILLATE that initiates or is responsible for achieving the relevant milestone event PROVIDED THAT the milestone payments required by this section 4.1(c) shall apply only to (1) the first LICENSED PRODUCT reaching each milestone event for a first therapy area which relates to treatment of VZV and (2) the first LICENSED PRODUCT reaching each milestone event for a second therapy area which relates to treatment of HCMV; and PROVIDED FURTHER THAT nothing in this section 4. 1(c) shall oblige LICENSEE to make multiple milestone payments for the same milestone event for any therapy area or upon reaching milestone events in more than two therapy areas in total.

 

(d)                   For any sublicense pursuant to Section 3.2 hereinabove (other than a sublicense to an AFFILIATE), [*] percent ([*]%) of all royalties, up front payments, and milestone payments due to LICENSEE.

 

4.2                               LICENSEE in furtherance of the objectives of this AGREEMENT agrees to make or to procure that its AFFILIATES make good faith expenditures towards the clinical development of at least one LICENSED PRODUCT, in a minimum amount of two million dollars (US$2,000,000), such expenditures to be committed within thirty six (36) months following the EFFECTIVE DATE. Upon written request, LICENSEE shall provide to LICENSOR written documentation of such expenditures at the conclusion of such thirty six (36) month period.

 

4.3                               During the term of this AGREEMENT and for one year thereafter, LICENSEE agrees to keep complete and accurate records of its and its AFFILIATES’ SALES and NET SALES and its and its AFFILIATES Section 4.2 expenditures in sufficient detail to enable the royalties and other payments due hereunder and LICENSEE’s compliance with this AGREEMENT to be determined, LICENSEE agrees to permit LICENSOR or its representatives, at LICENSOR’s expense, to periodically examine LICENSEE’S and any AFFILIATES’ books, ledgers, and records during regular business hours for the purpose of and to the extent necessary to verify any report required under this AGREEMENT. If any amounts due to LICENSOR are determined to have been underpaid in an amount equal to or greater than five percent (5%) of the total amount due during the period so examined, then LICENSEE will pay the cost of the examination plus accrued interest at eight percent (8%) per annum or the maximum rate allowed by law, whichever is lower. In the event that LICENSEE has overpaid any payment due to LICENSOR in an amount equal to or greater than five percent (5%) of the total, LICENSOR will return any such overpayment to LICENSEE after deduction of LICENSOR’s reasonable examination expenses.

 


[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to the omitted portion.

 

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4.4                               Within thirty (30) calendar days following each anniversary of the EFFECTIVE DATE, LICENSEE will deliver to LICENSOR a written progress report as to LICENSEE’s and any suhlicensee’s efforts and accomplishments during the preceding year in diligently commercializing LICENSED SUBJECT MATTER in LICENSED TERRITORY and LICENSEE’s and sublicensees’ commercialization plans for the upcoming year.

 

4.5                               All amounts payable hereunder by LICENSEE will be paid in United States dollars without set-off, deductions for taxes, assessments, fees, or charges of any kind.

 

4.6                               No payments due or royalty rates owed under this AGREEMENT will be reduced as the result of co-ownership of LICENSED SUBJECT MATTER by LICENSOR. and another party, including, but not limited to, LICENSEE.

 

4.7                               LICENSEE shall not be obligated to pay multiple royalties to LICENSOR for a single LICENSED PRODUCT in the event said LICENSED PRODUCT is covered by more than one patent application and/or patent that is included in the PATENT RIGHTS.

 

4.8                               LICENSEE shall not be obliged to pay multiple milestone payments per milestone event to LICENSOR for a single LICENSED PRODUCT

 

4.9                               Any and all sums to be paid to LICENSOR pursuant to this Agreement shall be paid by LICENSEE to LICENSOR at six (6) calendar monthly intervals.

 

V.     SPONSORED RESEARCH

 

5.1                               If LICENSEE desires to sponsor research for or related to the LICENSED SUBJECT MATTER. and particularly where LICENSEE receives payments for sponsored research pursuant to a sublicense granted by LICENSEE under this AGREEMENT, LICENSEE (a) will notify CARDIFF and KUL in writing of all opportunities to conduct this sponsored research (including clinical trials, if applicable), (b) solicit research and/or clinical proposals from CARDIFF and KUL for this purpose, and (c) will give good faith consideration to funding the proposals at CARDIFF and KUL.

 

VI.     PATENTS AND INVENTIONS

 

6.1                               After the EFFECTIVE DATE, LICENSEE will at its sole cost and expense (a) within applicable time limits prosecute and, subject to the provisions of section 6.2 hereinbelow, maintain in force for the full term thereof all patent applications and patents comprised within PATENT RIGHTS together with any patents divided out therefrom, (b) within applicable time limits apply for, prosecute and, subject to the provisions of section 6.2 hereinbelow, maintain in force for the full term thereof all and any possible extensions to or continuations of any patents within PATENT RIGHTS including but not limited to supplementary patent certificates and (c) within applicable time limits file, prosecute and maintain in force any patent applications in respect of any improvements to PATENT RIGHTS developed or acquired by L1CENSEE after the EFFECTIVE DATE and any patents granted pursuant thereto or divided out therefrom and LICENSEE will prepare and file the appropriate patent applications, using an attorney or agent of LICENSEE’s choosing, and LICENSEE will pay the cost of searching, preparing, filing, prosecuting and maintaining same. LICENSEE will promptly provide LICENSOR with a copy of any application filed by or on behalf of LICENSEE, as well as copies of any correspondence and documents received or filed by or on behalf of LICENSEE during filing, prosecution

 

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and/or maintenance of any such patent applications and patents including but not limited to all correspondence received from or sent to any patent offices relating (whether in whole or in part) to PATENT RIGHTS . LICENSOR agrees to provide copies of all information in its possession (including but not limited to data, reports or memoranda) necessary to LICENSEE for the prosecution of any current patent application comprised in PATENT RIGHTS.

 

6.2                               LICENSEE shall promptly notify LICENSOR if it does not intend (a) to pursue any patent application comprised within PATENT RIGHTS or relating to any improvements to PATENT RIGHTS developed or acquired by LICENSEE after EFFECTIVE DATE; and/or (b) to continue to maintain in force any patents within PATENT RIGHTS or relating to any improvements to PATENT RIGHTS. If LICENSEE does not intend to pursue any such patent application or to maintain in force any such patent, it will promptly notify LICENSOR such that LICENSOR, if it so wishes, may take over the prosecution of such patent application or the maintenance of such patent. LICENSOR may, at its sole option and discretion, file or prosecute or maintain such patent application or patent at its own expense. In respect of any patent application or patent relating to improvements to PATENT RIGHTS, LICENSEE shall assign to LICENSOR its entire right, title and interest in and to the invention which is the subject of such patent application and such patent application, subject to reimbursement of LICENSEE’s acquisition, maintenance and transfer costs, if applicable. LICENSEE agrees to co-operate with LICENSOR by making available all information in its possession (including but not limited to data, reports or memoranda) reasonably necessary to LICENSOR for the prosecution of any patent application or for the filing of any patent application in respect of any invention assigned by LICENSEE to LICENSOR hereunder. Where LICENSEE decides in accordance with this section 6.2 not to prosecute any patent application comprised within PATENT RIGHTS or to maintain in force any patent comprised within PATENT RIGHTS LICENSOR shall be entitled, at its option and in its sole discretion, on written notice to LICENSEE either to render the license granted to LICENSEE in respect of such patent or patent application non-exclusive or to terminate such licence.

 

6.3                               LICENSEE shall notify LICENSOR in good time, prior to making or attempting to make any change to or restriction of any claim of any patent application or patent comprised within PATENT RIGHTS to afford LICENSOR, at LICENSOR’s own expense, an opportunity to suggest an alternative to LICENSEE’s proposal.

 

6.4                               The PARTIES agree that they share a common legal interest to get valid enforceable patents and that LICENSOR and LICENSEE, will keep all privileged information received pursuant to this Section VI confidential.

 

VII.     INFRINGEMENT BY THIRD PARTIES

 

7.1                               LICENSEE, at its discretion and expense, may enforce any patent exclusively licensed hereunder against any infringement by third parties and is entitled to retain recovery from such enforcement, After reimbursement of LICENSEE’S reasonable legal costs and expenses related to such recovery, LICENSEE agrees to pay LICENSOR ten percent (I0%) of any recovery (including punitive damages) awarded for patent infringement. LICENSEE must notify LICENSOR in writing of any potential infringement within sixty

 

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(60) calendar days of knowledge thereof. If LICENSEE does not file suit against a substantial infringer within six (6) months of knowledge thereof, then LICENSOR may, at its sole discretion and expense, enforce any patent licensed hereunder on behalf of itself and LICENSEE, with LICENSOR retaining all recoveries from such enforcement and/or reduce the sublicense granted hereunder to non-exclusive with respect to the patent(s) at issue.

 

7.2                               In any suit or dispute involving an allegation of infringement, the PARTIES agree to cooperate fully with each other. At the request and expense of the party bringing suit, the other party will permit reasonable access during regular business hours, to all relevant personnel, records, papers, information, samples, specimens, and the like in its possession.

 

VIII.     PATENT MARKING

 

8.I                                 LICENSEE agrees to permanently and legibly mark all packaging containing individual LICENSED PRODUCT(S), documentation therefor, and when possible for actual LICENSED PRODUCT(S) SOLD by LICENSEE, and/or sublicensees of LICENSEE, LICENSED PRODUCTS with the number of any applicable patent(s) licensed hereunder in accordance with the relevant country’s patent laws, including Title 35, United States Code.

 

IX.      INDEMNIFICATION AND INSURANCE

 

9.1                               LICENSEE agrees to hold harmless and indemnify LICENSOR, CARDIFF, REGA, KUL and their respective officers, employees, students and agents from and against any and all claims, demands, causes of action, costs, expenses (including without limitation costs of suit and reasonable attorney’s fees), losses, damages and other liabilities of whatsoever nature and howsoever arising (including without limitation, any and all such things arising on account of any injury or death of persons or damage to property) caused by, or arising out of, or resulting from, the exercise or practice by LICENSEE, its sublicensees and/or their respective officers, employees, agents or representatives, of the rights granted hereunder and/or the manufacture, sale, offer for sale, use and/or import of LICENSED PRODUCTS; provided, however, that the following is excluded from LICENSEE’s obligation to indemnify and hold harmless:

 

the negligence or willful malfeasance by an officer, agent or employee of LICENSOR.

 

9.2                               In no event shall LICENSOR be liable for any:

 

(a)                   loss of contracts, loss of goodwill, loss of opportunity, loss of profits, loss of revenue:

 

financial or economic loss of any nature; or

 

indirect, special, consequential or punitive damages arising out of, or in connection with, this AGREEMENT or its subject matter, regardless of whether LICENSOR knows or should know of the possibility of such loss.

 

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The total aggregate liability of LICENSOR for all loss and damages of any kind relating to this AGREEMENT or its subject matter shall not exceed the amounts paid by LICENSEE to LICENSOR under this AGREEMENT pursuant to section IV during the one  (1) year period preceding the date of the first event that gave rise to such liability.

 

The foregoing exclusions and limitations shall apply to all claims and actions of any kind, whether based on contract, tort (including, but not limited to, negligence), or any other grounds.

 

9.3                               Beginning at the time when any LICENSED SUBJECT MATTER is being distributed or sold (including for the purpose of obtaining regulatory approvals) by LICENSEE or by a sublicensee, LICENSEE shall, at its sole cost arid expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate, and LICENSEE shall use reasonable efforts to have the LICENSOR, CARDIFF, REGA, KUL and their respective officers, employees, students and agents named as additional insureds. Such commercial general liability insurance shall provide; (i) product liability coverage; (ii) broad form contractual liability coverage for LICENSEE’s indemnification under this AGREEMENT; and (iii) coverage for litigation costs. The minimum amounts of insurance coverage required herein shall not be construed to create a limit of LICENSEE’S liability with respect to its indemnification under this AGREEMENT.

 

9.4                               LICENSEE shall provide LICENSOR with written evidence of such insurance within thirty (30) days of its procurement. Additionally, LICENSEE shall provide LICENSOR with written notice of at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance.

 

9.5                               LICENSEE shall maintain such commercial general liability insurance beyond the expiration or termination of this AGREEMENT during: (i) the period that any LICENSED PRODUCT is being commercially distributed or sold by LICENSEE or by a sublicensee or agent of LICENSEE; and (ii) the five (5) year period immediately after such period.

 

X.     USE OF NAMES OF LICENSOR, CARDIFF, REGA AND KUL

 

I0.1                          LICENSEE will not use the name of (or the name of any employee of) LICENSOR or CARDIFF or REGA or KUL in any advertising, promotional or sales literature, on its Web site, or for the purpose of raising capital without the advance express written consent of LICENSOR or CARDIFF or REGA (as the case may be), such consent not to be unreasonably withheld.

 

XI.     CONFIDENTIAL INFORMATION AND PUBLICATION

 

11.1                        The parties each agree that all information contained in documents marked “confidential” and forwarded to one by the other (i) are to be received in strict confidence, (ii) used only for the purposes of this AGREEMENT, and (iii) not disclosed by the recipient party (except as required by law or court order), its agents or employees without the prior

 

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written consent of the party disclosing the same, except to the extent that the recipient party can establish by competent written proof that such information:

 

(a)         was in the public domain at the time of disclosure;

 

(b)         later became part of the public domain through no act or omission of the recipient party, employees, agents, successors or assigns;

 

(c)          was lawfully disclosed to the recipient party by a third party having the right to disclose it;

 

(d)         was already known by the recipient party at the time of disclosure:

 

(e)          was independently developed by the recipient party without use of an other party’s confidential information; or

 

(f)           is required by law or regulation or by the rules of any regulatory or supervisory body to which the recipient party is subject or with whose rules it is necessary for the recipient party to comply to be disclosed.

 

11.2                        Each party’s obligation or confidence hereunder will be fulfilled by using at least the same degree of care with the other party’s confidential information as it uses to protect its own confidential information, but always at least a reasonable degree of care. The obligation of confidence shall remain in force throughout the term of this AGREEMENT and for a period of five (5) years thereafter,

 

11.3                        Any party may disclose to the relevant Patent Office personnel confidential information of the other party, necessary for the purpose of advancing the prosecution of patents relating to the LICENSED SUBJECT MATTER and improvements, provided however, that the disclosing party will inform the non-disclosing party of the intention to disclose and the nature of the confidential information to be disclosed prior to making such disclosure and the non-disclosing party will, to the extent possible, be given an opportunity to suggest an alternative to the disclosure.

 

11.4                        Notwithstanding any other provision herein to the contrary, LICENSOR shall be free to disclose confidential information belonging to LICENSEE in confidence to REGA, KUL and CARDIFF and LICENSOR, CARDIFF, REGA and KUL shall each have the right to publish the general scientific findings from research related to LICENSED SUBJECT MATTER, with due regard to the protection of LICENSEE’S confidential information, LICENSOR and/or CARDIFF and/or REGA and/or KUL will submit the manuscript of any proposed publication to LICENSEE at least thirty 130) calendar days in advance of submission for publication, and LICENSEE shall have the right to review and comment upon the publication in order to protect LICENSEE’S confidential information. Upon LICENSEE’S request, publication may be delayed up to ninety (90) additional calendar days to enable LICENSEE to secure adequate intellectual property protection of LICENSEE’S confidential information that would otherwise be affected by the publication.

 

XII.     ASSIGNMENT

 

12.1                        This AGREEMENT may be transferred or assigned by LICENSEE without the prior written consent of LICENSOR provided that (a) no such transfer or assignment shall be

 

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effective until receipt by LICENSOR, in full and in cleared funds, of all monies due to LICENSOR pursuant to Section 4.1(a) hereinabove and (b) such transferee or assignee agrees in writing to be fully bound by the terms and conditions of this AGREEMENT.

 

12.2                        This AGREEMENT may be transferred or assigned at any time by LICENSOR without the prior written consent of LICENSEE provided that such transferee or assignee agrees in writing to be fully bound by the terms and conditions of this AGREEMENT.

 

XIII.     TERM AND TERMINATION

 

13.1                        Subject to Section 6.2 hereinabove and Sections 13.2, 13.3, 13.4 and 13.5 hereinbelow, the term of this AGREEMENT is from EFFECTIVE DATE to the date upon which the last of the last patent or the last continuation (whether in whole or in part), the last reissue, the last reexamination, the last extension to any patents or the last supplementary protection certificate in respect of any patents within PATENT RIGHTS expires.

