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Subsequent Event
9 Months Ended
Sep. 30, 2014
Subsequent Events [Abstract]  
Subsequent Event
Subsequent Events
Brabant Pharma Limited Sales and Purchase Agreement
On October 24, 2014, Zogenix Europe acquired Brabant, pursuant to the terms of the Sale and Purchase Agreement dated October 24, 2014, by and among Zogenix Europe, the Company, Brabant and Anthony Clarke, Richard Stewart, Ann Soenen-Darcis, Jennifer Watson, Reyker Nominees Limited and Aquarius Life Science Limited (collectively, the Sellers). In connection with the consummation of the transactions on October 24, 2014 (the closing) contemplated by the Sale and Purchase Agreement, Zogenix Europe purchased the issued share capital of Brabant from the Sellers (the Acquisition) and the Company agreed to guarantee the obligations, commitments, undertakings and warranties of Zogenix Europe. Brabant owns worldwide development and commercialization rights to Brabafen, low-dose fenfluramine, for the treatment of Dravet syndrome (also known as Severe Myoclonic Epilepsy of Infancy). Dravet syndrome is a rare and catastrophic form of pediatric epilepsy with life threatening consequences for patients and current treatment options are very limited. Brabafen has recently received orphan drug designation in Europe and the United States for the treatment of Dravet syndrome.
Under the terms of the Sale and Purchase Agreement, at the closing Zogenix Europe paid to the Sellers consideration of (i) $20,000,000 in cash (plus $8,432,000 which represents the net cash position of Brabant at the closing), of which $2,000,000 (the escrow amount) will be deposited into escrow to fund potential indemnification claims for a period of 6 months, and (ii) 11,995,202 shares (the Shares) of the Company’s common stock. Zogenix Europe also committed to paying up to an aggregate amount of $95,000,000 in connection with the achievement of certain milestones for Brabafen, including $50,000,000 in regulatory milestones and $45,000,000 in sales milestones. The Company has agreed to use commercially reasonable efforts (as defined in the Sale and Purchase Agreement) to develop and commercialize Brabafen and to achieve the milestones.
In September 2012, Brabant entered into a collaboration and license agreement with the Universities of Antwerp and Leuven in Belgium (the Universities), which was amended and restated in October 2014. Under the terms of the agreement, the Universities granted Brabant an exclusive worldwide license to use the data obtained from the study, as well as certain intellectual property related to fenfluramine for the treatment of Dravet syndrome. Brabant is required to pay a mid single-digit percentage royalty on net sales of fenfluramine for the treatment of Dravet syndrome or, in the case of a sublicense of fenfluramine for the treatment of Dravet syndrome, a percentage in the mid-twenties of the sub-licensing revenues. The agreement terminates in September 2020; however, upon the commencement of Phase 3 clinical trials of fenfluramine or marketing approval by a regulatory authority, the agreement will be extended until September 2045. The agreement may be terminated by the Universities if Brabant: (a) does not use commercially reasonable efforts to (i) develop and commercialize fenfluramine for the treatment of Dravet syndrome or related conditions stemming from infantile epilepsy, or (ii) seek approval of fenfluramine for the treatment of Dravet syndrome in the United States; or (b) if Brabant becomes insolvent, shall make an assignment for the benefit of creditors, or shall have a petition in bankruptcy filed for or against it or for any similar relief has been filed against it. Brabant can terminate the agreement upon specified prior written notice to the Universities.
Both Zogenix Europe and the Sellers agreed to customary warranties and covenants in the Sale and Purchase Agreement. The Sellers agreed to indemnify Zogenix Europe for certain matters, including breaches of warranties and covenants included in the Sale and Purchase Agreement, up to the escrow amount, subject to limited exceptions.
Pursuant to the Sale and Purchase Agreement, the Company has agreed to prepare and file a registration statement on Form S-3 covering the resale of the Shares issued to the Sellers within 90 days of the closing and to use commercially reasonable efforts to cause such registration statement to be declared effective as promptly as practicable following the filing.
The Company will complete its accounting for this business combination during the fourth quarter of 2014.
Purdue Pharma L.P. Waiver Agreement
On October 29, 2014, the Company entered into a waiver agreement (the Waiver Agreement) with Purdue Pharma L.P. (Purdue) pursuant to which the Company granted a waiver to Purdue of the three-year Hatch-Waxman regulatory exclusivity period with respect to NDA 202880 for Zohydro ER in support of Purdue’s single-entity, extended-release hydrocodone product which is the subject of pending NDA 206627 and any single-entity, once-daily hydrocodone successor products or NDAs filed by Purdue (the Purdue Products). In addition, Purdue granted the Company a waiver of the Hatch-Waxman regulatory exclusivity period with respect to Purdue Products in support of our single-entity, twice-a-day hydrocodone product, including Zohydro ER and any successor products with any abuse deterrent properties or labeling claims. Under the terms of the Waiver Agreement, Purdue will pay to the Company (i) $5,000,000 within fifteen (15) days of the date of the Waiver Agreement, (ii) $5,000,000 on July 1, 2015, and (iii) a percentage royalty in the low single-digits on Purdue’s net sales of Purdue Product commencing on October 1, 2015 and ending on October 25, 2016, only to the extent such royalty payment by Purdue in the aggregate would exceed $5,000,000 and then only with respect to royalties in excess of such amount.
Teva Letter Agreement
On November 5, 2014, the Company entered into a letter agreement (the Letter Agreement) with Teva Pharmaceuticals USA, Inc. (Teva), under which the Comapny granted Teva a right of reference to certain carcinogenicity data generated by the Company for hydrocodone bitrate for use in connection with Teva’s NDA for its extended-release hydrocodone product candidate. Teva is obligated to pay the Company a one-time fee of $3,500,000 within 30 days of the date of the Letter Agreement.