UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): December 19, 2016
CONATUS PHARMACEUTICALS INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-36003 | 20-3183915 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 16745 West Bernardo Drive, Suite 200, San Diego, CA 92127 |
| (Address of Principal Executive Offices) (Zip Code) |
(858) 376-2600
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 1.01. Entry into a Material Definitive Agreement.
Option, Collaboration and License Agreement On December 19, 2016 (the “Execution Date”), Conatus Pharmaceuticals Inc. (“Conatus”) entered into an Option, Collaboration and License Agreement (the “Agreement”) with Novartis Pharma AG (“Novartis”) for the global development and commercialization of emricasan, Conatus’ first-in-class, orally active pan-caspase inhibitor. Under the Agreement, Novartis will make an upfront payment of $50 million to Conatus within five business days of the Execution Date. Conatus has granted Novartis an exclusive option (the “Option”) to collaborate with Conatus to develop products containing emricasan either as a single active ingredient (“Emricasan Only Products”) or in combination with other Novartis compounds for liver cirrhosis or liver fibrosis (“Combination Products”), including but not limited to Farnesoid X receptor agonists that Novartis is currently developing for the treatment of chronic liver diseases (collectively “Emricasan Products”), and upon exercise of the Option, Conatus will grant Novartis an exclusive, worldwide license to Conatus’ patent rights relating to emricasan to develop and commercialize Emricasan Products for the treatment, diagnosis and prevention of disease in all indications in humans. The Option is exercisable upon, among other things, Conatus providing notice to Novartis of the initiation of its planned Phase 2b clinical trial in decompensated nonalcoholic steatohepatitis (“NASH”) liver cirrhosis subjects (the “ENCORE-LF Trial”), which initiation is expected in the second quarter of 2017. The Option expires on October 31, 2017. Following Novartis’ exercise of the Option (the “License Effective Date”), Conatus will receive $7 million, subject to certain usual and customary closing conditions, including required anti-trust approvals. Conatus is eligible to receive up to an aggregate of $650 million in milestone payments over the term of the Agreement, contingent on the achievement of certain development, regulatory and commercial milestones. Novartis will be required to pay to Conatus tiered royalties ranging from the high-teens to the high-twenties as a percentage of net sales of Emricasan Only Products and tiered royalties ranging from the high-single digits to the mid-teens as a percentage of net sales of Combination Products, subject to reduction in certain cases. Conatus may elect, after the initiation of the first Phase 3 clinical trial for an Emricasan Product, to enter into a co-commercialization agreement with Novartis under which it would receive up to 30 percent of the commercial profits less the same percentage of the commercial losses (the “Profit and Loss Share”) for Emricasan Products in the United States. In the event Conatus so elects to enter into a co-commercialization agreement with Novartis, the net sales used to determine the amount of commercial milestone payments Conatus is entitled to receive from Novartis will be reduced by the Profit and Loss Share, Conatus will not receive royalties for sales in the United States and the royalties for sales outside of the United States will be reduced to the mid-teens to the low-twenties as a percentage of net sales of Emricasan Only Products and the mid-single digits to the low-teens as a percentage of net sales of Combination Products. Pursuant to the Agreement, Conatus is responsible for completing its (i) ongoing ENCORE-PH Phase 2b trial in primarily compensated NASH subjects, (ii) ongoing POLT-HCV-SVR Phase 2b trial in subjects with reestablished liver fibrosis, post-orthotopic liver transplant, due to hepatitis C virus who have a sustained viral response, (iii) ongoing ENCORE-NF Phase 2b trial in NASH fibrosis and (iv) planned ENCORE-LF Trial (collectively the “Phase 2b Trials”). In the event the costs of the Phase 2b Trials and related development work between the Execution Date and the License Effective Date differ from the agreed upon budget by the parties, Novartis will reimburse Conatus for any additional costs or Conatus will credit any amount under budget to Novartis’ future costs for the Phase 2b Trials. After the License Effective Date, Novartis and Conatus will share the costs of the Phase 2b Trials equally. Conatus expects the upfront and license option exercise payments and the cost-sharing under the Agreement to fund Conatus’ ongoing operations through 2019. Novartis will be responsible for Phase 3 development of Emricasan Only Products and all development for Combination Products, and Novartis has agreed to use commercially reasonable efforts to develop and commercialize Emricasan Products. Upon the License Effective Date, Conatus and Novartis will establish a Joint Steering Committee