LOXO ONCOLOGY,INC. (NASDAQ:LOXO) Files An 8-K Entry into a Material Definitive AgreementItem 1.01. Entry into a Material Definitive Agreement.
License, Development and Commercialization Agreement
On November14, 2017, Loxo Oncology,Inc. (the “Company” or “Loxo Oncology”) entered into a License, Development and Commercialization Agreement (the “Agreement”) with Bayer Consumer Care AG (“Bayer”) to which the Company and Bayer will collaborate to develop and commercialize larotrectinib and LOXO-195, Loxo Oncology’s franchise of highly selective TRK inhibitors for patients with TRK fusion cancers. to the Agreement, Loxo Oncology has granted co-exclusive development and commercialization licenses to Bayer for both larotrectinib and LOXO-195.
In addition to an upfront cash payment of $400.0 million, Loxo Oncology is eligible to receive $450.0 million in milestone payments upon larotrectinib regulatory approvals and first commercial sale events in certain major markets and an additional $200.0 million in milestone payments upon LOXO-195 regulatory approvals and first commercial sale events in certain major markets.
Loxo Oncology will lead global development activities and regulatory activities in the United States. Bayer will lead regulatory activities outside the United States and global commercial activities. Globally, Loxo Oncology will be responsible for 50% of development costs. In the United States, where Loxo Oncology and Bayer will co-promote the products, Loxo Oncology will be responsible for 50% of the commercial costs and receive 50% of the profits. Bayer will pay Loxo Oncology a $25.0 million milestone upon achieving a certain U.S. net sales threshold. Loxo Oncology will have the right to opt-out of the U.S. co-promotion, in which case Loxo Oncology would receive a royalty in the low thirties percent range on U.S. net sales, which is meant to approximate the economics of the 50/50 profit split.
Outside of the United States, where Bayer will commercialize, Bayer will pay Loxo Oncology tiered, double digit royalties on net sales, and sales milestones totaling $475.0 million. Bayer will book revenues worldwide.
The Agreement also includes a standstill provision that prevents Bayer from acquiring five percent or more of Loxo Oncology’s voting securities.
The Agreement will terminate as to a product or country upon the expiration of the royalty term applicable to such product in such country. The Agreement may be terminated by either party for material breach or bankruptcy. In addition, Bayer may terminate the Agreement after the fourth anniversary of the effective date upon written notice to Loxo Oncology, or in the event that Loxo Oncology receives a “complete response letter” from the U.S. Food and Drug Agency with respect to larotrectinib, or if Loxo Oncology does not receive marketing approval for larotrectinib by December31, 2018.
Loxo Oncology expects to file the Agreement as an exhibit to its Annual Report on Form10-K for the year ended December31, 2017 and intends to seek confidential treatment for certain terms and provisions of the Agreement. The foregoing description is qualified in its entirety by reference to the text of the Agreement when filed.
Loxo Oncology issued a press release on November14, 2017 announcing the Agreement, a copy of which is attached to this Current Report on Form8-K as Exhibit99.1.
To the extent that statements contained in this Current Report on Form8-K are not descriptions of historical facts regarding Loxo Oncology,Inc., they are forward-looking statements reflecting the current beliefs and expectations of management made to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Loxo Oncology’s expectations regarding the ability of Loxo Oncology to advance its research and development pipeline, including its discovery and preclinical pipeline in clinical trials; Loxo Oncology’s expectations regarding its ability to co-develop and co-commercialize larotrectinib or any other product candidate; the receipt of the upfront payment from Bayer; Loxo Oncology’s expectations regarding its ability to realize substantial potential downstream value and profits from its alliance with Bayer; and the potential of Loxo