Ideal BioStent

12 Months Ended

Nov. 30, 2012

Ideal Biostent [Abstract]

Ideal Biostent [Text Block]

Note 3– Ideal BioStent™

Purchase of Ideal BioStent™ — Foreclosure Sale Agreement

On September 30, 2010, Xenogenics entered into a Foreclosure Sale Agreement (“Foreclosure Sale Agreement”) with Venture Lending & Leasing IV, Inc., Venture Lending & Leasing V, Inc. and Silicon Valley Bank (collectively, the “Sellers”). Pursuant to the Foreclosure Sale Agreement, Xenogenics acquired all of the Sellers’ interests in certain bioabsorbable stent assets (known as “Ideal BioStent™”) and related technologies. In consideration for the purchase of the assets, Xenogenics made cash payments to the Sellers in the aggregate amount of $400,000, payable in three tranches as follows: (i) $135,000 was paid on October 12, 2010; (ii) $135,000 was paid on November 15, 2010; and (iii) $130,000 was paid on December 31, 2010.

Xenogenics is also required to make cash payments to the Sellers as follows based on the achievement of certain milestones:

· $300,000 is payable upon the earlier to occur of (i) initiation of pivotal Generation 2 stent human clinical trials, (ii) execution of an agreement in which Xenogenics grants a third party rights to develop or exploit the purchased assets, valued at no less than $3,000,000 (including all up-front payments and the net present value of any future royalty/milestone payments), and (iii) a “change of control” of Xenogenics;

· $1,000,000 is payable upon the earlier to occur of (i) regulatory approval by any regulatory authority in a European Union member country, (ii) execution of an agreement in which Xenogenics grants a third party rights to develop or exploit the purchased assets, valued at no less than $5,000,000 (including all up-front payments and the net present value of any future royalty/milestone payments); and (iii) a “change of control” of Xenogenics; and

· $3,000,000 is payable upon the earlier to occur of (i) regulatory approval by the U.S. Food and Drug Administration, (ii) execution of an agreement in which Xenogenics grants a third party rights to develop or exploit the purchased assets, valued at no less than $5,000,000 (including all up-front payments and the net present value of any future royalty/milestone payments); and (iii) a “change of control” of Xenogenics.

None of these milestones were achieved as of November 30, 2012 and, accordingly, none of these obligations have accrued. On September 30, 2011, Xenogenics entered into Amendment No. 1 to the Foreclosure Sale Agreement which extended the deadlines for the achievement of these milestones under the Foreclosure Sale Agreement by twelve months. On October 23, 2012, Xenogenics entered into Amendment No. 2 to the Foreclosure Sale Agreement which further extended the deadlines for the achievement of these milestones under the Foreclosure Sale Agreement by an additional twelve months. Xenogenics is required to use good faith reasonable efforts to achieve these milestones. Failure to achieve any of these milestones could result in all milestone payments, totaling $4.3 million, becoming immediately due and payable. If Xenogenics meets the financial hardship exception set forth in the Foreclosure Sale Agreement, Xenogenics could elect to pay all remaining milestone payments and continue commercialization efforts, or assign all intellectual property acquired by Xenogenics under the agreement to the counterparties to the agreement and cease all development and commercialization efforts.

Rutgers License Agreement

Effective September 30, 2010, Xenogenics entered into a license agreement (the “Rutgers License Agreement”) with Rutgers, The State University of New Jersey (“Rutgers”).

Pursuant to the Rutgers License Agreement, Rutgers granted Xenogenics a worldwide exclusive license to exploit and commercialize certain patents and other intellectual property rights, as further described in the Rutgers License Agreement, relating to bioabsorbable stents for interventional cardiology and peripheral vascular applications. In consideration for the license and other rights granted under the Rutgers License Agreement, Xenogenics paid Rutgers a license fee of $50,000. In addition, under the Rutgers License Agreement, Xenogenics is obligated to pay Rutgers a license maintenance fee of $25,000 on the third anniversary of the Rutgers License Agreement, and $50,000 on the fourth anniversary. Additionally, Xenogenics agreed to pay Rutgers for unpaid costs of $136,000 incurred by Rutgers prior to the effective date of the Rutgers License Agreement for preparing, filing, prosecuting, defending, and maintaining all United States patent applications and patents covered under the Rutgers License Agreement, of which $135,000 was paid in March 2011.

Xenogenics is also required to make cash payments to Rutgers as follows based on the achievement of certain milestones with respect to products to be commercialized using the intellectual property licensed pursuant to the Rutgers License Agreement:

· $50,000 is payable upon initiation of first in-human clinical trials anywhere in the world;

· $200,000 is payable upon initiation of pivotal human clinical trials anywhere in the world in connection with submitting an application for market approval to a regulatory authority; and

· $300,000 is payable upon submission of an application for market approval to a regulatory authority anywhere in the world.

None of these milestones were achieved as of November 30, 2012 and, accordingly, none of these obligations have accrued.

Upon the sale of products commercialized using the technology licensed pursuant to the Rutgers License Agreement, Xenogenics is required to make royalty payments to Rutgers in an amount equal to three percent of the annual aggregate gross amounts charged for such products less deductions for expenses such as sales/use taxes, transportation charges and trade discounts. Beginning with the first year of sales of products commercialized with the licensed technology, Xenogenics will make certain minimum royalty payments to Rutgers, which payments will be applied against any royalty payments earned by Rutgers for the relevant calendar year. Further, 50% of the Rutgers milestone payments actually paid to Rutgers will be offset against any future royalty payments earned under the Rutgers License Agreement.

The term of the Rutgers License Agreement commences on the effective date of the agreement and terminates on the earlier of (i) the expiration of all valid patents granted with respect to the licensed technology (or products commercialized therefrom) in a country, and (ii) ten years from the date of first commercial sale in a country. However, if either party breaches the agreement, the non-breaching party may terminate the agreement upon written notice to the other party of such breach and the failure of the other party to cure the breach within 90 days of such notice. Xenogenics also has the right to terminate the agreement at anytime and for any reason upon 120 days’ advance written notice to Rutgers.