composed of senior personnel from each of Conatus and Novartis to oversee the collaboration, development and commercialization of the Emricasan Products. In the event of a change of control of Conatus, Novartis has the right to disband the Joint Steering Committee and all decision-making power otherwise assigned to the Joint Steering Committee will be assigned solely to Novartis. Pursuant to the Agreement, for the period from the Execution Date until the earlier of five years after the first commercial sale of an Emricasan Product in the United States or major European market or ten years from the Execution Date, Conatus has agreed not to develop in any pivotal registration clinical trials or commercialize any pan-caspase inhibitors in liver disease. For the period from the Execution Date until five years after the first commercial sale of an Emricasan Only Product, Novartis has agreed not to develop in any pivotal registration clinical trials or commercialize any pan-caspase inhibitors for the diagnosis, prevention or treatment of disease in all indications in humans. Under the Agreement, Novartis will have a right of first negotiation prior to any offer by Conatus to any third party for future pan-caspase inhibitors that Conatus may develop or acquire for the treatment of liver diseases or for certain retained pan-caspase inhibitors, provided that any license or collaboration that Conatus enters into or proposes to enter into must be on terms and conditions in the aggregate no more favorable to such third party than those last offered to Novartis. With Conatus’ written consent, Novartis may sublicense the rights granted to it by Conatus in the United States and in any major European market. In the event Novartis sublicenses its rights under the Agreement in the United States or a major European market, Novartis is required to pay Conatus a certain percentage of all amounts paid to Novartis pursuant to the sublicense, with certain exceptions. Novartis may sublicense the rights granted to it by Conatus in all other territories at any time and in its sole discretion, provided that the sublicense complies with the applicable provisions of the Agreement. Novartis is also required to pay all milestone and royalty payments on net sales of Emricasan Products made by sublicensees. If Novartis has not exercised the Option during the designated option period, the Agreement will expire. If Novartis exercises the Option, unless terminated earlier, the Agreement will remain in effect on a product-by-product and country-by-country basis until Novartis’ royalty obligations expire. Both parties have certain termination rights in the circumstances of an uncured material breach or insolvency by the other party. Novartis has certain termination rights in the event of a mandated clinical trial hold for any Emricasan Only Product. Additionally, after the License Effective Date, Novartis has the right to terminate the Agreement without cause upon 180 days prior written notice to Conatus. In such event, the license granted to Novartis will be terminated and revert to Conatus, and Novartis will transfer any ongoing trials for the Emricasan Only Products to Conatus and will cease development of the Emricasan Products. In the event Novartis terminates the Agreement due to Conatus’ uncured material breach or insolvency, the license granted to Novartis pursuant to the Agreement will become irrevocable and Novartis will be required to continue to make all milestone and royalty payments otherwise due to Conatus under the Agreement, provided that if Conatus materially breaches the Agreement such that the rights licensed to Novartis or the commercial prospects of the Emricasan Products are seriously impaired, the milestone and royalty payments will be reduced by 50 percent. Additionally, the Agreement contains customary representations, warranties and covenants by Conatus and Novartis. Each of Conatus and Novartis is required to indemnify the other against all claims arising or resulting from the indemnifying party’s negligence or willful misconduct or breach of any covenants, warranties or representations in the Agreement, except to the extent that such claims arise from the breach, negligence or willful misconduct of the party seeking indemnification. Investment Agreement Concurrently with the entry into the Agreement, Conatus and Novartis entered into an Investment Agreement (the “Investment Agreement”) whereby Conatus agreed to sell and Novartis agreed to purchase, convertible promissory notes (the “Notes”) in one or two closings (each a “Closing”), for an aggregate principal amount of up to $15 million. Each Closing will occur at a date and time designated by Conatus, subject to the satisfaction of certain closing conditions, but must occur prior to December 31, 2019. The maturity date of the Notes will be December 31, 2019. The Notes will bear interest on the unpaid principal amount at a rate of 6 percent per annum from the date of issuance. Conatus may prepay or convert the Notes into shares of Conatus’ common stock, at its option, until December 31, 2019. Novartis may convert the Notes into