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Subsequent Event (Notes)
3 Months Ended
Mar. 31, 2014
Subsequent Events [Abstract]  
Subsequent Event
Subsequent Event
On April 23, 2014, the Company entered into the Asset Purchase Agreement with the Buyers, pursuant to which, and on the terms and subject to the conditions thereof, among other things, the Company agreed to sell its Sumavel DosePro product line to the Buyers, including the registered trademarks, certain contracts, the New Drug Application and other regulatory approvals, the books and records, marketing materials and product data relating to Sumavel DosePro.
Under the terms of the Asset Purchase Agreement, the Buyers will pay the Company $85,000,000 in cash upon Closing of the transaction, $8,500,000 of which will be deposited into escrow to fund potential indemnification claims for a period of 12 months. In addition to the upfront cash payment, the Company is eligible to receive additional cash payments of up to $20,000,000 based on the achievement of pre-determined sales and manufacturing milestones. Furthermore, Endo Ventures will assume responsibility for the Company’s royalty obligation to Aradigm on sales of Sumavel DosePro and assume other liabilities relating to Sumavel DosePro after the Closing.
The Asset Purchase Agreement contains customary representations, warranties and covenants, including covenants obligating the Company to continue to conduct the Sumavel DosePro business in the ordinary course and to cooperate in seeking regulatory approvals. Upon the Closing, the Company and Endo Ventures Bermuda will enter into a license agreement, pursuant to which the Company will grant Endo Ventures an exclusive, worldwide, royalty-free license to make and have made (subject to the limitations in the license agreement), use and research, develop and commercialize Sumavel DosePro. Also upon the Closing, Endo Ventures will purchase from the Company the finished goods inventory of Sumavel DosePro. The Company and Endo Ventures also will enter into a supply agreement, pursuant to which the Company will continue to manufacture Sumavel DosePro, and Endo Ventures will support Company’ s Sumavel DosePro manufacturing operations with a working capital advance of $7,000,000.
The obligation of the Buyers to purchase the Sumavel DosePro product line is subject to the satisfaction or waiver of a number of conditions set forth in the Asset Purchase Agreement, including (i) the accuracy of the representations and warranties and compliance with covenants contained in the Asset Purchase Agreement, (ii) the absence of any permanent injunction, law, regulation, decree or order by any government, court or governmental entity that would make illegal or otherwise prohibit the consummation of the transactions under the Asset Purchase Agreement, (iii) the absence of any actions or proceedings questioning the validity or legality of the transactions under the Asset Purchase Agreement, (iv) the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of any required third party consents, (v) there not having been a material adverse effect with respect to the Company’s Sumavel DosePro business, (vi) the delivery to the Buyers of a license agreement, supply agreement, escrow agreement and other transaction documents, and (vii) other customary conditions. The Company expects the Closing to occur during the second quarter of 2014, subject to the satisfaction of the foregoing closing conditions.
In connection with the Closing, the Company is required to extinguish all encumbrances on the assets to be sold to the Buyers, including those previously granted to Healthcare Royalty pursuant to the Financing Agreement. The Company expects to eliminate its existing debt obligation to Healthcare Royalty by paying approximately $40,000,000 to Healthcare Royalty, consistent with the terms of the Financing Agreement.
Either party may terminate the Asset Purchase Agreement if the Closing has not occurred by September 8, 2014, provided that if the party seeking to terminate the Asset Purchase Agreement is then in material breach of its obligations the outside date will be extended until ten business days following the date upon which such breach is cured.