 

13.2                        Subject to any rights herein which survive termination, this AGREEMENT will earlier terminate in its entirety:

 

(a)                                 automatically, if LICENSEE becomes bankrupt or insolvent and/or if the business of LICENSEE shall be placed in the hands of a receiver, assignee, or trustee, whether by voluntary act of LICENSEE or otherwise;

 

(b)                                 upon ninety (90) calendar days written notice from LICENSOR, if LICENSEE breaches or defaults on the payment or report obligations of Article IV, or use of name obligations of Article X, unless, before the end of the such ninety (90) calendar day notice period, LICENSEE has cured the default or breach to LICENSOR’s reasonable satisfaction, and so notifies LICENSOR, stating the manner of the cure;

 

(c)                                  upon thirty (30) calendar days written notice from LICENSOR, if LICENSEE fails to make the good faith expenditures detailed in Section 4.2 within the prescribed time period;

 

(d)                                 upon ninety (90) calendar days written notice from LICENSOR if LICENSEE breaches or defaults on any other obligation under this AGREEMENT, unless, before the end of the such ninety (90) calendar-day notice period, LICENSEE has cured the default or breach to LICENSOR’s reasonable satisfaction and so notifies LICENSOR, stating the manner of the cure:

 

(e)                                  at any time by mutual written agreement between LICENSEE and LICENSOR subject to any terms herein which survive termination;

 

(f)                                   at LICENSOR’s option if LICENSEE has defaulted or been in excess of one (1) month late on its payment obligations pursuant to the terms of this AGREEMENT on any two (2) occasions in a twelve (12) month period, provided however, that LICENSEE shall have fourteen (14) days from receiving written notice from LICENSOR of the second default or late payment to cure the default or late payment to the reasonable satisfaction of LICENSOR, and so notifies LICENSOR, stating the manner of cure;

 

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(g)                                  upon one hundred twenty (120) calendar days written notice from LICENSEE if any particular patent or patents included in PATENT RIGHTS and which account for at least thirty (30%) percent of the total royalty to LICENSOR pursuant to Article 4.1(b), is or are irrevocably adjudicated to be invalid; or

 

(h)                                 upon ninety (90) calendar days written notice from LICENSEE if LICENSOR is in breach of Section 11.1 (Confidential Information and Publication) unless, before the end of the such ninety (90) calendar-day notice period, LICENSOR has cured the default or breach to LICENSEE’s reasonable satisfaction and so notifies LICENSEE, stating the manner of the cure.

 

13.3                        (a)           Upon one hundred twenty (120) calendar days written notice from LICENSEE, LICENSEE may terminate its obligations to make payments under this AGREEMENT solely with respect to a particular patent or patents included in PATENT RIGHTS, provided such particular patent or patents is or are irrevocably adjudicated to be invalid; such termination of payments shall only apply in respect of SALES in the territory for which such particular patent or patents are invalidated and the definition of PATENT RIGHTS shall be deemed to have been amended by the deletion therefrom of such patent or patents and subject to such amendment this AGREEMENT shall continue in force.

 

(b)                                 LICENSOR may terminate this AGREEMENT in respect of any patent or patent application comprised within PATENT RIGHTS at any time in accordance with the provisions of Section 6.2 hereinabove and, where LICENSOR does so, the definition of PATENT RIGHTS shall be deemed to have been amended by the deletion therefrom of such patent or patent application and subject to such amendment this AGREEMENT shall continue in force.

 

13.4                        Upon termination of this AGREEMENT:

 

(a)                                 nothing herein will be construed to release any party of any obligation maturing prior to the effective date of the termination:

 

(b)                                 LICENSEE covenants and agrees to be bound by the provisions of Articles IV (Consideration, Payments and Reports), IX (Indemnification and Insurance), X (Use of LICENSOR’s Name), and XI (Confidential Information and Publication) of this AGREEMENT;

 

(c)                                  LICENSOR agrees to be bound by Article XI;

 

(d)                                 To the extent that termination is caused other than by breach of LICENSEE, LICENSEE may, after the effective date of the termination, sell all LICENSED PRODUCTS and parts therefor that it has on hand at the date of termination, provided LICENSEE pays the earned royalty thereon and any other amounts due pursuant to Article IV of this AGREEMENT.

 

(e)                                  Subject to Section 13.3(d), LICENSEE agrees to cease and desist any use and all SALE of the LICENSED SUBJECT MATTER and LICENSED PRODUCTS upon termination of this AGREEMENT and to provide to LICENSOR within ninety (90) days of the date of termination a written statement showing all monies due to but not paid to LICENSOR under Section 4 hereinabove in respect of the period up to and including the date of termination and LICENSEE AGREES to

 

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pay to LICENSOR all such monies at the same time as it delivers such statement to LICENSOR; and

 

(f)                                   LICENSEE grants to LICENSOR, CARDIFF, REGA and KUL a nonexclusive royalty bearing license with the right to sublicense others with respect to improvements made by LICENSEE (including improvements licensed by LICENSEE from third parties) but excluding any improvements assigned to LICENSOR hereunder. LICENSEE and LICENSOR and CARDIFF and REGA and KUL agree to negotiate in good faith the royalty rate for the nonexclusive license.

 

(g)                                To the extent that termination is caused other than by breach of LICENSEE, LICENSEE shall provide LICENSOR with a final statement of NET SALES within six (6) months following termination, and shall pay any royalties due no more than thirty (30) calendar days thereafter,

 

13.5                        Upon expiry of this AGREEMENT, LICENSEE shall, for a period of five (5) years alter the first (lst) commercial SALE of such LICENSED PRODUCT (or such part of such period as extends beyond the expiry date of this AGREEMENT), continue to pay royalties, milestone payments and other sums in respect of such LICENSED PRODUCT in accordance with sections 4.1(b), (c) and (d) hereinabove UNLESS LICENSEE can reasonably demonstrate that such LICENSED PRODUCT does not use or incorporate TECHNOLOGY RIGHTS of a confidential nature and in assessing whether or not such TECHNOLOGY RIGHTS are of a confidential nature any such TECHNOLOGY RIGHTS that are in the public domain as a result of any act or omission by LICENSEE (other than the inclusion of or reference to such TECHNOLOGY RIGHTS in a published application for a patent or issued patent) shall be deemed to be of a confidential nature; and LICENSEE shall comply with the provisions of sections 4.3, 4.4, 4.5. 4.6, 4.7 and 4.9 during such period.

 

XIV.     WARRANTY: SUPERIOR-RIGHTS

 

14.1                        LICENSOR represents and warrants that at EFFECTIVE DATE (a) it and REGA are jointly the owners of the entire right, title, and interest in and to PATENT RIGHTS and TECHNOLOGY RIGHTS, (b) it has the sole right to grant sublicenses thereunder, (c) it has not granted sublicenses thereunder to any other entity that would restrict rights granted hereunder except as stated herein; (d) it is not aware (not having made any enquiries or carried out any searches) of any belief that any patent comprised within PATENT RIGHTS is not valid or of any patent owned by LICENSOR and not included in PATENT RIGHTS which would be infringed by LICENSEE’s use of PATENT RIGHTS in accordance with the terms of this AGREEMENT.

 

14.2                        LICENSEE understands and agrees that LICENSOR, by this AGREEMENT, makes no representation as to the quality, operability or fitness for any use, safety, efficacy, approvability by regulatory authorities, time and cost of development, patentability, and/or breadth of LICENSED SUBJECT MATTER, PATENT RIGHTS or TECHNOLOGY RIGHTS, LICENSOR, by this AGREEMENT, also save as set out in section 14.1 hereinabove makes no representation as to whether any patent covered by PATENT RIGHTS is valid or as to whether there are any patents now held, or which will

 

14



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

be held, by others or by LICENSOR in the LICENSED FIELD nor does LICENSOR make any representation that the inventions contained in PATENT RIGHTS and/or LICENSED SUBJECT MATTER do not infringe any other patents now held or that will be held by others.

 

14.3                        LICENSEE, by execution hereof, acknowledges, covenants and agrees that LICENSEE has not been induced in any way by LICENSOR or employees thereof to enter into this AGREEMENT, and further warrants and represents that (a) LICENSEE has had the opportunity to conduct sufficient due diligence with respect to all items and issues pertaining to this AGREEMENT; and (b) LICENSEE possesses adequate knowledge and expertise, or has had the opportunity to use knowledgeable and expert consultants, to adequately conduct such due diligence, and subject to the representations and warranties provided by LICENSOR in section 14.1, agrees to accept all risks inherent herein; (c) LICENSEE is a corporation duly incorporated and validly existing under the laws of the state of Delaware, United States of America, with all corporate power and authority to enter into this Agreement and to perform its obligations hereunder including payment of all sums due to the Licensor hereunder; (d) the execution of this AGREEMENT by LICENSEE has been duly authorised by all requisite action on the part of LICENSEE and constitutes a valid, binding and enforceable obligation of LICENSEE; and (e) LICENSEE is not a party to any agreement (express or implied that may conflict with its obligations hereunder.

 

XV.     PARENT COMPANY GUARANTEE

 

15.                             As material inducement for LICENSOR to enter into and perform this AGREEMENT, LICENSEE has procured a guarantor acceptable to LICENSOR, who has entered into a guarantee agreement in the form set out in Exhibit II

 

XVI.     GENERAL

 

16.1                        This AGREEMENT constitutes the entire and only agreement between the PARTIES for LICENSED SUBJECT MATTER and all other prior negotiations, representations, agreements and understandings are superseded hereby. No agreements altering or supplementing the terms hereof will be made except by a written document signed by both PARTIES.

 

16.2                        Any notice required by this AGREEMENT shall be in writing and served personally or sent by registered or certified mail (postage prepaid) or by overnight courier service or by facsimile (and confirmed by airmail, postage prepaid) and addressed to the relevant party as follows:

 

If to LICENSOR to:

 

University College Cardiff Consultants Limited

30-36 Newport Road

Cardiff CF24 0DE, UK

ATTENTION: Dr. Nick Bourne

 

15



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Fax: +44 29 20 87 41 89

 

If to LICENSEE to:

 

ContraVir Research Incorporated

595 Stewart Avenue

Garden City

New York 11530

ATTENTION: Donald H. Picker, President

Fax: +1 212 297 0010

 

or to such other addresses or facsimile number as may be given from time to time under the terms of this notice provision. Any notice served personally shall be deemed to have been given upon such service. Any notice sent by mail shall be deemed to have been served five (5) days after the same shall have been posted and any notice sent by facsimile shall be deemed to have been served upon transmission and in providing such service it shall be sufficient to prove that the letter or facsimile was properly addressed and as the case may be posted or transmitted.

 

16.3                        LICENSEE agrees to comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this AGREEMENT.

 

16.4                        This Agreement shall be governed by and construed in all respects in accordance with the laws of England and Wales and the PARTIES hereby exclusively submit to the jurisdiction of the courts of England and Wales,

 

16.5                        Failure of LICENSOR to enforce a right under this AGREEMENT will not act as a waiver of right or the ability to later assert that right relative to the particular situation involved,

 

I6.6                          Headings included herein are for convenience only and will not be used to construe this AGREEMENT.

 

16.7                        If any part of this AGREEMENT is for any reason found to be unenforceable, all other parts nevertheless will remain enforceable,

 

16.8                        Save in respect of CARDIFF, REGA and KUL who shall each be entitled to enforce the provisions of Sections 15, 5.1, 9.1. 9.3, 10.1, 11.4 and 13.4(f) neither party intends that any provision of this AGREEMENT shall be enforceable by any person, firm, company or organisation who is not a party to this Agreement whether pursuant to the Contracts (Rights of Third Parties) Act 1999 or otherwise.

 

16



 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT AND THE NON-PUBLIC INFORMATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this AGREEMENT.

 

SIGNED by

 

 

 

N. B. BOURNE

/s/ N. B. Bourne

 

 

duly authorised representative

 

for and on behalf of UNIVERSITY

 

COLLEGE CARDIFF CONSULTANTS

 

LIMITED

 

 

 

 

 

SIGNED by

 

 

 

DONALD H. PICKER

/s/ Donald H. Picker

 

 

duly authorised representative

 

for and on behalf of

 

CONTRAVIR RESEARCH

 

INCORPORATED

 

 

17


Exhibit 99.1

 

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended.

 

Preliminary and Subject to Completion, dated November 21, 2013

 

INFORMATION STATEMENT

 

ContraVir Pharmaceuticals, Inc.

 

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, will be subject to reduced public company reporting requirements.

 

This information statement is being furnished in connection with the distribution by Synergy Pharmaceuticals Inc., or Synergy, to its shareholders of 100% of the outstanding shares of common stock of ContraVir Pharmaceuticals, Inc., a wholly owned subsidiary of Synergy, that holds directly or indirectly the assets and liabilities associated with Synergy’s FV-100 assets. To implement the distribution, Synergy will distribute all of the shares of ContraVir common stock on a pro rata basis to the Synergy shareholders.

 

For every common share of Synergy held of record by you as of the close of business on [*], 2013, the record date for the distribution, you will receive approximately [*] shares of ContraVir common stock. You will receive cash in lieu of any fractional shares of ContraVir common stock which you would have received after application of the above ratio. As discussed under “The Distribution — Trading Between the Record Date and Distribution Date,” if you sell your common shares of Synergy in the “regular-way” market after the record date and before the separation, you also will be selling your right to receive shares of our common stock in connection with the separation. We expect the shares of ContraVir common stock to be distributed by Synergy to you on [*], 2013. We refer to the date of the distribution of the ContraVir common stock as the “distribution date.”

 

No vote of Synergy’s shareholders is required. Therefore, you are not being asked for a proxy, and you are requested not to send us a proxy, in connection with the separation. You do not need to pay any consideration, exchange or surrender your existing common shares of Synergy or take any other action to receive your shares of ContraVir common stock.

 

There is no current trading market for ContraVir common stock, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop on or before the record date for the distribution, and we expect “regular-way” trading of ContraVir common stock to begin on the first trading day following the completion of the separation. We intend to begin discussions with various market makers in order to arrange for ContraVir common stock to be quoted on the OTCQB market tier operated by OTC Markets Group, Inc., or OTCQB, upon effectiveness of the separation from Synergy.  Since the OTCQB is a quotation service maintained by FINRA and is not an issuer listing service or securities market there are no listing requirements that must be satisfied by us prior to quotation. While the ultimate determination of eligibility for quotation is subject to approval by the Financial Industry Regulatory Authority, Inc., or FINRA,, in order for a security to be eligible for quotation by a market maker on the OTCQB, the security must be registered with the Commission and the issuer must be current in its required filings with such federal authority.  There can be no assurance that the ContraVir Common Stock will be approved by FINRA for quotation on any over-the-counter market, including the OTCQB.

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 14.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

 

The date of this information statement is          , 2013

 

This information statement was first mailed to Synergy shareholders on or about           , 2013.

 



 

TABLE OF CONTENTS

 

 

Page

Questions and Answers about the Separation and Distribution

3

Information Statement Summary

8

Risk Factors

13

Cautionary Statement Concerning Forward-Looking Statements

40

Dividend Policy

40

Capitalization

40

Management’s Discussion and Analysis of Financial Condition and Plan of Operations

42

Business

46

Management

57

Compensation Discussion and Analysis

59

Executive Compensation

59

Certain Relationships and Related Person Transactions

66

Security Ownership of Certain Beneficial Owners and Management

66

The Distribution

67

Our Relationship with Synergy Following the Distribution

70

Material U.S. Federal Income Tax Consequences

71

Description of Our Capital Stock

74

Where You Can Find More Information

76

Index to Financial Statements

77

 

Trademarks, Trade Names and Service Marks

 

We own or have rights to use the trademarks, service marks and trade names that we use in conjunction with the operation of our business. Some of the more important trademarks that we own or have rights to use that appear in this Information Statement include: www.contravir.com, which may be registered or trademarked in the United States and other jurisdictions. Each trademark, trade name or service mark of any other company appearing in this Information Statement is, to our knowledge, owned by such other company.

 

Presentation of Information

 

Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the financial statements of ContraVir Pharmaceuticals, Inc., which are comprised of Synergy’s FV-100 assets, assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “ContraVir Pharmaceuticals, Inc.,” “ContraVir,” “we,” “us,” “our” and “our company” refer to ContraVir Pharmaceuticals, Inc.. References in this information statement to “Synergy” refers to Synergy Pharmaceuticals Inc., a Delaware corporation, and its consolidated subsidiaries (other than ContraVir Pharmaceuticals, Inc.), unless the context otherwise requires.

 

2



 

QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

 

What is ContraVir and why is Synergy separating ContraVir’s business and distributing its stock?

 

ContraVir currently is a wholly owned subsidiary of Synergy that was formed to hold Synergy’s FV-100 assets. The separation of ContraVir from Synergy and the distribution of ContraVir common stock are intended to provide you with equity investments in two separate companies that will be able to focus on each of their respective businesses. We expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the sections entitled “The Distribution — Background” and “The Distribution — Reasons for the Separation.”

 

 

 

Is Synergy retaining any products after completion of the distribution?

 

Synergy will retain all product candidates that it has developed to treat gastrointestinal, or GI, disorders and diseases. Its lead product candidate is plecanatide (formerly called SP-304), a guanylate cyclase C, or GC-C, receptor agonist, to treat GI disorders, primarily chronic idiopathic constipation, or CIC, and constipation-predominant-irritable bowel syndrome, or IBS-C. CIC and IBS-C are functional gastrointestinal disorders that afflict millions of sufferers worldwide. CIC is primarily characterized by constipation symptoms but a majority of these patients report experiencing straining, bloating and abdominal discomfort as among their most bothersome symptoms. Synergy is also developing SP-333, a second generation GC-C receptor agonist for the treatment of inflammatory bowel diseases, such as ulcerative colitis, or UC.