shares of Conatus’ common stock upon a change of control of Conatus or termination of the Agreement in its entirety. If converted, the principal and accrued interest under the Notes will convert into Conatus’ common stock at a conversion price equal to 120 percent of the 20-day trailing average closing price per share of the common stock immediately prior to the conversion date. Upon the occurrence of certain events of default, the Notes require Conatus to repay the principal amount of the Notes and any unpaid accrued interest. The foregoing description of the Agreement, the Investment Agreement and the form of Note, and the transactions contemplated thereby, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the complete text of the Agreement, the Investment Agreement and the form of Note, which will be filed with the Securities and Exchange Commission (the “SEC”) as exhibits to Conatus’ Annual Report on Form 10-K for the year ending December 31, 2016.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 19, 2016, Shahzad Malik, M.D. resigned from the Board of Directors (the “Board”) of Conatus. Dr. Malik’s decision to resign from the Board did not result from any disagreement with Conatus concerning any matter relating to its operations, policies or practices. In connection with this resignation, pursuant to Conatus’ bylaws, the Board voted to decrease the size of the Board from seven to six members. The Board appointed James Scopa as the chair of the Audit Committee to replace Dr. Malik as the Audit Committee chair. The Board also determined that Mr. Scopa qualifies as an “audit committee financial expert” as that phrase is defined under the regulations promulgated by the SEC. Further, the Board appointed Daniel L. Kisner, M.D. as a member of the Audit Committee.
Item 7.01. Regulation FD Disclosure.
On December 19, 2016, Conatus issued a press release announcing the Agreement and the Investment Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In accordance with General Instruction B.2. of Form 8-K, the information in this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing. *** This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Current Report on Form 8-K are forward-looking statements, including statements regarding: the timing of the exercisability of the Option; the initiation of the ENCORE-LF trial in the second quarter of 2017; payments and events contingent on Novartis’ exercise of the Option, including eligibility to receive payments related to development, regulatory and commercial milestones and royalties; and the sufficiency of financial resources to fund Conatus’ emricasan development through 2019. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements speak only as of the date of this Current Report on Form 8-K and are subject to a number of risks, uncertainties and assumptions, including: Conatus’ ability to successfully enroll patients in and complete its ongoing and planned clinical trials; the Option being exercised by Novartis and Novartis continuing development and commercialization of emricasan; Conatus’ reliance on third parties to conduct its clinical trials, including the enrollment of patients, and manufacture its clinical drug supplies of emricasan; potential adverse side effects or other safety risks associated with emricasan that could delay or preclude its approval; results of future clinical trials of emricasan; Conatus’ ability to obtain additional financing in order to co- commercialize emricasan or develop other compounds; and those risks described in Conatus’ periodic reports it files with the SEC. The events and circumstances reflected in Conatus’ forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, Conatus does not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Item 9.01. Financial Statements and Exhibits.
(d) ExhibitsExhibit No. Description 99.1 Press release issued on December 19, 2016
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CONATUS PHARMACEUTICALS INC. | ||
| Date: December 19, 2016 | By: | /s/ Charles J. Cashion |
| Charles J. Cashion | ||
| Senior Vice President, Finance, Chief Financial Officer and Secretary | ||
EXHIBIT 99.1
Conatus Announces Exclusive Worldwide Option, Collaboration and License Agreement Covering Development and Commercialization of Emricasan
- Conference Call and Webcast Presentation at 5:30 p.m. ET Today -
- Continuing Initial Focus on NASH Cirrhosis with Parallel Development in NASH Fibrosis -
- Full Funding in Position for Remaining Development of Emricasan -
SAN DIEGO, Dec. 19, 2016 (GLOBE NEWSWIRE) -- Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) today announced it has entered into an exclusive option, collaboration and license agreement for the global development and commercialization of its first-in-class, orally active pan-caspase inhibitor emricasan with Novartis. Under the terms of the agreement with Novartis, Conatus will receive $50 million upfront, and is eligible to receive $7 million following the exercise of the license option. Conatus can borrow up to $15 million in the form of convertible promissory notes under an investment agreement with Novartis.
