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License and Other Agreements
12 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
License and Other Agreements

16. License and Other Agreements

 

Neogen Corporation

 

In May 2014, the Company entered into an exclusive license agreement with Neogen Corporation (“Neogen”). The Company granted an exclusive license to Neogen to (i) use the Company’s intellectual property (“IP”), consisting primarily of the ContraPest technology and (ii) manufacture, distribute and sell commercial rodent control products in the United States and certain U.S. territories, Canada and Mexico. Under the terms of the licensing agreement, the Company was required to submit an application to the United States Environmental Protection Agency (“EPA”) for approval of ContraPest, complete two agricultural field trials that support commercial feasibility for use of the product, and submit such studies and results to Neogen for their approval. The application to the EPA was submitted in August 2015, and the EPA granted registration approval for ContraPest effective August 2, 2016. The first field trial is complete, but has not yet been approved by Neogen. With respect to the second trial, the EPA indicated to the Company that it would be more efficient to wait until the product was approved rather than applying for an additional experimental use permit. Given that the EPA has granted registration approval, the Company is now preparing to commence the second field trial.

 

The Company has received nonrefundable, upfront license fee payments, totaling $488. The remaining license fee of $162 will be received when Neogen formally accepts the Company’s report on its study of the field trials. The Company has determined that the license does not have stand-alone value therefore, the license fees of $488 are deferred and recognized, on a straight-line basis, from May 2014, the effective date of the agreement, over the estimated related period of performance through December 2016, which includes the acceptance by Neogen of the Company’s study for the field trials that support commercial feasibility for use of the product.

 

For each of the years ended December 31, 2016 and 2015, the Company recognized revenue of $186 under the licensing agreement. As of December 31, 2016 and 2015, deferred revenue amounted to $0 and $186, respectively. Any changes in the estimated period of performance wound have been accounted for prospectively as a change in estimate.

 

In addition, Neogen was obligated under the licensing agreement to pay additional consideration to the Company consisting of future fixed-amount of contingent milestone payments (i.e. post-regulatory approval license fees) of up to an aggregate of $3 million, and sales-based royalties on the net sales of licensed products by Neogen, as well as its affiliates and sublicensees. The Company did not receive or earn these potential contingent consideration payments as the milestone events to receive such post-approval license fees and sales based royalties were not achieved prior to the termination of the agreement. The agreement was to expire upon the later of (i) the last expiration of last patent included in the licensed IP; or (ii) the tenth anniversary of the effective date of the agreement (i.e. May 2024).

 

As previously disclosed in our Current Report on Form 8-K dated and filed January 23, 2017, on January 23, 2017 we entered into a termination agreement (the “Settlement Agreement”) with Neogen Corporation (“Neogen”). Pursuant to the Settlement Agreement, the parties agreed to (a) terminate the existing Exclusive License Agreement between us and Neogen dated May 15, 2014 (the “License Agreement”), with neither Neogen or us having any further obligations thereunder (other than certain confidentiality obligations); (b) dismiss with prejudice the court action filed by Neogen in the District Court for the District of Arizona on January 19, 2017 (the “Court Action”), as further described below; and (c) mutually release any and all existing or future claims between the parties and their affiliates related to or arising from the License Agreement or the Court Action. As part of the Settlement Agreement, we agreed to pay to Neogen upon the execution of the Settlement Agreement an aggregate of $1.0 million in settlement of all claims.

 

NeoVenta Solutions, Inc.

 

In September 2015, the Company entered into a marketing, sales and distribution agreement with NeoVenta Solutions, Inc. (“NeoVenta”). The Company granted an exclusive license to NeoVenta to market, sell and distribute its product in certain granted foreign countries (“granted countries”), consisting of Bangladesh, India, Indonesia, Malaysia, Singapore, Sri Lanka and Thailand. Other granted countries can be added when approved and agreed upon by the parties. NeoVenta will be responsible for seeking applicable regulatory approvals to market ContraPest in the granted countries. After such regulatory approvals have been obtained, the Company has granted to NeoVenta an exclusive license to market, sell and distribute its product in these granted countries. NeoVenta will make purchases of product at predetermined prices from the Company. NeoVenta has agreed to minimum sales commitments of rodent control products in granted countries, which total $23 million over the first five years. NeoVenta will make purchases of product at predetermined prices from the Company.