 

 

 

Why am I receiving this document?

 

Synergy is delivering this document to you because you are a holder of common stock of Synergy. If you are a holder of Synergy common stock on [*], 2013, you are entitled to receive approximately [*] shares of ContraVir common stock for each common share of Synergy that you held at the close of business on the record date. ContraVir will not issue fractional shares of its common stock in the distribution. This document will help you understand how the separation and distribution will affect your investment in Synergy and your investment in ContraVir after the separation.

 

 

 

How will the separation of ContraVir from Synergy work?

 

To accomplish the separation, Synergy will distribute 100% of the outstanding shares of common stock of ContraVir to Synergy’s shareholders on a pro rata basis as a dividend.

 

 

 

Why is the separation of ContraVir structured as a distribution?

 

Synergy believes that a distribution of shares of ContraVir to the Synergy shareholders is an efficient way to separate its GI product candidates and its other product candidate in a manner that will create long-term value for Synergy, ContraVir and their respective shareholders.

 

 

 

What is the record date for the distribution?

 

The record date for the distribution will be [*], 2013.

 

 

 

When will the distribution occur?

 

We expect the shares of ContraVir common stock to be distributed by Synergy on [*], 2013 to holders of record of common shares of Synergy at the close of business on the record date.

 

 

 

What do shareholders need to do to participate in the distribution?

 

Shareholders of Synergy as of the record date will not be required to take any action to receive ContraVir common stock in the distribution, but you are urged to read this entire information statement carefully . No shareholder approval of the distribution is required. You are not being asked for a proxy . You do not need to pay any consideration, exchange or surrender your existing common shares of Synergy or take any other action to receive your shares of ContraVir common stock. Please do not send in your Synergy stock certificates.

 

3



 

Will I receive physical certificates representing shares of ContraVir common stock following the separation?

 

No. Following the separation, ContraVir will not issue physical certificates representing shares of ContraVir common stock. If you own common shares of Synergy as of the close of business on the record date, Synergy, with the assistance of Philadelphia Stock Transfer, Inc., the settlement and distribution agent, will electronically distribute shares of ContraVir common stock to you or to your brokerage firm on your behalf by way of direct registration in book-entry form. Philadelphia Stock Transfer will mail you a book-entry account statement that reflects your shares of ContraVir common stock, or your bank or brokerage firm will credit your account for the shares.

 

 

 

 

 

Following the distribution, shareholders whose shares are held in book-entry form may request that their shares of ContraVir common stock held in book-entry form be transferred to a brokerage or other account at any time, without charge.

 

 

 

How many shares of ContraVir common stock will I receive in the distribution?

 

Synergy will distribute to you approximately [*] shares of ContraVir common stock for each share of Synergy common stock held at the record date. Based on approximately [*] shares of Synergy common stock outstanding as of [*], 2013, a total of approximately 9,000,000 shares of ContraVir common stock will be distributed. Synergy will retain no shares of following the distribution. For additional information on the distribution, see “The Distribution.”

 

 

 

Will ContraVir issue fractional shares of its common stock in the distribution?

 

No. ContraVir will not issue fractional shares of its common stock in the distribution. Fractional shares that Synergy shareholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed ratably to those shareholders who would otherwise have been entitled to receive fractional shares.

 

 

 

What are the conditions to the distribution?

 

The distribution is subject to a number of conditions, including, among others,

 

·      the Synergy board of directors will have declared the distribution of all outstanding shares of ContraVir common stock to Synergy’s shareholders;

·      the U.S. Securities and Exchange Commission, or the “SEC,” will have declared our Registration Statement on Form 10, of which this Information Statement is a part, effective under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” no stop order suspending the effectiveness of the Registration Statement will be in effect, no proceedings for that purpose will be pending before or threatened by the SEC and this Information Statement will have been mailed to Synergy’s shareholders;

·      no order, injunction or decree that would prevent the consummation of the distribution will be threatened, pending or issued (and still in effect) by any governmental entity of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the distribution will be in effect, and no other event outside the control of Synergy will have occurred or failed to occur that prevents the consummation of the distribution;

·      no other events or developments will have occurred prior to the distribution that, in the judgment of the Synergy board of directors, would result in the distribution having a material adverse effect on Synergy or its shareholders; and

·      Synergy and us will have executed and delivered all ancillary agreements related to the distribution.

 

The fulfillment of the above conditions will not create any obligation on Synergy’s part to effect the distribution. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the SEC’s declaration of the effectiveness of the Registration Statement, in connection with the distribution. Synergy has the right not to complete the distribution if, at any time, the Synergy board of directors determines, in its sole and absolute discretion, that the distribution is not in the best interests of Synergy or its shareholders or is otherwise not advisable For a complete discussion of all of the conditions to the distribution, see “The Distribution — Conditions to the Distribution.”

 

4



 

What is the expected date of completion of the separation?

 

The completion and timing of the separation are dependent upon a number of conditions. We expect the shares of ContraVir common stock to be distributed by Synergy after the close of trading on [*], 2013 to the holders of record of common shares of Synergy at the close of business on the record date; however, no assurance can be provided as to the timing of the separation or that all conditions to the separation will be met.

 

 

 

Can Synergy decide to cancel the distribution of ContraVir common stock even if all the conditions have been met?

 

Yes. The distribution is subject to the satisfaction or waiver of certain conditions. See the section entitled “The Distribution — Conditions to the Distribution.” Until the distribution has occurred, Synergy has the right to terminate the distribution, even if all of the conditions are satisfied, if at any time the board of directors of Synergy determines that the distribution is not in the best interests of Synergy and its shareholders or that market conditions or other circumstances are such that it is not advisable at that time to separate the FV-100 assets from the remainder of Synergy.

 

 

 

What if I want to sell my shares of Synergy common stocks or my ContraVir common stock?

 

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.

 

 

 

What is “regular-way” and “ex-distribution” trading?

 

Beginning on or shortly before the record date and continuing up to and through the distribution date, it is expected that there will be two markets in common shares of Synergy: a “regular-way” market and an “ex-distribution” market. Common shares of Synergy that trade in the “regular-way” market will trade with an entitlement to shares of ContraVir common stock distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to shares of ContraVir common stock distributed pursuant to the distribution.

 

 

 

 

 

If you decide to sell any common shares of Synergy before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your common shares of Synergy with or without your entitlement to ContraVir common stock pursuant to the distribution.

 

Where will I be able to trade shares of ContraVir common stock?

 

There is no current trading market for ContraVir common stock, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop on or before the record date for the distribution, and we expect “regular-way” trading of ContraVir common stock to begin on the first trading day following the completion of the separation. We intend to begin discussions with various market makers in order to arrange for ContraVir common stock to be quoted on the OTCQB market tier operated by OTC Markets Group, Inc., or OTCQB, upon effectiveness of the separation from Synergy.  Since the OTCQB is a quotation service maintained by FINRA and is not an issuer listing service or securities market there are no listing requirements that must be satisfied by us prior to quotation. While the ultimate determination of eligibility for quotation is subject to approval by the Financial Industry Regulatory Authority, Inc., or FINRA,, in order for a security to be eligible for quotation by a market maker on the OTCQB, the security must be registered with the Commission and the issuer must be current in its required filings with such federal authority.  There can be no assurance that the ContraVir Common Stock will be approved by FINRA for quotation on any over-the- counter market, including the OTCQB.  ContraVir cannot predict the trading prices for its common stock before, on or after the distribution date.

 

What will happen to the listing of common shares of Synergy?

 

Common shares of Synergy will continue to trade on the Nasdaq Global Market after the distribution.

 

 

 

Will the number of common shares of Synergy that I own change as a result of the distribution?

 

No. The number of common shares of Synergy that you own will not change as a result of the distribution.

 

5



 

Will the distribution affect the market price of my Synergy shares?

 

Yes. As a result of the distribution, Synergy expects the trading price of shares of Synergy common stock immediately following the distribution to be lower than the “regular-way” trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the FV-100 assets held by ContraVir. Synergy believes that over time following the separation, assuming the same market conditions and the realization of the expected benefits of the separation, the Synergy common stock and the ContraVir common stock should have a higher aggregate market value as compared to what the market value of Synergy common stock would be if the separation and distribution did not occur. There can be no assurance, however, that such a higher aggregate market value will be achieved. This means, for example, that the combined trading prices of one share of Synergy common stock and [*] share of ContraVir common stock after the distribution may be equal to, greater than or less than the trading price of one share of Synergy common stock before the distribution.

 

 

 

 

 

For more information regarding the potential U.S. federal income tax consequences to Synergy and to you of the contribution and the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”

 

 

 

Will I be taxed on the shares of ContraVir distributed to me in the separation?

 

Yes. The distribution of ContraVir common stock in the separation will be a taxable dividend to Synergy stockholders. An amount equal to the fair market value of ContraVir common stock received by you will be treated as a taxable dividend to the extent of your ratable share of any current or accumulated earnings and profits of Synergy, with the excess treated as a non-taxable return of capital to the extent of your tax basis in Synergy stock and any remaining excess treated as capital gain.

 

 

 

 

 

See “Material U.S. Federal Income Tax Consequences” for more information. You should consult your tax advisor about the particular consequences of the distribution to you, including the application of state, local and foreign tax laws.

 

 

 

How will I determine my tax basis in the ContraVir shares distributed to me in the separation?

 

Your tax basis in shares of ContraVir common stock distributed to you in the separation will equal the fair market value of such shares on the date of such distribution. Your holding period for such shares will begin the day after the distribution date.

 

 

 

 

 

See “Material U.S. Federal Income Tax Consequences” for more information. You should consult your tax advisor about the particular consequences of the distribution to you, including the application of U.S. Federal, state, local and foreign tax laws.

 

 

 

How will the separation affect my tax basis and holding period in Synergy stock?

 

Your tax basis in shares of Synergy held at the time of the distribution of ContraVir common stock in the separation will be reduced (but not below zero) by the amount by which the fair market value of the ContraVir common stock distributed to you exceeds your ratable share of Synergy’s current and accumulated earnings and profits. Your holding period for such Synergy shares will not be affected by the distribution.

 

 

 

 

 

See “Material U.S. Federal Income Tax Consequences” for more information. You should consult your tax advisor about the particular consequences of the distribution to you, including the application of state, local and foreign tax laws.

 

6



 

What will ContraVir’s relationship be with Synergy following the separation?

 

On July 8, 2013, we entered into a shared services agreement, as amended and restated on August 5, 2013, with Synergy. This agreement provides for the provision of certain administrative, financial, legal, tax, insurance, facility, information technology and other services to ContraVir attributable to periods prior to, at and after ContraVir’s separation from Synergy and will govern the relationship between ContraVir and Synergy subsequent to the completion of the separation. For additional information regarding the shared services agreement, see the sections entitled “Risk Factors — Risks Related to the Separation” and “Our Relationship with Synergy Following the Distribution.”

 

 

 

Who will manage ContraVir after the separation?

 

ContraVir benefits from having in place a management team with an extensive background in the biopharma industry. Led by Gary S. Jacob, who will be ContraVir’s Chief Executive Officer after the separation until his replacement is identified, ContraVir’s management team possesses deep knowledge of, and extensive experience in, its industry. For more information regarding ContraVir’s management, see “Management.”

 

 

 

Are there risks associated with owning ContraVir common stock?

 

Yes. ContraVir’s business is subject to both general and specific risks relating to ContraVir’s business, the industry in which it operates, its ongoing contractual relationships with Synergy and its status as a separate, publicly traded company. ContraVir’s business is also subject to risks relating to the separation. These risks are described in the “Risk Factors” section of this information statement beginning on page 8. You are encouraged to read that section carefully.

 

 

 

Does ContraVir plan to pay dividends?

 

ContraVir currently intends to retain any earnings to finance research and development, acquisitions and the operation and expansion of its business, and does not anticipate paying any cash dividends for the foreseeable future. As a result, your return on your investment in ContraVir common stock will be determined by increases and decreases in the market price of its common stock. See “Dividend Policy.”

 

 

 

Who will be the distribution agent, transfer agent, and registrar for the ContraVir common stock?

 

The distribution agent, transfer agent, and registrar for the ContraVir common stock will be Philadelphia Stock Transfer, Inc. For questions relating to the transfer or mechanics of the stock distribution, you should contact:

 

 

 

 

 

ContraVir Pharmaceuticals, Inc.
Investor Relations
420 Lexington Avenue, Suite 2012
New York, New York 10170
(212) 297-0020

 

 

 

Where can I find more information about Synergy and ContraVir?

 

Before the distribution, if you have any questions relating to Synergy’s business performance, you should contact:

 

 

 

 

 

Synergy Pharmaceuticals Inc.
Investor Relations
420 Lexington Avenue, Suite 2012
New York, New York 10170
(212) 297-0020

 

 

 

 

 

After the distribution, ContraVir shareholders who have any questions relating to ContraVir’s business performance should contact us at:

 

 

 

 

 

ContraVir Pharmaceuticals, Inc.
Investor Relations
420 Lexington Avenue, Suite 2012
New York, New York 10170
(212) 297-0020

 

7



 

INFORMATION STATEMENT SUMMARY

 

The following is a summary of material information discussed in this information statement. This summary may not contain all the details concerning the separation or other information that may be important to you. To better understand the separation and ContraVir’s business and financial position, you should carefully review this entire information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the financial statements of ContraVir Pharmaceuticals, Inc., which are comprised of the assets and liabilities of Synergy’s FV-100 assets, assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “ContraVir Pharmaceuticals, Inc.,” “ContraVir,” “we,” “us,” “our” and “our company” refer to ContraVir Pharmaceuticals, Inc. References in this information statement to “Synergy” refers to Synergy Pharmaceuticals Inc., a Delaware corporation, and its consolidated subsidiaries (other than ContraVir Pharmaceuticals, Inc.), unless the context otherwise requires.

 

This information statement describes the assets to be transferred to us by Synergy in the separation as if the transferred assets were our business for all historical periods described. References in this information statement to our historical assets, liabilities, products, businesses or activities of our business are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the transferred businesses as the businesses were conducted as part of Synergy and its subsidiaries prior to the separation.

 

We are a biopharmaceutical company focused primarily on the development of drugs to treat herpes zoster, or shingles, which is an infection caused by the reactivation of varicella zoster virus, or VZV. The varicella zoster virus is commonly known as chicken pox upon initial exposure to the virus. The virus can lay dormant in nerve endings for many years and if reactivated, causes a painful rash called shingles. We are currently developing a compound called FV-100 for the treatment of shingles. FV-100 is an orally available small molecule, nucleoside analogue. Nucleoside analogs are capable of disrupting replication of the virus. FV-100 is a pro-drug of CF-1743, which means that FV-100 is more readily absorbed when given orally and then broken down to the active portion of the compound, or active moiety, CF-1743 upon entry to the blood stream.  FV-100 is the compound under development for the treatment of shingles. Published preclinical studies demonstrate that FV-100 is significantly more potent against VZV than currently marketed compounds acyclovir, valacyclovir, and famciclovir, the FDA-approved drugs used for the treatment of shingles. Preclinical studies further demonstrate that FV-100 has a more rapid onset of antiviral activity, and may fully inhibit the replication of VZV more rapidly than these drugs at significantly lower concentration levels. In addition, pharmacokinetic data from completed Phase 1 and 2 clinical trials suggest that FV-100 has the potential to demonstrate antiviral activity when dosed orally once-a-day at significantly lower blood levels than valacyclovir, acyclovir, and famciclovir.

 

FV-100 was previously in development by Inhibitex, Inc., or Inhibitex.  In January 2012, Bristol-Myers Squibb Company, or BMS acquired Inhibitex. In August 2012, Synergy acquired the FV-100 assets from BMS.  The FV-100 assets are licensed from University College Cardiff Consultants Limited (“Cardiff”) pursuant to the terms of that certain Patent and Technology License Agreement, dated as of February 2, 2005, between Cardiff and Contravir Research Incorporated, an entity with no prior relationship with the Company, as amended March 27, 2007.  Since Synergy acquired the FV-100 assets from BMS, it has not engaged in any clinical study of FV-100 or materially advanced the development of FV-100.  The Phase 2 clinical trial for FV-100 was completed by Inhibitex in December 2010. This trial represented the first clinical trial of FV-100 in shingles patients, and was a well-controlled; double blind study comparing two different dosing arms of FV-100 to an active control (valacyclovir). A total of 350 patients, aged 50 years and older, were enrolled in one of three treatment arms: 200 mg FV-100 administered once daily; 400 mg FV-100 administered once daily; and 1,000 mg valacyclovir administered three times per day. In addition to further evaluating its safety and tolerability, the main objectives of the trial were to evaluate the potential therapeutic benefit of FV-100 in reducing the severity and duration of shingles-related pain, the incidence of post-herpetic neuralgia (burning pain that follows healing of the shingles rash), or PHN, and the time to lesion healing. The primary endpoint for the FV-100 study was a 25% reduction in the severity and duration of shingles-related pain during the first 30 days as compared to valacyclovir. The trial missed its primary endpoint, as the results from the study showed a lack of statistical significance. There were, however, numerically favorable treatment differences, particularly in those patients that received 400 mg FV-100, relative to valacyclovir patients, with respect to the primary endpoint. As this was a Phase 2 study, we will be able to use this information to help design future clinical studies and discuss future study designs with FDA and regulatory authorities worldwide.