Conatus is eligible to receive significant payments if certain development, regulatory and commercial milestones are met. Furthermore, Conatus is eligible to receive tiered double digit royalties on emricasan single agent sales and tiered single to double digit royalties on sales of combination products containing emricasan. Conatus has the option to co-commercialize emricasan in the United States, including combination therapies, on a cost-sharing and revenue-sharing basis in lieu of U.S. royalties and with reduced ex-U.S. royalties. Conatus retains limited rights to develop other pan-caspase inhibitors.
In addition, Novartis will pay 50% of Conatus’ Phase 2b emricasan development costs after the option exercise, including the planned ENCORE-LF trial in decompensated NASH cirrhosis which, under the current development plan consistent with recent regulatory agency recommendations, will be conducted as Phase 2b rather than Phase 2b/3. Phase 2b emricasan development costs also encompass the ongoing ENCORE-PH trial in primarily compensated NASH cirrhosis, POLT-HCV-SVR trial in post-transplant HCV fibrosis and cirrhosis, and ENCORE-NF trial in NASH fibrosis. Novartis will assume full responsibility for emricasan’s Phase 3 development and all combination product development.
“We believe Novartis is ideally suited to collaborate with Conatus in the further development of emricasan for chronic liver diseases,” said Conatus co-founder, President and Chief Executive Officer Steven J. Mento, Ph.D. “This collaboration validates the Conatus emphasis on the initial development of emricasan as a single agent treatment for NASH cirrhosis in both compensated and decompensated patients, and sets the stage for simultaneous development of oral combination therapies for the treatment of NASH fibrosis including emricasan and one of the Novartis internal FXR (Farnesoid X receptor) agonists in clinical development. Their strong commitment to and expertise in liver disease, and proven record of success in drug development provide our best opportunity to deliver these potentially groundbreaking new therapies to chronic liver disease patients with high unmet medical need.”
“For Conatus, the near-term infusion of capital and Phase 2b cost-sharing allows us to fund ongoing operations through 2019. In addition, with the Novartis commitment to fund Phase 3 single agent emricasan development and all combination development activities, the resources are in place to complete emricasan development both as a single agent for NASH cirrhosis and as a single agent or part of a combination therapy for NASH fibrosis,” added Dr. Mento. “The option to co-commercialize in the United States preserves future flexibility for Conatus, and the ability to continue pursuing independent development of other compounds affords us the opportunity to build a portfolio of potential products to drive further long-term value for our shareholders.”
Conference Call/Webcast/Presentation
Conatus will host a conference call and webcast at 5:30 p.m. Eastern Time today, Monday, December 19, to discuss the collaboration and license agreement and update the emricasan development program. To access the conference call, please dial 877-312-5857 (domestic) or 970-315-0455 (international) at least five minutes prior to the start time and refer to conference ID 38755660. An associated presentation and live and archived webcast of the call will be available in the Investors section of the company’s website at www.conatuspharma.com.
