COMMERCIALIZATION AGREEMENTS

12 Months Ended

Dec. 31, 2018

COMMERCIALIZATION AGREEMENTS [Abstract]

NOTE 2 - COMMERCIALIZATION AGREEMENTS

On November 30, 2009, Protalix Ltd. and Pfizer entered into the Pfizer Agreement (as amended in June 2013) pursuant to which Pfizer was granted an exclusive, worldwide license to develop and commercialize taliglucerase alfa, except for Israel and Brazil. Under the Pfizer Agreement Protalix was entitled to 40% of the results (profits or losses) earned on Pfizer’s sales of taliglucerase alfa.

In October 2015, the Company entered into the following agreements with Pfizer:

Amended Pfizer Agreement - Pursuant to the amendment, the Company granted Pfizer an exclusive license in the entire world, including Israel but excluding Brazil. Pfizer acquired all the information, knowledge and permission to manufacture and sell Elelyso.

Protalix also agreed to provide Pfizer with:

Manufacturing and supply of the drug substance for its incorporation into the licensed product in consideration of an agreed price per unit.

Assistance in arranging for the manufacture of the drug substance by Pfizer or by alternative supplier chosen by Pfizer in consideration of an agreed hourly rate plus reimbursement of expenses.

Stock Purchase Agreement - the Company issued 5,649,079 shares of Common Stock to Pfizer.

Promissory note – as of the date of the amendment, the Company owed Pfizer $4.3 million as a result of the accumulated losses incurred by the Collaboration Operation. Following the new agreements, the Company committed to pay Pfizer the principal sum of the debt at the earlier of (a) November 12, 2020 and (b) the date upon which it becomes due pursuant to any event of default, as defined. The promissory note is presented in “other long term liabilities.”

The Amended Pfizer Agreement resulted in a discontinued operation as defined under ASU 2014-08 because it represented a strategic shift for the Company that has a major effect on the entity’s operations and financial results.

Revenues from the Pfizer Agreements as well as revenues from sales of Elelyso in Israel were presented as discontinued operations. The impact of the discontinued operations in the results of 2016 is immaterial.

In October 2017, Protalix Ltd. entered into the Chiesi Ex-U.S. Agreement with respect to the commercialization of pegunigalsidase alfa (hereafter – the drug) for treatment of Fabry disease. Under the terms of the Chiesi Agreement, Protalix Ltd. granted to Chiesi exclusive licensing rights for the commercialization of the drug for all markets outside of the United States. At the effective date, Protalix Ltd. had maintained the exclusive commercialization rights to the drug in the United States, which rights were subsequently granted to Chiesi in July 2018.

Protalix Ltd. will be mainly responsible for (i) continuing the development of the drug until a regulatory approval is granted and (ii) manufacture and supply the drug to Chiesi, based on Chiesi’s requests.

The consideration consists of the following:

a. Upfront, non-refundable payment of $25.0 million.

b. Additional payments of up to $25.0 million in development costs, capped at $10.0 million per year.

c. Milestone payments of up to $320.0 million with respect to certain regulatory and commercial events as defined in the Chiesi Agreement.

d. Additional payments as consideration for the supply of the drug. The payment will vary from 15% to 35% of Chiesi’s average selling price of the drug, depending on the amount of annual sales.

e. Protalix will be the sole manufacturer of the drug.

Chiesi does not have sublicensing rights (except for certain territories).

In July 2018, Protalix Ltd. entered into the Chiesi U.S. Agreement with respect to the commercialization of the drug for treatment of Fabry disease. Under the terms of the Chiesi U.S. Agreement, Protalix Ltd. granted to Chiesi exclusive licensing rights for the commercialization of the drug for all markets in the United States.

The consideration consists of the following:

a. Upfront, non-refundable payment of $25.0 million.

b. Additional payments of up to $20.0 million in development costs, capped at $7.5 million per year.

c. Milestone payments of up to $760.0 million with respect to certain regulatory and commercial events as defined in the Chiesi Agreement.

d. Additional payments as consideration for the supply of the drug. The payment will vary from 15% to 40% of Chiesi’s average selling price of the drug, depending on the amount of annual sales.

e. Protalix will be the sole manufacturer of the drug.

Chiesi does not have sublicensing rights.

On June 18, 2013, the Company entered into the Brazil Agreement with Fiocruz for alfataliglicerase. Fiocruz’s purchases of alfataliglicerase to date have been significantly below certain agreed upon purchase milestones and, accordingly, the Company has the right to terminate the Brazil Agreement. Notwithstanding, the Company is, at this time, continuing to supply alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with alfataliglicerase in Brazil. Approximately 10% of adult Gaucher patients in Brazil are currently treated with alfataliglicerase. The Company is discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations and, based on such discussions, the Company will determine what it believes to be the course of action that is in the best interest of the Company.