 

There were also favorable, non-statistically significant treatment differences observed for key secondary pain endpoints, including the reduction in the severity and duration of shingles-associated pain over 90 days (a 14% relative reduction as compared to valacyclovir for 400mg FV-100) and the incidence of  PHN (a 39% relative reduction as compared to valacyclovir for 400 mg FV-100). The secondary endpoints were not powered to demonstrate statistically significant treatment differences between the arms. FV-100 was generally well tolerated at both dose levels, and demonstrated a similar adverse event profile as compared to valacyclovir.

 

Synergy has not engaged in any clinical study of FV-100 or materially advanced development of the drug candidate. We are currently reviewing the clinical data from the Phase 2 trial and performing post hoc analyses, conducting additional market research, including reimbursement, pricing, and competitive analyses, etc. We are also evaluating a number of clinical, regulatory and commercial pathways for the potential future development of FV-100. Based upon the results of the Phase 2 study coupled with the

 

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additional market research, we are re-evaluating the focus of the clinical development program. We anticipate concluding this evaluation in the second half of 2013. It is likely that we will need to conduct an additional Phase 2 study which will be lengthy and expensive, if we continue with development of FV-100.  Inhibitex filed for an IND (IND 102,011) on March 19, 2008, which was approved by the FDA on April 20, 2008.  This IND was transferred from Inhibitex to its new sponsor, Synergy, on August 27, 2012.  The IND is currently in good standing and sponsorship will need to be transferred from Synergy to us upon the effectiveness of this transaction, when we become separate from Synergy.  Upon completion of the IND transfer to us, we will be able to run all clinical trials required to support FV-100 for the use in the treatment of shingles.

 

From Inception (May 15, 2013) through September 30, 2013, we generated no revenue.

 

Our Strengths

 

We believe that we possess a number of competitive advantages that distinguish us from our competitors, including:

 

·

 

Potential effectiveness in patients who present with shingles after 72 hours from the onset of an outbreak. Note: current marketed therapies require initiation of treatment within 72 hours of onset of the Shingles rash;

 

 

 

·

 

Potential to reduce pain to a greater extent over the first 90 days following initiation of therapy compared to the competition;

 

 

 

·

 

Potential to reduce the incidence of post-herpetic neuralgia, or PHN;

 

 

 

·

 

A reduction in the number of doses per day to 1-2 as compared to 3-5 with the competition; and

 

 

 

·

 

Greater potency at eradicating the zoster virus than the competition

 

Our Strategy

 

Design and conduct clinical trials that establish the superiority of FV-100 over the standard of care.

 

Market Opportunity for the Treatment of Shingles

 

VZV, a DNA virus and a member of the herpes virus group, is the virus that causes both chickenpox and herpes zoster, or shingles. Chickenpox, the initial infection caused by VZV in an individual, generally occurs during childhood and it is caused by exposure to another individual with an active infection. After the chickenpox infection subsides, VZV remains latent in the individual’s  nerves including the dorsal root and cranial nerve ganglia, and can re-emerge later in life. Therefore, shingles is typically not transmitted from one individual to the next, and only those individuals who have had chickenpox are generally at risk for shingles.

 

Although shingles can occur in any individual with a prior VZV infection, its incidence varies with its key risk factors, which are advanced age, immune system status and being female. Shingles is largely a disease of the aged or aging, with over 50% of all cases occurring in individuals over the age of 60, and approximately 80% occurring in individuals over the age of 40. A study in 2007 based upon data from 2000 implied that there were approximately 1 million new cases shingles cases that year. Due to the aging of the population in many industrialized countries, as well as the increasing use of immunosuppressive agents in transplant patients, patients with autoimmune diseases such as rheumatoid arthritis and the increased numbers of immunosuppressed patients from cancer therapy, the incidence of shingles has increased and is expected to continue to increase. A recent study from the Centers for Disease Control investigating medical claims data from MarketScan ®  databases from 1993-2006 indicated that the crude incidence of shingles cases increased 259% over that period of time. Furthermore, a study conducted by the Mayo Clinic suggests that the recurrence rate for shingles is approximately 6.2%, which reflects a much higher rate than prior studies, which assessed a shorter follow-up period. It is estimated that approximately 20-30% of all persons in the U.S. will suffer from shingles at some point during their lifetime.

 

The symptoms associated with shingles generally include localized lesions (rash and blisters) and pain. In many cases the patient may notice localized pain as a prodromal symptom or the time period which the disease process has begun but is not manifest with any clinical symptoms, prior to the appearance of any lesions; however, the first recognizable symptom of shingles is generally lesions that will continue to form for a week or two. Such skin lesions generally are found on one half of the body and follow the path of nerves that emanate from the spinal cord around the torso (thoracic); however, the infection is also commonly found on the face, neck, lower back and in certain rare cases, systemically. Within several weeks, the lesions in the infected areas will typically begin to heal, and these dermatological symptoms generally will resolve within a month or less after the appearance of the first lesion. In rare instances, lesions may never appear, but localized pain will be present.

 

The pain associated with an episode of shingles is attributed to both the damage caused to the affected nerves by the replication of VZV and the inflammatory response associated with the infection. Pain symptoms are commonly described as a burning sensation, with bouts of stabbing and shooting pain, often set off by contact with the infected area. The majority of shingles patients experience

 

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such pain for several weeks in connection with their active infection, referred to as acute pain. For many patients, shingles-associated pain does not resolve when the lesions heal and the inflammation subsides, but, rather, continues for months, or possibly years. Persistent shingles-associated pain that lasts more than three to four weeks is referred to as sub-acute pain or neuralgia. Shingles-associated pain that persists more than three months is generally referred to as PHN, which is the most common and clinically relevant complication of shingles. Approximately 15-20% of all shingles patients experience PHN, although the incidence of PHN is more prevalent in patients over 50 years of age. Previous studies have established that additional risk factors for PHN include greater acute pain intensity during the initial 4 weeks, severity of the dermatological symptoms or lesions, and the presence and greater severity of localized pain prior to the appearance of the lesions or rash.

 

Valacyclovir, acyclovir and famciclovir are oral antivirals currently indicated and approved by the FDA, and regulatory agencies in many other countries, for the treatment shingles. These  drugs, available as generics, are referred to as “pan-herpetic” drugs, as they are used to treat infections caused by various herpes viruses, including herpes simplex 1 and 2, and VZV. Unlike those drugs, FV-100 only has antiviral activity against VZV, and not the other herpes viruses. Based upon an analysis by data compiled by IMS Health, Inc. (“IMS”) on our behalf, and a recent utilization study of the use of Valtrex ®  from 1994-2009 conducted by the FDA as well as other market research we have independently conducted, we estimate that 15 -30% of the nearly 17 million retail prescriptions written for valacyclovir, acyclovir and famciclovir combined in 2009 were for the treatment of herpes zoster.

 

Risks Associated with Our Business

 

An investment in our common stock involves risks associated with our business. The following list of risk factors is not exhaustive. Please read carefully the risks relating to these and other matters described under “Risk Factors” beginning on page 8 and “Cautionary Statement Concerning Forward-Looking Statements” on page 33.

 

·               We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.

 

·               Our product candidate is in the early stages of development and its commercial viability remains subject to the successful outcome of current and future preclinical studies, clinical trials, regulatory approvals and the risks generally inherent in the development of pharmaceutical product candidate. If we are unable to successfully advance or develop our product candidate, our business will be materially harmed.

 

·               If the results of preclinical studies or clinical trials for our product candidate, including those that are subject to existing or future license or collaboration agreements, are unfavorable or delayed, we could be delayed or precluded from the further development or commercialization of our product candidate, which could materially harm our business.

 

·               If third party vendors upon whom we intend to rely on to conduct our preclinical studies or clinical trials do not perform or fail to comply with strict regulations, these studies or trials of our product candidate may be delayed, terminated, or fail, or we could incur significant additional expenses, which could materially harm our business.

 

·               We, and our collaborators, must comply with extensive government regulations in order to advance our product candidate through the development process and ultimately obtain and maintain marketing approval for our products in the U.S. and abroad.

 

·               Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.

 

·               The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidate, our business will be substantially harmed.

 

·               If our product candidate is unable to compete effectively with marketed drugs targeting similar indications as our product candidate, our commercial opportunity will be reduced or eliminated.

 

·               If the manufacturers upon whom we rely fail to produce FV-100, in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of our product candidate.

 

·               If government and third-party payers fail to provide adequate reimbursement or coverage for our products or those we develop through collaborations, our revenues and potential for profitability will be harmed.

 

·               If a third party claims we are infringing on its intellectual property rights, we could incur significant expenses, or be prevented

 

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from further developing or commercializing our product candidate.

 

·               Even if our product candidate receives regulatory approval, it may still face future development and regulatory difficulties.

 

·               Healthcare reform measures could hinder or prevent our product candidate’s commercial success.

 

·               We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may be unable to complete the development and commercialization of our product candidate, or continue our development programs.

 

·               We may not achieve some or all of the expected benefits of the Separation and Distribution, if any.

 

·               The assets and resources that we acquired from Synergy in connection with the Contribution Agreement and the Shared Services Agreement may not be sufficient for us to operate as a stand-alone company, and we may experience difficulty in separating our assets and resources from Synergy.

 

Implications of Being an Emerging Growth Company

 

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

 

·               requirement to provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

·               reduced disclosure about our executive compensation arrangements;

 

·               no non-binding advisory votes on executive compensation or golden parachute arrangements; and

 

·               exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

 

We have irrevocably elected not to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies..

 

We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the distribution; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

 

To the extent that we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.

 

The Separation and Distribution

 

On August 8, 2013, Synergy announced that it intended to separate its FV-100 assets from the remainder of its business.

 

On [*], 2013, the Synergy board of directors approved the distribution of 100% of our issued and outstanding shares of common stock on the basis of approximately [*] shares of our common stock for each share of Synergy common stock held on the record date.

 

Our Post-Separation Relationship with Synergy

 

On July 8, 2013, we entered into a Shared Services Agreement, as amended and restated August 5, 2013, with Synergy, effective May 16, 2013. This agreement provides for the provision of certain administrative, financial, legal, insurance, facility, information technology and other services to ContraVir attributable to periods prior to, at and after ContraVir’s separation from Synergy and will govern the relationship between ContraVir and Synergy subsequent to the completion of the separation. For additional information

 

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regarding the shared services agreement, see the sections entitled “Risk Factors — Risks Related to the Separation” and “Our Relationship with Synergy Following the Distribution.”

 

Reasons for the Separation

 

The Synergy board of directors believes that separating the FV-100 assets from the remainder of Synergy is in the best interests of Synergy and its shareholders because such separation is expected to:

 

·               improve strategic planning, increase management focus and streamline decision-making by providing the flexibility to implement the unique strategic plans of each company and to respond more effectively to different clinical, patient and market needs of each company in changing business, pharmacological and economic environments;

 

·               allow each of Synergy and us to adopt the capital structure, investment policy and dividend policy best suited to each business’ financial profile and business needs, as well as resolve the current competition for capital among Synergy and its investors; and

 

·               facilitate incentive compensation arrangements for employees more directly tied to the performance of the relevant company’s business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives, while at the same time creating an independent equity structure that will facilitate our ability to effect future acquisitions and in-licensing utilizing our common stock.

 

The Synergy board of directors considered a number of potentially negative factors in evaluating the separation, including risks relating to the creation of a new public company, possible increased costs and one-time separation costs, but concluded that the potential benefits of the separation outweighed these factors. For more information, see the sections entitled “The Distribution — Reasons for the Distribution” and “Risk Factors” included elsewhere in this information statement.

 

Corporate Information

 

ContraVir was incorporated in Delaware on May 15, 2013 for the purpose of holding Synergy’s FV-100 assets in connection with the separation and distribution described herein. Prior to the contribution of the FV-100 assets, which will occur immediately prior to the distribution, we had no operations. The address of ContraVir’s principal executive offices is 420 Lexington Avenue, Suite 2012, New York, New York 10170. ContraVir’s telephone number is (212) 297-0020.

 

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RISK FACTORS

 

You should carefully consider the following risks and other information in this information statement in evaluating us and our common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition. The risk factors generally have been separated into three groups: risks related to our business, risks related to the separation and risks related to our common stock.

 

Risks Related to Our Business

 

Our prospects are largely dependent on the success of FV-100, which was the subject of a Phase II clinical trial that failed to meet its primary endpoints. While we seek to determine the implications, if any, of the Phase II results on our FV-100 product candidate and consider other potential strategic pathways, there can be no assurance we will be able to successfully advance or develop our FV-100 product candidate and if we are unable to further develop or obtain regulatory approval, our business will be materially harmed.

 

In December 2010, Inhibitex, Inc., a previous owner of the FV-100 assets,  announced that in a pivotal Phase II clinical trial of FV-100, an oral antiviral compound being developed to treat herpes zoster, more commonly referred to as shingles, failed to meet its primary endpoint. Since Synergy acquired the FV-100 assets from BMS, it has not engaged in any clinical study of FV-100 or materially advanced the development of FV-100. We are currently conducting various analyses of our preclinical and clinical data related to FV-100, as well as analyzing the various lots of clinical trial material used in the Phase II trials in an effort to determine whether the results of the Phase II trial were a consequence of one or more factors, including the potency and consistency of the clinical trial material, the change in the dosing schedule, and selection of the patient population studied and the appropriateness of the primary efficacy endpoint used in the clinical trial to determine the effectiveness of the treatments. If we are unable to successfully advance or develop our FV-100 product candidate, it will have a material adverse effect on our business.

 

Our product candidate is in the early stages of development and its commercial viability remains subject to the successful outcome of current and future preclinical studies, clinical trials, regulatory approvals and the risks generally inherent in the development of pharmaceutical product candidate. If we are unable to successfully advance or develop our product candidate, our business will be materially harmed.

 

In the near-term, failure to successfully advance the development of FV-100 may have a material adverse effect on us. To date, we have not successfully developed or commercially marketed, distributed or sold any product candidate. The success of our business depends primarily upon our ability to successfully advance the development of FV-100 through preclinical studies and clinical trials, have these product candidate approved for sale by the FDA or regulatory authorities in other countries, and ultimately have this product candidate successfully commercialized by us or a strategic collaborator. We cannot assure you that the results of our ongoing preclinical studies or clinical trials will support or justify the continued development of our product candidate, or that we will receive approval from the FDA, or similar regulatory authorities in other countries, to advance the development of our product candidate.

 

Our product candidate must satisfy rigorous regulatory standards of safety and efficacy before we can advance or complete their clinical development or they can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy preclinical studies and clinical trials, develop acceptable manufacturing processes, and obtain regulatory approval of our product candidate. Despite these efforts, our product candidate may not:

 

·                             offer therapeutic or other medical benefits over existing drugs or other product candidate in development to treat the same patient population;

·                             be proven to be safe and effective in current and future preclinical studies or clinical trials;

·                             have the desired effects;

·                             be free from undesirable or unexpected effects;

·                             meet applicable regulatory standards;

·                             be capable of being formulated and manufactured in commercially suitable quantities and at an acceptable cost; or

·                             be successfully commercialized by us or by collaborators.

 

Even if we demonstrate favorable results in preclinical studies and early-stage clinical trials, we cannot assure you that the results of late-stage clinical trials will be favorable enough to support the continued development of our product candidate. A number of companies in the pharmaceutical and biopharmaceutical industries have experienced significant delays, setbacks and failures in all stages of development, including late-stage clinical trials, even after achieving promising results in preclinical testing or early-stage clinical trials. Accordingly, results from completed preclinical studies and early-stage clinical trials of our product candidate may not be predictive of the results we may obtain in later-stage trials. Furthermore, even if the data collected from preclinical studies and clinical trials involving our product candidate demonstrates a satisfactory safety and efficacy profile, such results may not be sufficient to support the submission of a NDA or BLA to obtain regulatory approval from the FDA in the U.S., or other similar regulatory agencies in other jurisdictions, which is required to market and sell the product.

 

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Our product candidate will require significant additional research and development efforts, the commitment of substantial financial resources, and regulatory approvals prior to advancing into further clinical development or being commercialized by us or collaborators. We cannot assure you that our product candidate will successfully progress through the drug development process or will result in a commercially viable product. We do not expect our product candidate to be commercialized by us or collaborators for at least several years.

 

Our product candidate may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products or investigational new drugs, which may delay or preclude their further development or regulatory approval, or limit their use if approved.

 

Throughout the drug development process, we must continually demonstrate the safety and tolerability of our product candidates to obtain regulatory approval to further advance their clinical development or to market them. Even if our product candidate demonstrate biologic activity and clinical efficacy, any unacceptable adverse side effects or toxicities, when administered alone or in the presence of other pharmaceutical products, which can arise at any stage of development, may outweigh their potential benefit. In preclinical studies and clinical trials we have conducted to date, our product candidate has demonstrated an acceptable safety profile, although these studies and trials have involved a small number of subjects or patients over a limited period of time. We may observe adverse or significant adverse events or drug-drug interactions in future preclinical studies or clinical trials of this product candidate, which could result in the delay or termination of their development, prevent regulatory approval, or limit their market acceptance if they are ultimately approved.