About Emricasan Clinical Development
To date, emricasan has been studied in over 650 subjects in sixteen clinical trials across a broad range of liver disease etiologies and stages of progression. In multiple clinical trials, emricasan has demonstrated statistically significant, rapid and sustained reductions in elevated levels of key biomarkers of inflammation and apoptosis that are implicated in the severity and progression of liver disease. Recent emricasan clinical trial results have demonstrated emricasan’s ability to provide statistically significant improvements in clinically important validated surrogate endpoints of portal hypertension and liver function across a variety of etiologies in the subgroups of liver cirrhosis patients with highest medical need. The parallel EmricasaN, a Caspase inhibitOR, for Evaluation (ENCORE) clinical trials are designed to provide clinically relevant efficacy, dosing, and safety data from chronic administration in patients with nonalcoholic steatohepatitis (NASH) cirrhosis and fibrosis to support the design of Phase 3 efficacy and safety trials in these indications.
The company is evaluating emricasan’s potential effects on clinically relevant consequences of NASH cirrhosis in its ongoing Phase 2b ENCORE-PH (for Portal Hypertension) clinical trial with an HVPG portal hypertension surrogate endpoint, initiated in November 2016, in patients with compensated or early decompensated liver cirrhosis caused by NASH, and with severe portal hypertension. The company is evaluating emricasan’s potential longer-term effects on liver structure in its ongoing Phase 2b ENCORE-NF (for NASH Fibrosis) clinical trial with a histology-based endpoint, initiated in January 2016, in patients with NASH fibrosis and its ongoing Phase 2b POLT-HCV-SVR clinical trial with a histology-based endpoint, initiated in May 2014, in post-orthotopic liver transplant (POLT) recipients who have reestablished liver fibrosis or cirrhosis post-transplant as a result of recurrent hepatitis C virus (HCV) infection and who have successfully achieved a sustained viral response (SVR) following antiviral therapy. The planned Phase 2b ENCORE-LF (for Liver Function) clinical trial with a composite clinical endpoint, expected to begin in the first half of 2017, will evaluate the effects of emricasan on liver function and collect chronic administration safety information in decompensated NASH cirrhosis patients. Conatus expects top-line results from its ongoing and planned clinical trials to be available periodically beginning in the first half of 2018.
About Conatus Pharmaceuticals
Conatus is a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease. Conatus is developing its lead compound, emricasan, for the treatment of patients with chronic liver disease. Emricasan is designed to reduce the activity of enzymes that mediate inflammation and apoptosis. Conatus believes that by reducing the activity of these enzymes, emricasan has the potential to interrupt the disease progression across the spectrum of liver disease. For additional information, please visit www.conatuspharma.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this press release are forward looking statements, including statements regarding: payments and events contingent on Novartis’ exercise of the option; the exercisability of Novartis’ option and the initiation of the ENCORE-LF trial in the second quarter of 2017; eligibility to receive payments related to development, regulatory and commercial milestones and royalties; Novartis’ suitability to collaborate with Conatus; the feasibility of emricasan single agent or combination products; providing the best opportunity to deliver therapies to liver patients; the sufficiency of financial resources to fund Conatus’ operations through 2019 and fully fund emricasan development; the potential benefit in liver disease patients from chronic administration of emricasan; the ability of the ENCORE trials to provide data to support the design of Phase 3 trials; the timelines to announce results from ongoing and planned clinical trials beginning in the first half of 2018; and emricasan's potential to interrupt the disease progression across the spectrum of liver disease. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions, including: Conatus’ ability to successfully enroll patients in and complete its ongoing and planned clinical trials; the Option being exercised by Novartis and Novartis continuing development and commercialization of emricasan; Conatus’ reliance on third parties to conduct its clinical trials, including the enrollment of patients, and manufacture its clinical drug supplies of emricasan; potential adverse side effects or other safety risks associated with emricasan that could delay or preclude its approval; results of future clinical trials of emricasan; Conatus’ ability to obtain additional financing in order to co-commercialize emricasan or develop other compounds; and those risks described in Conatus’ prior press releases and in the periodic reports it files with the Securities and Exchange Commission. The events and circumstances reflected in Conatus’ forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, Conatus does not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
MEDIA: David Schull
Russo Partners, LLC
(858) 717-2310
David.Schull@RussoPartnersLLC.com
INVESTORS: Alan Engbring
Conatus Pharmaceuticals Inc.
(858) 376-2637
aengbring@conatuspharma.com