Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Islet Sciences, Inc (1425919) 10-Q published on Apr 22, 2015 at 12:25 pm
Reporting Period: Jan 30, 2015
On March 3, 2015, the Company, entered into a license agreement with Brighthaven Ventures, LLC ("BHV") for exclusive rights to develop and commercialize the SGLT2 inhibitor remogliflozin etabonate ("remogliflozin") as noted in the Subsequent Events note below. James Green, the Company’s President, Chief Executive Officer and director, and William Wilkison, the Company’s Chief Operating Officer and director, are Members of BHV. Each of Mr. Green and Dr. Wilkison owns 50% of the outstanding membership interests of BHV.
On March 24, 2015, Richard Schoninger, Jacqueline Schoninger, Scott Schoninger, Gerald Allen, and Cova Capital Partners, LLC ("Plaintiffs"), filed a lawsuit against James Green and William Wilkison, members of our Board of Directors and our CEO and COO, respectively, in the United States District Court for the Southern District of New York (Case No. 15-cv-2233). Plaintiffs' complaint asserts various claims, including breach of contract, fraud, and unjust enrichment relating to a merger agreement entered into between us and Brighthaven Ventures L.L.C. ("BHV"). Plaintiffs seek an unspecified amount of compensatory damages, $100,000,000 in punitive damages, that a constructive trust be placed upon defendants' ownership in BHV and interest and costs. The Company is not a party to the action and is unable to determine at this time what effects this action will have on the Company and it operations and finances.
On March 19, 2015, Joel Perlin, a member of our Board of Directors and the Avogenx, Inc. Board of Directors, resigned from each Board to devote time to other matters.
On September 30, 2014, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company, BHV, a North Carolina limited liability company, Avogenx, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Avogenx”), Islet Merger Sub, Inc., a Nevada corporation and a direct wholly owned subsidiary of Avogenx, and each of the members of BHV (the “BHV Members”). On March 3, 2015, the Company entered into an exclusive license agreement (the “License Agreement”) with BHV, and in connection therewith the parties to the Merger Agreement entered into a termination agreement (the “Termination Agreement”) terminating the Merger Agreement.
Pursuant to the License Agreement, if certain conditions are met as described below, the Company will receive (i) an exclusive sublicense to develop and commercialize pharmaceutical preparations containing the novel sodium-glucose cotransporter 2 inhibitors (“SGLT2”) remogliflozin and remogliflozin etabonate (the “Products”) and (ii) an exclusive license to a biphasic formulation technology for the development and commercialization of the Products. BHV holds an exclusive license for the development and commercialization of the Products from their current owner, Kissei Pharmaceutical Co., Ltd. (“Kissei”). The Products are currently in Phase IIb development for Type II Diabetes and Non-alcoholic Steatohepatitis, commonly referred to as “NASH.”
The licenses granted under the License Agreement will become effective only if, on or before May 31, 2015, (i) the Company receives not less than $10,000,000 in additional equity or debt financing and (ii) the Company pays to BHV $5,000,000 as an upfront payment for the license. In the event that these conditions are not met, the Company will not receive any rights to the Products, and the License Agreement will automatically terminate on May 31, 2015. Upon effectiveness, the territory for the licenses granted under the License Agreement is all countries of the world except for Japan, Korea, Taiwan, China and Latin America (Brazil, Argentina, Bolivia, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela) (the “Territory”).
Upon effectiveness of the licenses under the License Agreement, the Company will be required to pay BHV and Kissei up to $35.1 million pre-regulatory approval and up to an additional $76.75 million post-regulatory approval if certain development, regulatory and commercial milestones are successfully achieved. Royalties under the License Agreement will be due to BHV and Kissei on net sales in the Territory during the term of the License Agreement. In addition to the upfront and milestone payments and royalties payable by the Company to BHV, in the event that the Company grants any option, sublicense or other right, or otherwise transfers or assigns any right, in the Products to a third party prior to phase 3, the Company will be required to pay to BHV a percentage of such compensation under certain circumstances.
Pursuant to the Termination Agreement entered into simultaneously with the License Agreement, the Merger Agreement was terminated effective immediately. The Termination Agreement provides that certain provisions of the Merger Agreement will survive, including provisions relating to confidentiality and the Company’s obligation to pay BHV’s expenses incurred in connection with the Merger Agreement. In addition, the Termination Agreement contains general releases by the parties, requires the Company to indemnify BHV and the BHV Members and provides that the Company will be responsible for all costs and expenses incurred by any party to the Termination Agreement (including BHV and the BHV Members) in connection with the Termination Agreement, the Merger Agreement and the transactions contemplated thereby and the entry into and the negotiation of the License Agreement. As a result of the termination of the Merger Agreement, Avogenx withdrew its previously filed registration statement on Form S-4 relating to the Merger Agreement.
Further details concerining the License Agreement and Termination Agreement, can be found in the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2015 (the “8-K”). The foregoing description of the License Agreement and Termination Agreement is only a summary and is qualified in its entirety by reference to the License Agreement and Termination Agreement, which are attached to the 8-K (in redacted form and subject to a Confidential Treatment Request in the case of the License Agreement).