 

The initial term of the agreement is for five years from the earlier of (i) obtaining the required certifications for ContraPest or any products saleable in any of the countries in the territory; or (ii) six months after approval of ContraPest or any other products by the EPA. The agreement will automatically renew for one additional five year period. Thereafter, the agreement will renew for successive one-year periods unless written notification of intent not to renew is provided by either party to the other not less than sixty days prior to the beginning of any one-year renewal period.

 

Somerville

 

In May 2014, the Company entered into a service contract with the City of Somerville, Massachusetts (“Somerville”) whereby the Company was providing services and/or supplies in connection with conducting a rodent population study through field trials for Somerville. The total contract amount was not to exceed $215 for the services rendered and/or supplies received. Through an amendment to the contract, the contract was extended to December 31, 2016. Services under the contract are now complete. The Company has recognized revenue for services rendered under this contract of $132 during the year ended December 31, 2016 in other revenue in the statements of operations and comprehensive loss.

 

Chicago Transit Authority

 

In September 2015 the Company entered into a services contract with the Chicago Transit Authority, or CTA, to begin a field trial of the Company’s bait station, which study is now complete. The total contract amount was not to exceed $58. The services contract ended in March 2016. The Company recognized revenue for services rendered under this contract of $42 during the year ended December 31, 2015, in other revenue in the statements of operations and comprehensive loss.

 

University of Arizona

 

In 2005, the Company entered into an exclusive license agreement with the Arizona Board of Regents of the University of Arizona (“University”) to in-license certain patents and other intellectual property to be used in the future product development in the domestic animal fertility control market. The patent claims in the United States, Australia and New Zealand cover the use of the vinyl cyclohexene Diep oxide to deplete ovarian follicles in individual mammals and reproduction of mammals. The license agreement gives the Company exclusive rights to commercialize products based on this intellectual property. The University owns the patent rights, but the agreement requires the Company to pay all costs incurred by the University in maintaining and perfecting the patent rights. In exchange for the intellectual property, the Company paid the University a nonrefundable fee of $5, agreed to reimburse the University for its patent costs, pay milestone payments totaling up to $75 upon the achievement of certain research, development and regulatory milestones. In addition, the University is entitled to royalty fees of 5% of net sales of the licensed product and sublicensing royalty income of licensed product.

 

In June 2015, the Company and University executed an amended and restated exclusive license agreement. The amendment reduced the milestone payments to totaling up to $50,000 upon the achievement of certain research, development and regulatory milestones and royalty fees from 5% to 2% of net sales of licensed product and 4% of any sublicensing royalty income of licensed product. As consideration for the amended terms, the Company entered into a warrant purchase agreement whereby the University was granted a warrant to purchase 15,000 shares of common stock, with an initial fair value of $53. The warrant is exercisable immediately for a term of five years from the effective date of the amendment. See Note 9.

 

The agreement will terminate with last-to-expire patent licensed under the agreement which extends to 2026. The Company may terminate the agreement or the grant of rights under the agreement, at any time, upon ninety days prior written notice to the University. Future milestone payments are considered to be contingent consideration and will be accrued when probable of being paid. At December 31, 2015 and 2016, no milestone payments were probable of being paid and it is not likely in the near future.

 

Bioceres/INMET S.A. Agreement

 

In January 2016, the Company entered into a services agreement with Bioceres, Inc. (“Bioceres”), a wholly-owned subsidiary of Bioceres S.A., a leading agricultural biotechnology company in Argentina, and its Argentinean subsidiary, Ingenieria Metabolica

 

S.A. (“INMET”) to develop a production method for synthetic triptolide, the main ingredient in ContraPest. The Company also entered into an agency agreement with INMET whereby the Company appointed INMET as its exclusive agent to seek regulatory approval for and conduct pre-sales and marketing of its product, ContraPest, in Argentina. The Company and INMET have also agreed to manufacture and distribute its product in Argentina and other countries, as mutually agreed, through a newly formed entity.

 

The term of the service agreement is for two years. The service agreement can be terminated at any time upon written notice by either party for any reason. The term of the agency agreement with INMET is the earlier of: (i) when the Company and INMET incorporate the joint venture entity in Argentina or (ii) January 2018.