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Subsequent Events
12 Months Ended
Dec. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

Note 14: Subsequent Events

Licensing Arrangement

On January 12, 2017, the Company entered into a license agreement, and related amendment, with Sato Pharmaceutical Co., Ltd., or Sato, relating to SB204, its lead drug candidate for the treatment of acne vulgaris in Japan (the “Agreement”). Pursuant to the Agreement, the Company granted to Sato an exclusive, royalty-bearing, non-transferable license under certain of the Company’s intellectual property rights, with the right to sublicense with the Company’s prior written consent, to develop, use and sell products in Japan that incorporate SB204 in certain topical dosage forms for the treatment of acne vulgaris, and to make the finished form of such products. The rights granted to Sato do not include the right to manufacture the active pharmaceutical ingredient of SB204, which the Company will retain the rights to supply to Sato. The Company will also supply finished product to Sato for use in the development of SB204 in the licensed territory. During a specified time period, Sato has an exclusive option to negotiate the terms under which its license would be expanded to include certain additional territories within Asia, subject to Sato’s payment of a specified option exercise fee. Under the terms of the Agreement, the Company also has exclusive rights to certain intellectual property that may be developed by Sato in the future, which the Company could choose to use for its own development and commercialization of SB204 outside of Japan.  

In exchange for the licenses granted to Sato under the Agreement, Sato agreed to pay the Company an upfront payment, as well as additional milestone payments upon achievement of various future development, regulatory and commercial milestones. Pursuant to the terms of the Agreement, Sato is required to pay the Company an upfront payment of 1.25 billion Japanese Yen (“JPY”), and up to an aggregate of 2.75 billion JPY upon the achievement of various development and regulatory milestones. Under the Agreement, Sato also agreed to pay the Company up to an aggregate of 0.9 billion JPY in milestone payments upon the achievement of various commercial milestones. Sato must also pay the Company a royalty equal to a mid-single digit percentage of net sales of licensed products in the licensed territory, subject to a reduction in the royalty payments in certain circumstances.

The term of the Agreement and the period during which Sato must pay royalties under the Agreement expires, on a licensed product-by-licensed product basis, on the tenth anniversary of the first commercial sale of a licensed product in the licensed field in the licensed territory. The term of the Agreement may be renewed by mutual written agreement of the parties for additional two year periods following expiration of the initial term.

The Company is obligated pursuant to the Agreement to supply Sato with all quantities of licensed products required by Sato to develop the licensed products in the licensed field in the licensed territory. As part of the Agreement, the Company and Sato have also agreed to negotiate a commercial supply agreement pursuant to which the Company would be the exclusive supplier to Sato of the active pharmaceutical ingredient of licensed products for the manufacture of licensed products in the licensed territory.

Sato is responsible for funding the development and commercial costs for the program that are specific to Japan. The Company is obligated to perform certain oversight, review and supporting activities for Sato, including: (i) using commercially reasonable efforts to obtain marketing approval of SB204 in the U.S, (ii) sharing all future scientific information the Company may obtain during the term of the Agreement pertaining to SB204, (iii) performing certain additional pre-clinical studies if such studies are deemed necessary by the Japanese regulatory authority, up to and not to exceed a total cost of $1,000 and (iv) participating in a joint committee that oversees, reviews and approves Sato’s development and commercialization activities under the Agreement. Additionally, the Company has granted Sato the option to use the Company’s trademarks in connection with the commercialization of licensed products in the licensed territory for no additional consideration, subject to the Company’s approval of such use.

On January 19, 2017, the Company received the upfront payment, which was equivalent to $10,813.

The Agreement may be terminated (i) by Sato without cause upon 120 days’ advance written notice to the Company; (ii) by either party in the event of the other party’s uncured material breach upon 60 days’ advance written notice; (iii) force majeure; (iv) by either party in the event of the other party’s dissolution, liquidation, bankruptcy or insolvency and (v) by the Company immediately upon written notice if Sato challenges the validity, patentability, or enforceability of any of the Company’s patents or patent applications licensed to Sato under the Agreement.

The intellectual property rights granted to Sato under the Agreement include certain intellectual property rights which we have licensed from UNC. Under the Company’s license agreement with UNC (Note 3), the Company is obligated to pay UNC a running royalty percentage in the low single digits on net sales of licensed products, including net sales that may be generated by Sato. Additionally, the Company made a payment to UNC in February 2017 representing the portion of the Sato upfront payment that was estimated to be directly attributable to the UNC intellectual property rights included in the license to Sato.

The Company also entered into an agreement with a third party to assist the Company in exploring the licensing opportunity which led to the execution of the Agreement with Sato. The Company paid a fee of $216 to the third party upon execution of the Agreement and is obligated to pay the third party a low-single-digit percentage of any future milestone payments the Company may receive from Sato under the Agreement.