 

We have incurred significant losses since inception, anticipate that we will incur continued losses for the foreseeable future and our independent registered public accounting firm’s report, contained herein, includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to operate in the future.

 

As of September 30, 2013, we had an accumulated deficit of $322,557 since May 15, 2013 (inception). We expect to incur significant and increasing operating losses for the next several years as we expand our research and development, continue our clinical trials of FV-100, acquire or license technologies, advance other product candidates into clinical development, complete clinical trials, seek regulatory approval and, if we receive FDA approval, commercialize our products. Primarily as a result of our losses and limited cash balances, our independent registered public accounting firm has included in its report for the year ended June 30, 2013 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital.

 

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our clinical and regulatory efforts, which is critical to the realization of our business plan. The accompanying financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to predict at this time the potential success of our business. The revenue and income potential of our proposed business and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all of your investment in our company.

 

If the actual or perceived therapeutic benefits of FV-100 are not sufficiently different from existing generic drugs currently used to treat shingles or reduce or prevent shingles-associated pain and PHN, we may terminate the development of FV-100 at any time, or our ability to generate significant revenue from the sale of FV-100, if approved, may be limited and our potential profitability could be harmed.

 

Valacyclovir, famciclovir and acyclovir are existing generic drugs currently marketed to treat shingles patients. Generic drugs are compounds that have no remaining patent protection, and generally have an average selling price substantially lower than drugs that are protected by patents and intellectual property rights. Unless a patented drug can differentiate itself from generic drugs treating the same condition or disease in a clinically meaningful manner, the existence of generic competition in any indication may impose significant pricing pressure on patented drugs. Accordingly, if at any time we believe that FV-100 may not provide meaningful therapeutic benefits, perceived or real, over these existing generic drugs, we may delay or terminate its future development. We cannot provide any assurance that later-stage clinical trials of FV-100, will demonstrate any meaningful therapeutic benefits over existing generic drugs sufficient to justify its continued development. Further, if we successfully develop FV-100 and it is approved for sale, we cannot assure you that any real or perceived therapeutic benefits of FV-100 over generic drugs will result in it being, accepted for sale by insurance company formularies, prescribed by physicians or commanding a price higher than the existing generic drugs.

 

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If the results of preclinical studies or clinical trials for our product candidate, including those that are subject to existing or future license or collaboration agreements, are unfavorable or delayed, we could be delayed or precluded from the further development or commercialization of our product candidate, which could materially harm our business.

 

In order to further advance the development of, and ultimately receive regulatory approval to sell, our product candidate, we must conduct extensive preclinical studies and clinical trials to demonstrate their safety and efficacy to the satisfaction of the FDA or similar regulatory authorities in other countries, as the case may be. Preclinical studies and clinical trials are expensive, complex, can take many years to complete, and have highly uncertain outcomes. Delays, setbacks, or failures can occur at any time, or in any phase of preclinical or clinical testing, and can result from concerns about safety or toxicity, a lack of demonstrated efficacy or superior efficacy over other similar products that have been approved for sale or are in more advanced stages of development, poor study or trial design, and issues related to the formulation or manufacturing process of the materials used to conduct the trials. The results of prior preclinical studies or clinical trials are not necessarily predictive of the results we may observe in later stage clinical trials. In many cases, product candidate in clinical development may fail to show desired safety and efficacy characteristics despite having favorably demonstrated such characteristics in preclinical studies or earlier stage clinical trials.

 

In addition, we may experience numerous unforeseen events during, or as a result of, preclinical studies and the clinical trial process, which could delay or impede our ability to advance the development of, receive regulatory approval for, or commercialize our product candidate, including, but not limited to:

 

·                             communications with the FDA, or similar regulatory authorities in different countries, regarding the scope or design of a trial or trials;

 

·                             regulatory authorities or IRBs not authorizing us to commence or conduct a clinical trial at a prospective trial site;

 

·                             enrollment in our clinical trials being delayed, or proceeding at a slower pace than we expected, because we have difficulty recruiting patients or participants dropping out of our clinical trials at a higher rate than we anticipated;

 

·                             our third party contractors, upon whom we rely for conducting preclinical studies, clinical trials and manufacturing of our trial materials, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;

 

·                             having to suspend or ultimately terminate our clinical trials if participants are being exposed to unacceptable health or safety risks;

 

·                             IRBs or regulators requiring that we hold, suspend or terminate our preclinical studies and clinical trials for various reasons, including non-compliance with regulatory requirements; and

 

·                             the supply or quality of drug material necessary to conduct our preclinical studies or clinical trials being insufficient, inadequate or unavailable.

 

Even if the data collected from preclinical studies or clinical trials involving our product candidate demonstrate a satisfactory safety and efficacy profile, such results may not be sufficient to support the submission of a NDA or BLA to obtain regulatory approval from the FDA in the U.S., or other similar foreign regulatory authorities in foreign jurisdictions, which is required to market and sell the product.

 

If third party vendors upon whom we intend to rely on to conduct our preclinical studies or clinical trials do not perform or fail to comply with strict regulations, these studies or trials of our product candidate may be delayed, terminated, or fail, or we could incur significant additional expenses, which could materially harm our business.

 

We have limited resources dedicated to designing, conducting and managing preclinical studies and clinical trials. We intend to rely on third parties, including clinical research organizations, consultants and principal investigators, to assist us in designing, managing, monitoring and conducting our preclinical studies and clinical trials. As of the date hereof, we have not entered into any contracts with third party vendors for any studies to be conducted. We intend to rely on these vendors and individuals to perform many facets of the drug development process, including certain preclinical studies, the recruitment of sites and patients for participation in our clinical trials, maintenance of good relations with the clinical sites, and ensuring that these sites are conducting our trials in compliance with the trial protocol and applicable regulations. If these third parties fail to perform satisfactorily, or do not adequately fulfill their obligations under the terms of our agreements with them, we may not be able to enter into alternative arrangements without undue delay or additional expenditures, and therefore the preclinical studies and clinical trials of our product candidate may be delayed or prove unsuccessful. Further, the FDA may inspect some of the clinical sites participating in our clinical trials in the U.S., or our third-party vendors’ sites, to determine if our clinical trials are being conducted according to GCPs. If we or the FDA determine that our third-party vendors are not in compliance with, or have not conducted our clinical trials according to, applicable regulations we may be forced to delay, repeat or terminate such clinical trials.

 

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We have limited capacity for recruiting and managing clinical trials, which could impair our timing to initiate or complete clinical trials of our product candidate and materially harm our business.

 

We have limited capacity to recruit and manage the clinical trials necessary to obtain FDA approval or approval by other regulatory authorities. By contrast, larger pharmaceutical and bio-pharmaceutical companies often have substantial staffs with extensive experience in conducting clinical trials with multiple product candidates across multiple indications. In addition, they may have greater financial resources to compete for the same clinical investigators and patients that we are attempting to recruit for our clinical trials. To the best of our knowledge, the following companies are potential competitors as we develop FV-100: Epiphany Biosceinces, Inc., Astellas Pharma US, Inc., GlaxoSmithKline plc and Janus Pharmaceuticals, Inc.  Specifically, we are aware that valomaciclovir is being developed by Epiphany Pharmaceuticals and has completed Phase IIb clinical trials for VZV infections. To our knowledge, other potential competitors are in earlier stages of development for VZV infections. If potential competitors are successful in completing drug development for their product candidates and obtain approval from the FDA, they could limit the demand for FV-100.

 

As a result, we may be at a competitive disadvantage that could delay the initiation, recruitment, timing, completion of our clinical trials and obtaining regulatory approvals, if at all, for our product candidate.

 

We, and our collaborators, must comply with extensive government regulations in order to advance our product candidate through the development process and ultimately obtain and maintain marketing approval for our products in the U.S. and abroad.

 

The product candidates that we, or our collaborators, are developing require regulatory approval to advance through clinical development and to ultimately be marketed and sold, and are subject to extensive and rigorous domestic and foreign government regulation. In the U.S., the FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record-keeping, labeling, storage, approval, advertising, promotion, sale and distribution of pharmaceutical and biopharmaceutical products. Our product candidate is also subject to similar regulation by foreign governments to the extent we seek to develop or market them in those countries. We, or our collaborators, must provide the FDA and foreign regulatory authorities, if applicable, with preclinical and clinical data, as well as data supporting an acceptable manufacturing process, that appropriately demonstrate our product candidate’ safety and efficacy before they can be approved for the targeted indications. Our product candidate has not been approved for sale in the U.S. or any foreign market, and we cannot predict whether we or our collaborators will obtain regulatory approval for any product candidate we are developing or plan to develop. The regulatory review and approval process can take many years, is dependent upon the type, complexity, novelty of, and medical need for the product candidate, requires the expenditure of substantial resources, and involves post-marketing surveillance and vigilance and ongoing requirements for post-marketing studies or Phase 4 clinical trials. In addition, we or our collaborators may encounter delays in, or fail to gain, regulatory approval for our product candidate based upon additional governmental regulation resulting from future legislative, administrative action or changes in FDA policy or interpretation during the period of product development. Delays or failures in obtaining regulatory approval to advance our product candidate through clinical development, and ultimately commercialize them, may:

 

·                             adversely impact our ability to raise sufficient capital to fund the development of the program candidate;

 

·                             adversely affect our ability to further develop or commercialize our product candidate;

 

·                             diminish any competitive advantages that we or our collaborators may have or attain; and

 

·                             adversely affect the receipt of potential milestone payments and royalties from the sale of our products or product revenues.

 

Furthermore, any regulatory approvals, if granted, may later be withdrawn. If we or our collaborators fail to comply with applicable regulatory requirements at any time, or if post-approval safety concerns arise, we or our collaborators may be subject to restrictions or a number of actions, including:

 

·                             delays, suspension or termination of clinical trials related to our products;

 

·                             refusal by regulatory authorities to review pending applications or supplements to approved applications;

 

·                             product recalls or seizures;

 

·                             suspension of manufacturing;

 

·                             withdrawals of previously approved marketing applications; and

 

·                             fines, civil penalties and criminal prosecutions.

 

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Additionally, at any time we or our collaborators may voluntarily suspend or terminate the preclinical or clinical development of a product candidate, or withdraw any approved product from the market if we believe that it may pose an unacceptable safety risk to patients, or if the product candidate or approved product no longer meets our business objectives. The ability to develop or market a pharmaceutical product outside of the U.S. is contingent upon receiving appropriate authorization from the respective foreign regulatory authorities. Foreign regulatory approval processes typically include many, if not all, of the risks and requirements associated with the FDA regulatory process for drug development and may include additional risks.

 

We have limited experience in the development of small molecule antiviral product candidate and therefore may encounter difficulties developing our product candidate or managing our operations in the future.

 

Our lead product candidate, FV-100, is a chemical compound, also referred to as a small molecule. We have limited experience in the discovery, development and manufacturing of these small molecule antiviral compounds. In order to successfully develop this product candidate, we must continuously supplement our research, clinical development, regulatory, medicinal chemistry, virology and manufacturing capabilities through the addition of key employees, consultants or third-party contractors to provide certain capabilities and skill sets that we do not possess.

 

Furthermore, we have adopted an operating model that largely relies on the outsourcing of a number of responsibilities and key activities to third-party consultants, and contract research and manufacturing organizations in order to advance the development of our product candidate. Therefore, our success depends in part on our ability to retain highly qualified key management, personnel, and directors to develop, implement and execute our business strategy, operate the company and oversee the activities of our consultants and contractors, as well as academic and corporate advisors or consultants to assist us in this regard. We are currently highly dependent upon the efforts of our management team.  In order to develop our product candidate, we need to retain or attract certain personnel, consultants or advisors with experience in the drug development activities of small molecules that include a number of disciplines, including research and development, clinical trials, medical matters, government regulation of pharmaceuticals, manufacturing, formulation and chemistry, business development, accounting, finance, human resources and information systems.  We are highly dependent upon our senior management and scientific staff, particularly Gary S. Jacob, Ph.D., our Chief Executive Officer. The loss of services of Dr. Jacob or one or more of our other members of senior management could delay or prevent the successful completion of our planned clinical trials or the commercialization of our product candidate.

 

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists.  The competition for qualified personnel in the biotechnology and pharmaceuticals field is intense. We will need to hire additional personnel as we expand our clinical development and commercial activities. While we have not had difficulties recruiting qualified individuals, to date, we may not be able to attract and retain quality personnel on acceptable terms given the competition for such personnel among biotechnology, pharmaceutical and other companies.  Although we have not experienced material difficulties in retaining key personnel in the past, we may not be able to continue to do so in the future on acceptable terms, if at all. If we lose any key managers or employees, or are unable to attract and retain qualified key personnel, directors, advisors or consultants, the development of our product candidate could be delayed or terminated and our business may be harmed.

 

We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.

 

A pharmaceutical product cannot be marketed in the U.S. or other countries until we have completed rigorous and extensive regulatory review processes, including approval of a brand name. Any brand names we intend to use for our product candidate will require approval from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or the PTO. The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a product brand name if we believe the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidate. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidate.

 

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

 

Our product candidate may not prove to be safe and efficacious in clinical trials and may not meet all the applicable regulatory requirements needed to receive regulatory approval. In order to receive regulatory approval for the commercialization of our product candidate, we must conduct, at our own expense, extensive preclinical testing and clinical trials to demonstrate safety and efficacy of this product candidate for the intended indication of use. Clinical testing is expensive, can take many years to complete, if at all, and its outcome is uncertain. Failure can occur at any time during the clinical trial process.

 

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The results of preclinical studies and early clinical trials of new drugs do not necessarily predict the results of later-stage clinical trials. The design of our clinical trials is based on many assumptions about the expected effects of our product candidate, and if those assumptions are incorrect it may not produce statistically significant results. Preliminary results may not be confirmed on full analysis of the detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and efficacy sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected from clinical trials of our product candidate may not be sufficient to support the filing of an NDA or to obtain regulatory approval in the United States or elsewhere. Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if or when we will have an approved product for commercialization or achieve sales or profits.

 

Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.

 

We may experience delays in clinical testing of our product candidate. We do not know whether planned clinical trials will begin on time, will need to be redesigned or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a clinical trial, in securing clinical trial agreements with prospective sites with acceptable terms, in obtaining institutional review board approval to conduct a clinical trial at a prospective site, in recruiting patients to participate in a clinical trial or in obtaining sufficient supplies of clinical trial materials. Many factors affect patient enrollment, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, competing clinical trials and new drugs approved for the conditions we are investigating. Clinical investigators will need to decide whether to offer their patients enrollment in clinical trials of our product candidate versus treating these patients with commercially available drugs that have established safety and efficacy profiles. Any delays in completing our clinical trials will increase our costs, slow down our product development, timeliness and approval process and delay our ability to generate revenue.

 

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidate, our business will be substantially harmed.

 

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidate or any product candidate we may seek to develop in the future will ever obtain regulatory approval.

 

Our product candidate could fail to receive regulatory approval for many reasons, including the following:

 

·              the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

 

·          we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

 

·              the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

·              the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

 

·              the data collected from clinical trials of our product candidate may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

 

·              the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

 

·              the FDA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing with partners; and

 

·              the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

 

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidate, which would significantly harm our business, results of operations and prospects.

 

In addition, even if we were to obtain approval, regulatory authorities may approve our product candidate for fewer or more

 

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limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidate.

 

We, as a newly formed entity, have not previously submitted a biologics license application, or BLA, or a New Drug Application, or NDA, to the FDA, or similar drug approval filings to comparable foreign authorities, for our product candidate, and we cannot be certain that  our product candidate will be successful in clinical trials or receive regulatory approval. Further, our product candidate may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidate, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our product candidate, our revenues will be dependent, in part, upon our collaborators’ ability to obtain regulatory approval of the companion diagnostics to be used with our product candidate, as well as the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patients that we are targeting for our product candidate are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

 

We plan to seek regulatory approval and to commercialize our product candidate, directly or with a collaborator, worldwide including the United States, the European Union and other additional foreign countries which we have not yet identified. While the scope of regulatory approval is similar in other countries, to obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our product candidate, and we cannot predict success in these jurisdictions.

 

We may be required to suspend or discontinue clinical trials due to unexpected side effects or other safety risks that could preclude approval of our product candidate.

 

Our clinical trials may be suspended at any time for a number of reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the clinical trial patients. In addition, the FDA or other regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the clinical trial patients.

 

Administering any product candidate to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of our product candidate and could result in the FDA or other regulatory authorities denying further development or approval of our product candidate for any or all targeted indications. Ultimately, some or all of our product candidates may prove to be unsafe for human use. Moreover, we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effects as a result of participating in our clinical trials.

 

If we fail to comply with healthcare regulations, we could face substantial enforcement actions, including civil and criminal penalties and our business, operations and financial condition could be adversely affected.

