On September 12, 2020, Seattle Genetics, Inc. (the "Company") reported that it entered into a license and collaboration agreement (the "Collaboration Agreement") with Merck Sharp & Dohme Corp. ("MSDC"), a subsidiary of Merck & Co., Inc., effective September 13, 2020 (Filing, 8-K, Seattle Genetics, SEP 12, 2020, View Source [SID1234565063]). Pursuant to the Collaboration Agreement, the Company and MSDC agreed to jointly develop and commercialize, on a worldwide basis, the Company’s product candidate, ladiratuzumab vedotin. Ladiratuzumab vedotin is an antibody-drug conjugate that is currently being evaluated in phase 1 and phase 2 clinical trials both as monotherapy and in combination with other agents (including Keytruda (pembrolizumab)) for patients with metastatic breast cancer and select solid tumors with high LIV-1 expression.
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Pursuant to the Collaboration Agreement, the Company granted to MSDC co-exclusive (with the Company) worldwide development and commercialization licenses for ladiratuzumab vedotin and other LIV-1-targeting ADCs (the "Licensed Product"). In addition to an upfront cash payment of $600 million, the Company will be eligible to receive up to $850 million in milestone payments upon the initiation of certain clinical trials and regulatory approval in certain major markets and up to an additional $1.75 billion in milestone payments upon the achievement of specified annual sales thresholds of the Licensed Product. Globally, the Company will be responsible for 50% of future costs to develop and commercialize the Licensed Product and receive 50% of the profits.
The companies would jointly develop the Licensed Product. The Company would lead regulatory and distribution activities, and record sales, in the United States and Canada. MSDC would lead regulatory activities in Europe, and the Company would lead distribution activities and record sales in Europe. The Company and MSDC would co-commercialize the Licensed Product in the United States and Europe. MSDC would lead regulatory, promotion and distribution activities, and would record sales, in countries outside of the United States, Canada and Europe.
The Collaboration Agreement will remain in effect, unless earlier terminated, until the Licensed Product is no longer being developed or commercialized under the Collaboration Agreement. The Collaboration Agreement also contains customary provisions for termination by MSDC for convenience, and by either party, including in the event of breach of the Collaboration Agreement, subject to cure, or upon a challenge of such party’s licensed patents or upon the other party’s bankruptcy, subject, in each case, to customary reversion rights.
Stock Purchase Agreement
On September 12, 2020 and effective September 13, 2020, in connection with entry into the Collaboration Agreement, the Company entered into a stock purchase agreement (the "Purchase Agreement") with MSDC pursuant to which the Company agreed to issue and sell, and MSDC agreed to purchase, 5,000,000 newly-issued shares of the Company’s common stock (the "Shares"), at a purchase price of $200 per share, for an aggregate purchase price of $1.0 billion, pursuant to the terms and conditions thereof. Pursuant to the Purchase Agreement and subject to certain conditions and limitations, the Company agreed to file certain registration statements with the Securities and Exchange Commission (the "SEC"), upon demand by MSDC not sooner than 18 months following the closing of the transactions contemplated by the Purchase Agreement, to register the resale of the Shares by MSDC, and MSDC agreed that, excluding specified extraordinary matters, it will vote the Shares in accordance with the recommendations of the Company’s board of directors at any meeting of the Company’s stockholders until such time as MSDC, together with its affiliates, beneficially owns less than 1% of the Company’s outstanding common stock.
The closing of the purchase and the sale of the Shares is subject to the satisfaction or waiver of certain customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act").
The foregoing is only a brief description of the Collaboration Agreement and the Purchase Agreement (together, the "Agreements"), does not purport to be complete and is qualified in its entirety by reference to the full text of such Agreements, which the Company intends to file as exhibits to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 to be filed with the SEC. In addition, the Agreements contain customary representations, warranties and covenants by the Company, indemnification obligations of the parties and other obligations of the
parties. The representations, warranties and covenants contained in the Agreements are made only for purposes of such Agreements and are made as of specific dates; are solely for the benefit of the parties; may be subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Agreements, including being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties, instead of establishing matters as facts; and may be subject to standards of materiality and knowledge applicable to the contracting parties that differ from those applicable to investors generally. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company.