Related Party Transactions

3 Months Ended

Mar. 31, 2017

Related Party Transactions

Related Party Transactions

15.  Related Party Transactions

License Agreement with Yale

On September 30, 2013, the Company entered into the Yale Agreement with Yale (see Note 12). Yale is a related party because the Company’s Chief Executive Officer is one of the inventors of the patents that the Company has licensed from Yale and, as such, is entitled to a specified share of the glutamate product-related royalty revenues that may be received by Yale under the Yale Agreement. As partial consideration for the license under the Yale Agreement, on September 30, 2013, the Company issued to Yale 250,000 common shares, representing 5.1% of the Company’s then outstanding equity on a fully diluted basis. The fair value of the shares, totaling $152, was recognized as research and development expense at the time of issuance of the shares. During the three months ended March 31, 2017 and 2016, the Company recognized research and development expense under the Yale Agreement of $0 and $8, respectively. As of March 31, 2017 and December 31, 2016, the Company owed no amounts to Yale.

Guarantor and Co-Guarantor Warrants

The Guarantor and Co-Guarantor of the Credit Agreement with Wells Fargo are each shareholders and members of the board of directors of the Company. The Company agreed to issue warrants to Guarantor and Co-Guarantor in exchange for their respective guaranties (see Notes 7 and 8). The warrants were issued on January 26, 2017, pursuant to which each director received a warrant to purchase 107,500 common shares at an exercise price of $9.2911 per share.

Kleo Pharmaceuticals, Inc.

On August 29, 2016, the Company executed a stock purchase agreement with Kleo to purchase 3,000,000 shares of Kleo common stock at a purchase price of $1.00 per share in an initial closing, which was completed on August 31, 2016, and committed to purchase an aggregate 5,500,000 additional shares of Kleo common stock at a purchase price of $1.00 per share (see Note 5). Kleo is a related party because the Company has determined that it exercises significant influence over the operating and financial policies of Kleo. In connection with its investment in Kleo, the Company received the right to designate two members of Kleo’s board of directors, who are the Chairman of the Company’s board of directors and another outside director of the Company. Also, the Chief Executive Officer and controlling stockholder of Kleo is a shareholder of the Company. In addition to the purchases under the stock purchase agreement described above, on August 29, 2016, the Company entered into an agreement with the Chief Executive Officer of Kleo to purchase 500,000 shares of Kleo common stock from him, which purchase was completed in March 2017 (see Note 5). As of March 31, 2017, the Company owned 27.9% of Kleo’s outstanding capital stock. The Company has also entered into a clinical development master services agreement with Kleo to assist Kleo with clinical development. As of March 31, 2017, the Company had not performed any services or received any payments under this agreement.

Biohaven Pharmaceuticals, Inc.

BPI is a related party because its three founders, each of whom beneficially owned one-third of the equity of BPI prior to the Company’s acquisition of BPI on December 31, 2016 (see Note 16), are shareholders of the Company and also serve as the Company’s Chairman of the board of directors, Chief Executive Officer and Chief Medical Officer, respectively. Since the Company’s incorporation in September 2013, the Company is deemed to have had a variable interest in BPI, and BPI is deemed to have been a VIE, of which the Company is the primary beneficiary. Accordingly, the Company has consolidated the results of BPI since September 2013. All transactions between the Company and BPI have been eliminated in consolidation. On December 31, 2016, the Company acquired 100% of the capital stock of BPI for aggregate purchase consideration of $595 in the form of promissory notes to each of the former stockholders of BPI. In May 2017, the promissory notes were paid in full (see Note 17).