 

As a developer of pharmaceuticals, even though we do not intend to make referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse, false claims and patients’ privacy rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse laws and patient privacy laws of both the federal government and the states in which we conduct our business. The laws include:

 

·                             the federal healthcare program anti-kickback law, which prohibits, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

 

·                             federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, and which may apply to entities like us which provide coding and billing information to customers;

 

·                             the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;

 

·                             the Federal Food, Drug, and Cosmetic Act, which among other things, strictly regulates drug manufacturing and product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples; and

 

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·                             state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.

 

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defends against it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

 

If we are unable to satisfy regulatory requirements, we may not be able to commercialize our product candidate.

 

We need FDA approval prior to marketing our product candidate in the United States. If we fail to obtain FDA approval to market our product candidate, we will be unable to sell our product candidate in the United States and we will not generate any revenue.

 

The FDA’s review and approval process, including among other things, evaluation of preclinical studies and clinical trials of a product candidate as well as the manufacturing process and facility, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-designed and well-controlled pre-clinical testing and clinical trials that the product candidate is both safe and effective for each indication for which approval is sought. Satisfaction of these requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. We cannot predict if or when we will submit an NDA for approval for our product candidate currently under development. Any approvals we may obtain may not cover all of the clinical indications for which we are seeking approval or may contain significant limitations on the conditions of use.

 

The FDA has substantial discretion in the NDA review process and may either refuse to file our NDA for substantive review or may decide that our data is insufficient to support approval of our product candidate for the claimed intended uses. Following any regulatory approval of our product candidate, we will be subject to continuing regulatory obligations such as safety reporting, required and additional post marketing obligations, and regulatory oversight of promotion and marketing. Even if we receive regulatory approvals, the FDA may subsequently seek to withdraw approval of our NDA if we determine that new data or a reevaluation of existing data show the product is unsafe for use under the conditions of use upon the basis of which the NDA was approved, or based on new evidence of adverse effects or adverse clinical experience, or upon other new information. If the FDA does not file or approve our NDA or withdraws approval of our NDA, the FDA may require that we conduct additional clinical trials, preclinical or manufacturing studies and submit that data before it will reconsider our application. Depending on the extent of these or any other requested studies, approval of any applications that we submit may be delayed by several years, may require us to expend more resources than we have available, or may never be obtained at all.

 

We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products to the extent we seek regulatory approval to market our product candidates in a foreign jurisdiction. As of the date hereof we have not identified any foreign jurisdictions which we intend to seek approval from. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to marketing the product in those countries. The approval process varies and the time needed to secure approval in any region such as the European Union or in a country with an independent review procedure may be longer or shorter than that required for FDA approval. We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that an approval in one country or region will result in approval elsewhere.

 

If our product candidate is unable to compete effectively with marketed drugs targeting similar indications as our product candidate, our commercial opportunity will be reduced or eliminated.

 

We face competition generally from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize GI drugs that are safer, more effective, have fewer side effects or are less expensive than our product candidate. These potential competitors compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

 

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If approved and commercialized, FV-100 intends to compete with at least 4 currently approved prescription therapies for the treatment of shingles, acyclovir, valacyclovir and famiciclovir.  In addition, Zostavax®, a live attenuated varicella zoster virus VZV vaccine, is available and may reduce the overall incidence of shingles. We also believe other companies are developing products that will compete with shingles should they be approved by the FDA. For example, valomaciclovir is being developed by Epiphany Pharmaceuticals and has completed Phase IIb clinical trials for VZV infections. To our knowledge, other potential competitors are in earlier stages of development. If potential competitors are successful in completing drug development for their product candidates and obtain approval from the FDA, they could limit the demand for FV-100.

 

We expect that our ability to compete effectively will depend upon our ability to:

 

·                             successfully identify and develop key points of product differentiations from currently available therapies;

 

·                             successfully and rapidly complete clinical trials and submit for and obtain all requisite regulatory approvals in a cost-effective manner;

 

·                             maintain a proprietary position for our products and manufacturing processes and other related product technology;

 

·                             attract and retain key personnel;

 

·                             develop relationships with physicians prescribing these products; and

 

·                             build an adequate sales and marketing infrastructure for our product candidate.

 

Because we will be competing against significantly larger companies with established track records, we will have to demonstrate that, based on experience, clinical data, side-effect profiles and other factors, our products, if approved, are competitive with other products. If we are unable to compete effectively in the GI drug market and differentiate our products from other marketed GI drugs, we may never generate meaningful revenue.

 

We currently have no sales and marketing organization. If we are unable to establish a direct sales force in the United States to promote our products, the commercial opportunity for our products may be diminished.

 

We currently have no sales and marketing organization. If  our product candidate is approved by the FDA, we intend to market that product through our own sales force. We will incur significant additional expenses and commit significant additional management resources to establish our sales force. We may not be able to establish these capabilities despite these additional expenditures. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire and train sales and marketing personnel. If we elect to rely on third parties to sell our product candidate in the United States, we may receive less revenue than if we sold our products directly. In addition, although we would intend to use due diligence in monitoring their activities, we may have little or no control over the sales efforts of those third parties. In the event we are unable to develop our own sales force or collaborate with a third party to sell our product candidate, we may not be able to commercialize our product candidate which would negatively impact our ability to generate revenue.

 

We may need others to market and commercialize our product candidate in international markets.

 

Currently, we do not have any plans to enter international markets. In the future, if appropriate regulatory approvals are obtained, we may commercialize our product candidate in international markets. However, we have not decided how to commercialize our product candidate in those markets. We may decide to build our own sales force or sell our products through third parties. If we decide to sell our product candidate in international markets through a third party, we may not be able to enter into any marketing arrangements on favorable terms or at all. In addition, these arrangements could result in lower levels of income to us than if we marketed our product candidate entirely on our own. If we are unable to enter into a marketing arrangement for our product candidate in international markets, we may not be able to develop an effective international sales force to successfully commercialize those products in international markets. If we fail to enter into marketing arrangements for our products and are unable to develop an effective international sales force, our ability to generate revenue would be limited.

 

If the manufacturers upon whom we rely fail to produce FV-100, in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of our product candidate.

 

We do not currently possess internal manufacturing capacity. We plan to utilize the services of contract manufacturers to manufacture our clinical supplies. Any curtailment in the availability of FV-100, however, could result in production or other delays with consequent adverse effects on us. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may result in production delays or higher raw material costs.

 

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We continue to pursue API and drug product supply agreements with other manufacturers. We may be required to agree to minimum volume requirements, exclusivity arrangements or other restrictions with the contract manufacturers. We may not be able to enter into long-term agreements on commercially reasonable terms, or at all. If we change or add manufacturers, the FDA and comparable foreign regulators may require approval of the changes. Approval of these changes could require new testing by the manufacturer and compliance inspections to ensure the manufacturer is conforming to all applicable laws and regulations and GMP. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary for the production of our product candidate.

 

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products may encounter difficulties in production, particularly in scaling up production. These problems include difficulties with production costs and yields, quality control, including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. In addition, any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical trials, increase the costs associated with conducting our clinical trials and, depending upon the period of delay, require us to commence new clinical trials at significant additional expense or to terminate a clinical trial.

 

We are responsible for ensuring that each of our contract manufacturers comply with the GMP requirements of the FDA and other regulatory authorities from which we seek to obtain product approval. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. The approval process for NDAs includes a review of the manufacturer’s compliance with GMP requirements. We are responsible for regularly assessing a contract manufacturer’s compliance with GMP requirements through record reviews and periodic audits and for ensuring that the contract manufacturer takes responsibility and corrective action for any identified deviations. Manufacturers of FV-100 or other product candidates may be unable to comply with these GMP requirements and with other FDA and foreign regulatory requirements, if any.

 

While we will oversee compliance by our contract manufacturers, ultimately we will not have control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of FV-100 or other product candidates is compromised due to a manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize FV-100 or other product candidates, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of FV-100 or other product candidates, entail higher costs or result in us being unable to effectively commercialize FV-100 or other product candidates. Furthermore, if our manufacturers fail to deliver the required commercial quantities on a timely basis and at commercially reasonable prices, we may be unable to meet demand for any approved products and would lose potential revenues.

 

We may not be able to manufacture our product candidate in commercial quantities, which would prevent us from commercializing our product candidate.

 

To date, our product candidate has been manufactured in small quantities for preclinical studies and clinical trials. If our product candidate is approved by the FDA or comparable regulatory authorities in other countries for commercial sale, we will need to manufacture such product candidate in larger quantities. We may not be able to increase successfully the manufacturing capacity for  our product candidate in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. If we are unable to increase successfully the manufacturing capacity for a product candidate, the clinical trials as well as the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in supply. Our product candidate requires precise, high quality manufacturing. Our failure to achieve and maintain these high quality manufacturing standards in collaboration with our third-party manufacturers, including the incidence of manufacturing errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could harm our business, financial condition and results of operations.

 

Materials necessary to manufacture our product candidate may not be available on commercially reasonable terms, or at all, which may delay the development and commercialization of our product candidate.

 

We rely on the third-party manufacturers of our product candidate to purchase from third-party suppliers the materials necessary to produce bulk APIs, and product candidate for our clinical trials, and we will rely on such manufacturers to purchase such materials to produce the APIs and finished products for any commercial distribution of our products if we obtain marketing approval. Suppliers may not sell these materials to our manufacturers at the time they need them in order to meet our required delivery schedule or on commercially reasonable terms, if at all. We do not have any control over the process or timing of the acquisition of these materials by our manufacturers. Moreover, we currently do not have any agreements for the production of these materials. If our manufacturers are unable to obtain these materials for our clinical trials, testing of the affected product candidate would be delayed, which may significantly impact our ability to develop the product candidate. If we or our manufacturers are unable to purchase these materials after regulatory approval has been obtained for one of our products, the commercial launch of such product would be delayed or there would be a shortage in supply of such product, which would harm our ability to generate revenues from such product and achieve or sustain profitability.

 

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Our product candidate, if approved for sale, may not gain acceptance among physicians, patients and the medical community, thereby limiting our potential to generate revenues.

 

If our product candidate is approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product by physicians, healthcare professionals and third-party payers and our profitability and growth will depend on a number of factors, including:

 

·                             demonstration of safety and efficacy;

 

·                             changes in the practice guidelines and the standard of care for the targeted indication;

 

·                             relative convenience and ease of administration;

 

·                             the prevalence and severity of any adverse side effects;

 

·                             budget impact of adoption of our product on relevant drug formularies and the availability, cost and potential advantages of alternative treatments, including less expensive generic drugs;

 

·                             Pricing, reimbursement and cost effectiveness, which may be subject to regulatory control;

 

·                             effectiveness of our or any of our partners’ sales and marketing strategies;

 

·                             the product labeling or product insert required by the FDA or regulatory authority in other countries; and

 

·                             the availability of adequate third-party insurance coverage or reimbursement.

 

If any product candidate that we develop does not provide a treatment regimen that is as beneficial as, or is perceived as being as beneficial as, the current standard of care or otherwise does not provide patient benefit, that product candidate, if approved for commercial sale by the FDA or other regulatory authorities, likely will not achieve market acceptance. Our ability to effectively promote and sell any approved products will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive price and our ability to obtain sufficient third-party coverage or reimbursement. If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, patients and third-party payers, our ability to generate revenues from that product would be substantially reduced. In addition, our efforts to educate the medical community and third-party payers on the benefits of our product candidate may require significant resources, may be constrained by FDA rules and policies on product promotion, and may never be successful.

 

Guidelines and recommendations published by various organizations can impact the use of our product.

 

Government agencies promulgate regulations and guidelines directly applicable to us and to our product. In addition, professional societies, practice management groups, private health and science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the health care and patient communities. Recommendations of government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines suggesting the reduced use of our products or the use of competitive or alternative products that are followed by patients and health care providers could result in decreased use of our proposed product.

 

If third-party contract manufacturers upon whom we rely to formulate and manufacture our product candidate do not perform, fail to manufacture according to our specifications or fail to comply with strict regulations, our preclinical studies or clinical trials could be adversely affected and the development of our product candidate could be delayed or terminated or we could incur significant additional expenses.

 

We do not own or operate any manufacturing facilities. We intend to rely on third-party contractors, at least for the foreseeable future, to formulate and manufacture these preclinical and clinical materials. Our reliance on third-party contract manufacturers exposes us to a number of risks, any of which could delay or prevent the completion of our preclinical studies or clinical trials, or the regulatory approval or commercialization of our product candidate, result in higher costs, or deprive us of potential product revenues. Some of these risks include:

 

·                             our third-party contractors failing to develop an acceptable formulation to support later-stage clinical trials for, or the commercialization of, our product candidate;

 

·                             our contract manufacturers failing to manufacture our product candidate according to their own standards, our specifications, cGMPs, or otherwise manufacturing material that we or the FDA may deem to be unsuitable in our clinical trials;

 

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·                             our contract manufacturers being unable to increase the scale of, increase the capacity for, or reformulate the form of our product candidate. We may experience a shortage in supply, or the cost to manufacture our products may increase to the point where it adversely affects the cost of our product candidate. We cannot assure you that our contract manufacturers will be able to manufacture our products at a suitable scale, or we will be able to find alternative manufacturers acceptable to us that can do so;

 

·                             our contract manufacturers placing a priority on the manufacture of their own products, or other customers’ products;

 

·                             our contract manufacturers failing to perform as agreed or not remain in the contract manufacturing business; and

 

·                             our contract manufacturers’ plants being closed as a result of regulatory sanctions or a natural disaster.

 

Manufacturers of pharmaceutical products are subject to ongoing periodic inspections by the FDA, the U.S. Drug Enforcement Administration (“DEA”) and corresponding state and foreign agencies to ensure strict compliance with FDA-mandated cGMPs, other government regulations and corresponding foreign standards. While we are obligated to audit their performance, we do not have control over our third-party contract manufacturers’ compliance with these regulations and standards. Failure by our third-party manufacturers, or us, to comply with applicable regulations could result in sanctions being imposed on us or the drug manufacturer from the production of other third-party products. These sanctions may include fines, injunctions, civil penalties, failure of the government to grant pre-market approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.

 

In the event that we need to change our third-party contract manufacturers, our preclinical studies, clinical trials or the commercialization of our product candidate could be delayed, adversely affected or terminated, or such a change may result in significantly higher costs.

 

Due to regulatory restrictions inherent in an IND, NDA or BLA, various steps in the manufacture of our product candidate may need to be sole-sourced. In accordance with cGMPs, changing manufacturers may require the re-validation of manufacturing processes and procedures, and may require further preclinical studies or clinical trials to show comparability between the materials produced by different manufacturers. Changing our current or future contract manufacturers may be difficult for us and could be costly, which could result in our inability to manufacture our product candidate for an extended period of time and therefore a delay in the development of our product candidate. Further, in order to maintain our development time lines in the event of a change in our third-party contract manufacturer, we may incur significantly higher costs to manufacture our product candidate.

 

Our industry is highly competitive and subject to rapid technological changes. As a result, we may be unable to compete successfully or develop innovative products, which could harm our business.

 

Our industry is highly competitive and characterized by rapid technological change. Key competitive factors in our industry include, among others, the ability to successfully advance the development of a product candidate through preclinical and clinical trials; the efficacy, toxicological, safety, resistance or cross-resistance, and dosing profile of a product or product candidate; the timing and scope of regulatory approvals, if ever achieved; reimbursement rates for and the average selling price of competing products and pharmaceutical products in general; the availability of raw materials and qualified contract manufacturing and manufacturing capacity; manufacturing costs; establishing and maintaining intellectual property and patent rights and their protection; and sales and marketing capabilities. If ultimately approved, FV-100 or any other product candidate we may develop, would compete against existing therapies or other product candidates in various stages of clinical development that we believe may potentially become available in the future for the treatment of chronic shingles-associated pain and the prevention of staphylococcal infections. Some of the large pharmaceutical companies that currently market products that would compete with our product candidate, if approved, include, but are not limited to multiple large generic companies such as GlaxoSmithKline and Merck.

 

Developing a pharmaceutical product candidate is a highly competitive, expensive and risky activity with a long business cycle. Many organizations, including the large pharmaceutical and biopharmaceutical companies that have existing products on the market or in clinical development that could compete with FV-100 have substantially more resources than we have, and much greater capabilities and experience than we have in research and discovery, designing and conducting preclinical studies and clinical trials, operating in a highly regulated environment, manufacturing drug substances and drug products, and marketing and sales. Our competitors may be more successful than we are in obtaining FDA or other regulatory approvals for their product candidates and achieving broad market acceptance once they are approved. Our competitors’ drugs or product candidates may be more effective, have fewer negative side effects, be more convenient to administer, have a more favorable resistance profile, or be more effectively marketed and sold than any drug we, or our potential collaborators, may develop or commercialize. New drugs or classes of drugs from competitors may render our product candidate obsolete or non-competitive before we are able to successfully develop them or, if approved, before we can recover the expenses of developing and commercializing them. We anticipate that we or our collaborators will face intense and increasing competition as new drugs and drug classes enter the market and advanced technologies or new drug targets become available. If our product candidate does not demonstrate any competitive advantages over existing drugs, new drugs or product candidate, we or our future collaborators may terminate the development or commercialization of our product candidate at any time.

 

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We anticipate that FV-100 if successfully developed and approved, will compete directly or indirectly with existing generic drugs. Generic drugs are drugs whose patent protection has expired, and generally have an average selling price substantially lower than drugs protected by intellectual property rights. Unless a patented drug can differentiate itself from a generic drug in a meaningful manner, the existence of generic competition in any indication may impose significant pricing pressure on competing patented drugs.

 

We also face, and will continue to face, intense competition from other companies for collaborative arrangements with pharmaceutical and biopharmaceutical companies, and for attracting investigators and clinical sites capable of conducting our preclinical studies and clinical trials. These competitors, either alone or with their collaborators, may succeed in developing technologies or products that are safer, more effective, less expensive or easier to administer than ours. Accordingly, our competitors may succeed in obtaining FDA or other regulatory approvals for their product candidates more rapidly than we can. Companies that can complete clinical trials, obtain required regulatory approvals and commercialize their products before their competitors may achieve a significant competitive advantage, including certain patent and FDA marketing exclusivity rights that could delay the ability of competitors to market certain products. We cannot assure you that product candidates resulting from our research and development efforts, or from joint efforts with our collaborators, will be able to compete successfully with our competitors’ existing products or products under development.

 

We do not currently have any internal drug discovery capabilities, and therefore we are dependent on in-licensing or acquiring development programs from third parties in order to obtain additional product candidates.

 

If in the future we decide to further expand our pipeline, we will be dependent on in-licensing or acquiring product candidates as we do not have significant internal discovery capabilities at this time. Accordingly, in order to generate and expand our development pipeline, we have relied, and will continue to rely, on obtaining discoveries, new technologies, intellectual property and product candidates from third-parties through sponsored research, in-licensing arrangements or acquisitions. We may face substantial competition from other biotechnology and pharmaceutical companies, many of which may have greater resources then we have, in obtaining these in-licensing, sponsored research or acquisition opportunities. Additional in-licensing or acquisition opportunities may not be available to us on terms we find acceptable, if at all. In-licensed compounds that appear promising in research or in preclinical studies may fail to progress into further preclinical studies or clinical trials.

 

If a product liability claim is successfully brought against us for uninsured liabilities, or such claim exceeds our insurance coverage, we could be forced to pay substantial damage awards that could materially harm our business.

 

The use of any of our existing or future product candidates in clinical trials and the sale of any approved pharmaceutical products may expose us to significant product liability claims. We currently have product liability insurance coverage for our clinical trials in the amount of $5.0 million, under Synergy’s existing insurance policy. This coverage will need to be replaced upon the distribution being proposed in this information statement. Such insurance coverage, under Synergy or independently procured, may not protect us against any or all of the product liability claims that may be brought against us in the future. We may not be able to acquire or maintain adequate product liability insurance coverage at a commercially reasonable cost or in sufficient amounts or scope to protect us against potential losses. In the event a product liability claim is brought against us, we may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against us. In the event our product candidate is approved for sale by the FDA and commercialized, we may need to substantially increase the amount of our product liability coverage. Defending any product liability claim or claims could require us to expend significant financial and managerial resources, which could have an adverse effect on our business.

 

If our use of hazardous materials results in contamination or injury, we could suffer significant financial loss.

 

Our research activities, through third parties, involve the controlled use of certain hazardous materials and medical waste. Notwithstanding the regulations controlling the use and disposal of these materials, as well as the safety procedures we undertake, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or environmental discharge or exposure, we may be held liable for any resulting damages, which may exceed our financial resources and have an adverse effect on our business.

 

Risks Relating to the Commercialization of our Product Candidate

 

We may delay or terminate the development of a product candidate at any time if we believe the perceived market or commercial opportunity does not justify further investment, which could materially harm our business.

 

Even though the results of preclinical studies and clinical trials that we have conducted or may conduct in the future may support further development of one or more of our product candidates, we may delay, suspend or terminate the future development of a product candidate at any time for strategic, business, financial or other reasons, including the determination or belief that the emerging profile of the product candidate is such that it may not receive FDA approval, gain meaningful market acceptance, generate a significant return to shareholders, or otherwise provide any competitive advantages in its intended indication or market.

 

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If we fail to enter into collaborations, license agreements or other transactions with third parties to accelerate the development of our product candidate, we will bear the risk of developmental failure.

 

We plan to seek out-licensing opportunities as a way to accelerate the development of our product candidate. There is no guarantee that we will enter into a future transaction on favorable terms, or at all, or that discussions will initiate or progress on our desired timelines. Completing transactions of this nature is difficult and time-consuming. Potentially interested parties may decline to re-engage or may terminate discussions based upon their assessment of our competitive, financial, regulatory or intellectual property position or for any other reason. Furthermore, we may choose to defer consummating a transaction relating to our product candidate until additional clinical data is obtained. If we decide do not actively pursue a transaction until we have additional clinical data, we and our stockholders will bear the risk that our product candidate fails prior to any future transaction.

 

If we fail to enter into or maintain collaborations or other sales, marketing and distribution arrangements with third parties to commercialize our product candidate, or otherwise fail to establish marketing and sales capabilities, we may not be able to successfully commercialize our products.

 

We currently have no infrastructure to support the commercialization of our product candidate, and have little, if any, experience in the commercialization of pharmaceutical products. Therefore, if our product candidate is successfully developed and ultimately approved for sale, our future profitability will depend largely on our ability to access or develop suitable marketing and sales capabilities. We anticipate that we will need to establish relationships with other companies, through license and collaborations agreements, to commercialize our product candidate in the U.S. and in other countries around the world. To the extent that we enter into these license and collaboration agreements, or marketing and sales arrangements with other companies to sell, promote or market our products in the U.S. or abroad, our product revenues, which may be in the form of indirect revenue, a royalty, or a split of profits, will depend largely on their efforts, which may not be successful. In the event we develop a sales force and marketing capabilities, this may result in us incurring significant costs before the time that we may generate any significant product revenues. We may not be able to attract and retain qualified third parties or marketing or sales personnel, or be able to establish marketing capabilities or an effective sales force.

 

If government and third-party payers fail to provide adequate reimbursement or coverage for our products or those we develop through collaborations, our revenues and potential for profitability will be harmed.

 

In the U.S. and most foreign markets, our product revenues, and therefore the inherent value of our product candidate, will depend largely upon the reimbursement rates established by third-party payers for such product candidate or products. Such third-party payers include government health administration authorities, managed-care organizations, private health insurers and other similar organizations. These third-party payers are increasingly challenging the price and examining the cost effectiveness of medical products, services and pharmaceuticals. In addition, significant uncertainty exists as to the reimbursement status, if any, of newly approved drugs or pharmaceutical products. Further, the comparative effectiveness of new compounds over existing therapies and the assessment of other non-clinical outcomes are increasingly being considered in the decision by these payers to establish reimbursement rates. We may also need to conduct post-marketing clinical trials in order to demonstrate the cost-effectiveness of our products. Such studies may require us to commit a significant amount of management time and financial resources. We cannot assure you that any products we successfully develop will be reimbursed in part, or at all, by any third-party payers in any countries.

 

Domestic and foreign governments continue to propose legislation designed to expand the coverage, yet reduce the cost, of healthcare, including pharmaceutical drugs. In some foreign markets, governmental agencies control prescription drugs’ pricing and profitability. In the U.S. significant changes in federal health care policy have been recently approved and will mostly likely result in reduced reimbursement rates in the future. We expect that there will continue to be federal and state proposals to implement more governmental control over reimbursement rates of pharmaceutical products. In addition, we expect that increasing emphasis on managed care and government intervention in the U.S. healthcare system will continue to put downward pressure on the pricing of pharmaceutical products domestically. Cost control initiatives could decrease the price that we receive for any of our product candidates that may be approved for sale in the future, which would limit our revenues and profitability. Accordingly, legislation and regulations affecting the pricing of pharmaceutical products may change before our product candidate is approved for sale, which could further limit or eliminate reimbursement rates for our product candidate. Further, pressure from social activist groups, whose goal it is to reduce the cost of drugs, particularly in less developed nations, may also place downward pressure on the price of drugs, which could result in downward pressure on the prices of our products in the absence of generic competition.

 

If any product candidate that we develop independently or through collaborations is approved but does not gain meaningful acceptance in its intended market, we are not likely to generate significant revenues or become profitable.

 

Even if our product candidate is successfully developed and we or a collaborator obtain the requisite regulatory approvals to commercialize it in the future, it may not gain market acceptance or utilization among physicians, patients or third party payers. The degree of market acceptance that our product candidate may achieve will depend on a number of factors, including:

 

·                             the therapeutic efficacy or perceived benefit of the product relative to existing therapies, if they exist;

 

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·                             the timing of market approval and existing market for competitive drugs;

 

·                             the level of reimbursement provided by payers to cover the cost of the product to patients;

 

·                             the net cost of the product to the user or payer;

 

·                             the convenience and ease of administration of our product;

 

·                             the product’s potential advantages over existing or alternative therapies;

 

·                             the actual or perceived safety of similar classes of products;

 

·                             the actual or perceived existence, prevalence and severity of negative side effects;

 

·                             the effectiveness of sales, marketing and distribution capabilities; and

 

·                             the scope of the product label approved by the FDA.

 

There can be no assurance that physicians will choose to prescribe or administer our product, if approved, to the intended patient population. If our product does not achieve meaningful market acceptance, or if the market for our product proves to be smaller than anticipated, we may not generate significant revenues or ever become profitable.

 

Even if we or a collaborator achieve market acceptance for our product, we may experience downward pricing pressure on the price of our product due to social or political pressure to lower the cost of drugs, which would reduce our revenue and future profitability.

 

Pressure from social activist groups and future government regulations, whose goal it is to reduce the cost of drugs, particularly in less developed nations, also may put downward pressure on the price of drugs, which could result in downward pressure on the prices of our product in the future.

 

We may be unable to successfully develop a product candidate that is the subject of collaboration if our collaborator does not perform, terminates our agreement, or delays the development of our product candidate.

 

We expect to continue to enter into and rely on license and collaboration agreements or other business arrangements with third parties to further develop and/or commercialize our existing and future product candidates. Such collaborators or partners may not perform as agreed upon or anticipated, fail to comply with strict regulations, or elect to delay or terminate their efforts in developing or commercializing our product candidates even though we have met our obligations under the arrangement. For example, if an existing or future collaborator does not devote sufficient time and resources to our collaboration arrangement, we may not realize the full potential benefits of the arrangement, and our results of operations may be adversely affected.

 

A majority of the potential revenue from existing and future collaborations will likely consist of contingent payments, such as payments for achieving development or regulatory milestones and royalties payable on the sales of approved products. The milestone and royalty revenues that we may receive under these collaborations will depend primarily upon our collaborator’s ability to successfully develop and commercialize our product candidate. In addition, our collaborators may decide to enter into arrangements with third parties to commercialize products developed under our existing or future collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. In many cases, we will not be directly involved in the development or commercialization of our product candidate and, accordingly, will depend entirely on our collaborators. Our collaboration partners may fail to develop or effectively commercialize our product candidate because they:

 

·                             do not allocate the necessary resources due to internal constraints, such as limited personnel with the requisite scientific expertise, limited capital resources, or the belief that other product candidate or other internal programs may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;

 

·                             do not have sufficient resources necessary to fully support the product candidate through clinical development, regulatory approval and commercialization;

 

·                             are unable to obtain the necessary regulatory approvals; or

 

·                             may re-evaluate the importance and their support for developing our product candidate pipeline due to a change in management, business operations or financial strategy.

 

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In addition, a collaborator may decide to pursue the development of a competitive product candidate developed outside of our collaboration with them. Conflicts may also arise if there is a dispute about the progress of, or other activities related to, the clinical development or commercialization of a product candidate, the achievement and payment of a milestone amount, the ownership of intellectual property that is developed during the course of the collaborative arrangement, or other licensing agreement terms. If a collaboration partner fails to develop or effectively commercialize our product candidate for any of these reasons, we may not be able to replace them with another partner willing to develop and commercialize our product candidate under similar terms, if at all. Similarly, we may disagree with a collaborator as to which party owns newly or jointly-developed intellectual property. Should an agreement be revised or terminated as a result of a dispute and before we have realized the anticipated benefits of the collaboration, we may not be able to obtain certain development support or revenues that we anticipated receiving. We may also be unable to obtain, on terms acceptable to us, a license from such collaboration partner to any of its intellectual property that may be necessary or useful for us to continue to develop and commercialize the product candidate.

 

If we are unable to adequately protect or expand our intellectual property related to our current or future product candidates, our business prospects could be harmed.

 

Our success, competitive position and future revenues will depend in part on our ability and the ability of Cardiff, the licensor of the FV-100 assets, to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets ,to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. Under the Cardiff Agreement, we hold certain exclusive patent rights for our FV-100 assets, including licensed rights under U.S. patents and U.S. patent applications as well as licensed rights under foreign patents and patent applications owned by Cardiff.

 

We will be able to protect our proprietary intellectual property rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent position of pharmaceutical and biopharmaceutical companies involves complex legal and factual questions, and, therefore, we cannot predict with certainty whether we will be able to ultimately enforce our patents or proprietary rights. Therefore, any issued patents that we own or otherwise have intellectual property rights to may be challenged, invalidated or circumvented, and may not provide us with the protection against competitors that we anticipate.

 

The degree of future protection for our proprietary intellectual property rights is uncertain because issued patents and other legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. Our future patent position will be influenced by the following factors:

 

·            we or our licensors may not have been the first to discover the inventions covered by each of our or our licensors’ pending patent applications and issued patents, and we may have to engage in expensive and protracted interference proceedings to determine priority of invention;

 

·            our or our licensors’ pending patent applications may not result in issued patents;

 

·            our or our licensors’ issued patents may not provide a basis for commercially viable products, may not provide us with any competitive advantages, or may be challenged by third parties; and

 

·            third parties may develop intellectual property around our or our licensors’ patent claims to design competitive intellectual property and ultimately product candidates that fall outside the scope of our or our licensors’ patents.

 

Because of the extensive time required for the development, testing and regulatory review and approval of a product candidate, it is possible that before our product candidate can be approved for sale and commercialized, our relevant patent rights may expire, or such patent rights may remain in force for only a short period following approval and commercialization. Patent expiration could adversely affect our ability to protect future product development and, consequently, our operating results and financial position. Also, patent rights may not provide us with adequate proprietary protection or competitive advantages against competitors with similar technologies. The laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and those countries may lack adequate rules and procedures for defending our intellectual property rights. For example, we may not be able to prevent a third party from infringing our patents in a country that does not recognize or enforce patent rights, or that imposes compulsory licenses on or restricts the prices of life-saving drugs. Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property.

 

We may not develop or obtain rights to products or processes that are patentable. Even if we or our licensors do obtain patents, such patents may not adequately protect the products or technologies we own or have licensed, or otherwise be limited in scope. In addition, we may not have total control over the patent prosecution of subject matter that we license from others. Accordingly, we may be unable to exercise the same degree of control over this intellectual property as we would over our own. Others may challenge, seek to invalidate, infringe or circumvent any pending or issued patents we own or license, and rights we receive under those issued patents may not provide competitive advantages to us. We cannot assure you as to the degree of protection that will be afforded by any of our issued or pending patents, or those licensed by us.

 

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If a third party claims we are infringing on its intellectual property rights, we could incur significant expenses, or be prevented from further developing or commercializing our product candidate.

 

Our success will also depend on our ability to operate without infringing the patents and other proprietary intellectual property rights of third parties. This is generally referred to as having the “freedom to operate”. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. The defense and prosecution of intellectual property claims, USPT interference proceedings and related legal and administrative proceedings, both in the U.S. and internationally, involve complex legal and factual questions. As a result, such proceedings are lengthy, costly and time-consuming and their outcome is highly uncertain. We may become involved in protracted and expensive litigation in order to determine the enforceability, scope and validity of the proprietary rights of others, or to determine whether we have the freedom to operate with respect to the intellectual property rights of others.

 

Patent applications in the U.S. are, in most cases, maintained in secrecy until approximately 18 months after the patent application is filed. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Therefore, patent applications relating to products similar to our product candidate may have already been filed by others without our knowledge. In the event that a third party has also filed a patent application covering our product candidate or other claims, we may have to participate in an adversarial proceeding, known as an interference proceeding in the USPT office, or similar proceedings in other countries to determine the priority of invention. In the event an infringement claim is brought against us, we may be required to pay substantial legal fees and other expenses to defend such a claim and, if we are unsuccessful in defending the claim, we may be prevented from pursuing the development and commercialization of a product candidate and may be subject to injunctions and/or damage awards.

 

In the future, the USPT or a foreign patent office may grant patent rights to our product candidate or other claims to third parties. Subject to the issuance of these future patents, the claims of which will be unknown until issued, we may need to obtain a license or sublicense to these rights in order to have the appropriate freedom to further develop or commercialize them. Any required licenses may not be available to us on acceptable terms, if at all. If we need to obtain such licenses or sublicenses, but are unable to do so, we could encounter delays in the development of our product candidate, or be prevented from developing, manufacturing and commercializing our product candidate at all. If it is determined that we have infringed an issued patent and do not have the freedom to operate, we could be subject to injunctions, and/or compelled to pay significant damages, including punitive damages. In cases where we have in-licensed intellectual property, our failure to comply with the terms and conditions of such agreements could harm our business.

 

It is becoming common for third parties to challenge patent claims on any successful product candidate or approved drug. If we or our collaborators become involved in any patent litigation, interference or other legal proceedings, we could incur substantial expense, and the efforts of our technical and management personnel will be significantly diverted. A negative outcome of such litigation or proceedings may expose us to the loss of our proprietary position or to significant liabilities, or require us to seek licenses that may not be available from third parties on commercially acceptable terms, if at all. We may be restricted or prevented from developing, manufacturing and selling our product candidate in the event of an adverse determination in a judicial or administrative proceeding, or if we fail to obtain necessary licenses.

 

We cannot be sure that any patents will be issued or that patents licensed to us will be issued from any of our patent applications or, should any patents issue, that we will be provided with adequate protection against potentially competitive products. Furthermore, we cannot be sure that patents issued or licensed to us will be of any commercial value, or that private parties or competitors will not successfully challenge these patents or circumvent our patent position in the U.S. or abroad. In the absence of adequate patent protection, our business may be adversely affected by competitors who develop comparable technology or products.

 

If we materially breach or default under the Cardiff Agreement, Cardiff will have the right to terminate the agreement and we could lose critical license rights, which would materially harm our business.

 

We do not currently own any patents, trademarks, or copyrights; however, our business is substantially dependent upon certain intellectual property rights that we license from Cardiff. Therefore, our commercial success will depend to a large extent on our ability to maintain and comply with our obligations under the Cardiff Agreement. The Cardiff Agreement provides Cardiff with the right to terminate the Cardiff Agreement for an uncured breach by us, or if we are insolvent or the subject of a bankruptcy proceeding, or potentially other reasons. We expect that other technology in-licenses that we may enter into in the future will contain similar provisions and impose similar obligations on us. If we fail to comply with any such obligations to Cardiff or future licensors, such licensor will likely terminate their out-licenses to us, in which case we would not be able to market products covered by these licenses, including our FV-100 assets. The loss of our license with Cardiff with respect to the FV-100 assets, and potentially other licenses that we enter into in the future, would have a material adverse effect on our business. In addition, our failure to comply with obligations under our material in-licenses may cause us to become subject to litigation or other potential disputes under any such license agreements.

 

In addition, the Cardiff Agreement and BMS Agreement each requires us to make certain payments, including license fees, milestone payments royalties, and other such terms typically required under licensing agreements and these types of technology in-

 

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licenses generally could make it difficult for us to find corporate partners and less profitable for us to develop product candidates utilizing these existing product candidates and technologies.

 

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information and may not adequately protect our intellectual property.

 

We rely on trade secrets to protect our technology, especially where we do not believe patent protection is obtainable, or prior to us filing patent applications on inventions we may make from time to time. However, trade secrets are difficult to protect. In order to protect our proprietary technology and processes, we also rely in part on confidentiality and intellectual property assignment agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information nor result in the effective assignment to us of intellectual property, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover our trade secrets and proprietary information, and in such case we could not assert any trade secret rights against such party. Enforcing a claim that a third-party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the U.S. may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

 

Our failure to successfully discover, acquire, develop and market additional product candidates or approved products would impair our ability to grow.

 

As part of our growth strategy, we intend to develop and market additional products and product candidates. We are pursuing various therapeutic opportunities through our pipeline. We may spend several years completing our development of any particular current or future internal product candidate, and failure can occur at any stage. The product candidates to which we allocate our resources may not end up being successful. In addition, because our internal research capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us. The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising pharmaceutical product candidates and products. Failure of this strategy would impair our ability to grow.

 

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.

 

In addition, future acquisitions may entail numerous operational and financial risks, including:

 

·                             disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies;

 

·                             incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;

 

·                             higher than expected acquisition and integration costs;

 

·                             difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;

 

·                             increased amortization expenses;

 

·                             impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;

 

·                             inability to motivate key employees of any acquired businesses; and

 

·                             assumption of known and unknown liabilities

 

Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to

 

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be sufficiently safe and effective for approval by regulatory authorities.

 

Even if our product candidate receives regulatory approval, it may still face future development and regulatory difficulties.

 

Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product’s indicated uses or impose ongoing requirements for potentially costly post-approval studies. FV-100 and other product candidates would also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-market information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with GMP, regulations. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product or the manufacturer, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidate or the manufacturing facilities for our product candidate fail to comply with applicable regulatory requirements, a regulatory agency may:

 

·                             issue warning letters;

 

·                             impose civil or criminal penalties;

 

·                             suspend regulatory approval;

 

·                             suspend any ongoing clinical trials;

 

·                             refuse to approve pending applications or supplements to applications filed by us;

 

·                             impose restrictions on operations, including costly new manufacturing requirements;

 

·                             seize or detain products or request us to initiate a product recall; or

 

·                             pursue and obtain an injunction.

 

Even if our product candidate receives regulatory approval in the United States, we may never receive approval to commercialize it outside of the United States.

 

In the future, we may seek to commercialize FV-100 and/or other product candidates in foreign countries outside of the United States. In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other jurisdictions regarding safety and efficacy. Approval procedures vary among jurisdictions and can involve product testing and administrative review periods different from, and greater than, those in the United States. The time required to obtain approval in other jurisdictions might differ from that required to obtain FDA approval. The regulatory approval process in other jurisdictions may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory processes in others. Failure to obtain regulatory approvals in other jurisdictions or any delay or setback in obtaining such approvals could have the same adverse effects detailed above regarding FDA approval in the United States. As described above, such effects include the risks that FV-100 or other product candidates may not be approved for all indications for use included in proposed labeling or for any indications at all, which could limit the uses of FV-100 or other product candidates and have an adverse effect on our products’ commercial potential or require costly post-marketing studies.

 

We intend to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to seek or obtain regulatory approval for or commercialize our product candidate.

 

We intend to enter into agreements with third-party contract research organizations, or CROs, under which we will delegate to the CROs the responsibility to coordinate and monitor the conduct of our clinical trials and to manage data for our clinical programs. We, our CROs and our clinical sites are required to comply with current Good Clinical Practices, or cGCPs, regulations and guidelines issued by the FDA and by similar governmental authorities in other countries where we are conducting clinical trials. We have an ongoing obligation to monitor the activities conducted by our CROs and at our clinical sites to confirm compliance with these requirements. In the future, if we, our CROs or our clinical sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. In addition, our clinical trials must be conducted with product produced under cGMP regulations, and will require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

 

If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or

 

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if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidate. As a result, our financial results and the commercial prospects for our product candidate would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

 

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

 

We are a small company with no employees as of September 30, 2013.  All management services are being provided to us by our parent company, Synergy, under our Shared Services Agreement or SSA. Our two Executive Officers are serving in their positions under the SSA until such time as suitable candidates can be found to fill their roles. To continue our clinical trials and commercialize our product candidate, we will need to expand our employee base for managerial, operational, financial and other resources. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Over the next 12 months depending on the progress of our planned clinical trials, we plan to add additional employees to assist us with our clinical programs. Our future financial performance and our ability to commercialize our product candidate and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:

 

·                             manage development efforts effectively;

 

·                             manage our clinical trials effectively;

 

·                             integrate additional management, administrative, manufacturing and sales and marketing personnel;

 

·                             maintain sufficient administrative, accounting and management information systems and controls; and

 

·                             hire and train additional qualified personnel.

 

We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results and impact our ability to achieve development milestones.

 

Reimbursement may not be available for our product candidate, which would impede sales.

 

Market acceptance and sales of our product candidate may depend on coverage and reimbursement policies and health care reform measures. Decisions about formulary coverage as well as levels at which government authorities and third-party payers, such as private health insurers and health maintenance organizations, reimburse patients for the price they pay for our products as well as levels at which these payers pay directly for our products, where applicable, could affect whether we are able to commercialize these products. We cannot be sure that reimbursement will be available for any of these products. Also, we cannot be sure that coverage or reimbursement amounts will not reduce the demand for, or the price of, our products. We have not commenced efforts to have our product candidate reimbursed by government or third party payers. If coverage and reimbursement are not available or are available only at limited levels, we may not be able to commercialize our products.

 

In recent years, officials have made numerous proposals to change the health care system in the United States. These proposals include measures that would limit or prohibit payments for certain medical treatments or subject the pricing of drugs to government control. In addition, in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to government control. If our products are or become subject to government regulation that limits or prohibits payment for our products, or that subjects the price of our products to governmental control, we may not be able to generate revenue, attain profitability or commercialize our products.

 

As a result of legislative proposals and the trend towards managed health care in the United States, third-party payers are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. They may also impose strict prior authorization requirements and/or refuse to provide any coverage of uses of approved products for medical indications other than those for which the FDA has granted market approvals. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their use of newly-approved drugs, which in turn will put pressure on the pricing of drugs.

 

Healthcare reform measures could hinder or prevent our product candidate’s commercial success.

 

The U.S. government and other governments have shown significant interest in pursuing healthcare reform. Any government-adopted reform measures could adversely impact the pricing of healthcare products and services in the United States or internationally and the amount of reimbursement available from governmental agencies or other third-party payers. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payers of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate

 

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revenues and achieve and maintain profitability.

 

New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, that relate to healthcare availability, methods of delivery or payment for products and services, or sales, marketing or pricing, may limit our potential revenue, and we may need to revise our research and development programs. The pricing and reimbursement environment may change in the future and become more challenging due to several reasons, including policies advanced by the current executive administration in the United States, new healthcare legislation or fiscal challenges faced by government health administration authorities. Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably.

 

For example, in March 2010, President Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the PPACA. This law will substantially change the way healthcare is financed by both government health plans and private insurers, and significantly impact the pharmaceutical industry. The PPACA contains a number of provisions that are expected to impact our business and operations in ways that may negatively affect our potential revenues in the future. For example, the PPACA imposes a non-deductible excise tax on pharmaceutical manufacturers or importers that sell branded prescription drugs to U.S. government programs which we believe will increase the cost of our products. In addition, as part of the PPACA’s provisions closing a funding gap that currently exists in the Medicare Part D prescription drug program (commonly known as the “donut hole”), we will be required to provide a discount on branded prescription drugs equal to 50% of the government-negotiated price, for drugs provided to certain beneficiaries who fall within the donut hole. Similarly, PPACA increases the level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1% and requires collection of rebates for drugs paid by Medicaid managed care organizations. The PPACA also includes significant changes to the 340B drug discount program including expansion of the list of eligible covered entities that may purchase drugs under the program. At the same time, the expansion in eligibility for health insurance benefits created under PPACA is expected to increase the number of patients with insurance coverage who may receive our products. While it is too early to predict all the specific effects the PPACA or any future healthcare reform legislation will have on our business, they could have a material adverse effect on our business and financial condition.

 

Congress periodically adopts legislation like the PPACA and the Medicare Prescription Drug, Improvement and Modernization Act of 2003, that modifies Medicare reimbursement and coverage policies pertaining to prescription drugs. Implementation of these laws is subject to ongoing revision through regulatory and sub regulatory policies. Congress also may consider additional changes to Medicare policies, potentially including Medicare prescription drug policies, as part of ongoing budget negotiations. While the scope of any such legislation is uncertain at this time, there can be no assurances that future legislation or regulations will not decrease the coverage and price that we may receive for our proposed products. Other third-party payers are increasingly challenging the prices charged for medical products and services. It will be time consuming and expensive for us to go through the process of seeking coverage and reimbursement from Medicare and private payors. Our proposed products may not be considered cost-effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our proposed products on a profitable basis. Further federal and state proposals and health care reforms are likely which could limit the prices that can be charged for the product candidate that we develop and may further limit our commercial opportunities. Our results of operations could be materially adversely affected by proposed healthcare reforms, by the Medicare prescription drug coverage legislation, by the possible effect of such current or future legislation on amounts that private insurers will pay and by other health care reforms that may be enacted or adopted in the future.

 

In September 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-marketing authority, including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA’s exercise of this authority could result in delays or increased costs during product development, clinical trials and regulatory review, increased costs to assure compliance with post-approval regulatory requirements, and potential restrictions on the sale and/or distribution of approved products.

 

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

 

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, as well as personally identifiable information of clinical trial participants and employees. Similarly, our business partners and third party providers possess certain of our sensitive data. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information, including our data being breached at our business partners or third-party providers, could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation which could adversely affect our business.

 

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Our clinical activities involve the handling of hazardous materials, and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

 

Our clinical activities involve the controlled storage, use and disposal of hazardous materials. We are subject to federal, state, city and local environmental, health and safety laws and regulations governing, among other matters, the use, manufacture, storage, handling and disposal of these hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or if we fail to comply with such laws and regulations, local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations or impose sanctions, such as fines, and we could be held liable for any resulting damages or liabilities. We do not currently maintain hazardous materials insurance coverage.

 

We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may be unable to complete the development and commercialization of our product candidate, or continue our development programs.

 

We expect to significantly increase our spending to advance the preclinical and clinical development of our product candidate and launch and commercialize any product candidate for which we receive regulatory approval, including building our own commercial organizations to address certain markets. We will require additional capital for the further development and commercialization of our product candidate, as well as to fund our other operating expenses and capital expenditures.

 

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidate. We may also seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Any of these events could significantly harm our business, financial condition and prospects.

 

Our future capital requirements will depend on many factors, including:

 

·              the progress of the development of FV-100;

 

·              the number of product candidates we pursue;

 

·              the time and costs involved in obtaining regulatory approvals;

 

·              the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

 

·              our plans to establish sales, marketing and/or manufacturing capabilities;

 

·              the effect of competing technological and market developments;

 

·              the terms and timing of any collaborative, licensing and other arrangements that we may establish;

 

·              general market conditions for offerings from biopharmaceutical companies;

 

·              our ability to establish, enforce and maintain selected strategic alliances and activities required for product commercialization; and

 

·              our revenues, if any, from successful development and commercialization of our product candidate.

 

In order to carry out our business plan and implement our strategy, we anticipate that we will need to obtain additional financing from time to time and may choose to raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, bank lines of credit, asset sales, government grants, or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights to certain of our product candidate or marketing territories. Our inability to raise capital when needed would harm our business, financial condition and results of operations, and could cause our stock price to decline or require that we wind down our operations altogether.

 

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Risks Related to our Relationship with Synergy

 

Our primary assets serve as collateral under the terms of that certain loan and security agreement we entered into with Synergy. If we should default on these obligations, Synergy could foreclose on our assets and we would be unable to continue our business and operations.

 

On June 5, 2013, we entered into a loan and security agreement with Synergy pursuant to which Synergy agreed to lend us up to five hundred thousand dollars ($500,000) for working capital purposes (the “Loan Agreement”).  On November 18, 2013, we entered into an amendment to the Loan Agreement with Synergy pursuant to which Synergy agreed to increase the aggregate amount available to us under the Loan Agreement from five hundred thousand dollars ($500,000) to one million dollars ($1,000,000). Also on June 5, 2013, August 29, 2013 and October 18, 2013, pursuant to the Loan Agreement, Synergy made an advance to us of $100,000, $100,000 and $150,000, respectively, under a promissory note (the “Note”).  The Note bears interest at six percent (6%) per annum and such interest shall be paid on the 15th of each of January, March, June and September, beginning September 15, 2013.  The Note matures on the earlier of June 10, 2014 or the date that the entire principal amount and interest shall become due and payable by reason of an event of default under the Note or otherwise.  In addition, Synergy has the right to demand payment of the unpaid principal amount and all accrued but unpaid interest thereon at any time after August 4, 2013, upon providing us fifteen (15) days prior written notice.  In connection with the Loan Agreement we granted Synergy a security interest in all of our assets, including our intellectual property, until the Note is repaid in full.  These assets represent substantially all of our operations. If we should default under the repayment provisions of one or more of these obligations, Synergy could seek to foreclose on these assets as a means of being repaid under the obligations. If the Synergy were successful, we would lose the rights to our intellectual property, be unable to conduct our business, and our ability to generate revenue and fund our ongoing operations would be materially adversely affected.

 

Approval of commercial terms between us and Synergy does not preclude the possibility of stockholder litigation, including but not limited to derivative litigation nominally against Synergy and against its directors and officers and also against us and our directors and officers.

 

The commercial terms of the Contribution Agreement, Shared Services Agreement and Loan and Security Agreement that we have entered into with Synergy have been negotiated, we believe, at arms’ length. We have no basis for believing that the terms of these agreements will not be in the best interests of both Synergy and its stockholders and also us and our stockholders. Nonetheless, no assurance can be given that any stockholder of Synergy will not claim in a lawsuit that such terms in fact are not in the best interests of Synergy and its stockholders, that the directors and officers of Synergy breached their fiduciary duties in connection with such agreements and that any disclosures by Synergy to its stockholders regarding these agreements and the relationship between Synergy and us did not satisfy applicable requirements. In any such instance, we and our directors and officers may also be named as defendants and we would have to defend ourselves and our directors and officers. While we will seek indemnification from Synergy under the terms of these agr