APPX » Topics » Product License and Manufacturing Agreements with American BioScience

This excerpt taken from the APPX 10-K filed Sep 19, 2006.

Product License and Manufacturing Agreements with American BioScience

In November 2001, we signed a perpetual license agreement with ABI under which we acquired the exclusive rights to market and sell Abraxane® in North America for indications relating to breast, lung, ovarian, prostate and other cancers. Under the agreement, we made an initial payment to ABI of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. ABI is responsible for conducting clinical studies in support of Abraxane® and for substantially all costs associated with the development and obtaining regulatory approval for Abraxane®, except that we provided $2.0 million of Abraxane® for use in clinical trials, the cost of which we charged to research and development expense in 2001. Any profit, as defined in the license agreement, resulting from our sales of Abraxane® will be shared equally between ABI and us, following the recapture of half of the pre-launch sales, marketing and pre-production start-up costs we have incurred. Following completion of our pending merger with ABI, this license agreement would effectively cease to exist.

The terms of the license agreement were negotiated to reflect the value of the licensed product rights acquired, then in late-stage development, ABI’s remaining obligation to complete the NDA filing and the potential sales of the product under licensed clinical indications. The license agreement was a product of several months of extensive negotiation with ABI involving outside counsel, investment banks and a nationally recognized valuation firm. Based upon the analysis and recommendations of our advisors, we believe that the overall terms of the agreement were fair to us, including in comparison to similar licenses between unrelated parties. The agreement was unanimously approved by the disinterested members of our Board of Directors, with those directors who also have an affiliation with ABI recusing themselves from the vote. There are no restrictions on how ABI would use payments made under the license agreement and we understand such payments have been

 

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and will be used both to fund the development of Abraxane® in relation to our licensed product rights and for other purposes.

In December 2001, in conjunction with our initial public offering, we recorded an initial payment due ABI of $60.0 million. In our financial statements, the license agreement was accounted for as an asset contributed by a principal shareholder using the shareholder’s historical cost basis, which was zero, and the $60.0 million payment was accounted for as a distribution of stockholders’ equity. For income tax purposes, the payment was recorded as an asset and is being amortized over a 15-year period. Because there was no corresponding charge to income, the income tax benefit of this payment is being credited to stockholders’ equity as realized.

Under the license agreement, ABI earned milestone payments upon the filing and approval of Abraxane® for the metastatic breast cancer indication. The first such milestone of $10.0 million was achieved in May, 2004 when the FDA accepted American BioScience’s NDA for the metastatic breast cancer indication. This payment was expensed and paid in the second quarter of 2004. The FDA then approved Abraxane® for the filed indication in January 2005, triggering a $15.0 million milestone payment in the first quarter of 2005 which will be capitalized and amortized over the expected life of the product, subject to periodic review for impairment.

Regulatory and publication achievements related to other licensed indications under study, including lung, ovarian and prostate cancers will trigger further milestone payments to ABI. Such payments generally total $17.5 million per agreed indication. As with the indication of breast cancer, those payments earned prior to FDA approval for each indication will be expensed, while amounts earned upon FDA approval of those indications will be capitalized and amortized over the expected life of the product. We have the option not to make one or more of the milestone payments tied to certain indications under study if sales of the product do not meet specified levels.

Upon achievement of major annual one-time Abraxane® sales milestones, we are required to make additional payments which, in the aggregate, could total $110.0 million should annual Abraxane® sales exceed $1.0 billion. The first sales milestone payment of $10.0 million would be triggered upon achievement of annual calendar year Abraxane® sales in excess of $200.0 million and the second sales milestone of $20.0 million upon the achievement of annual calendar year sales in excess of $400.0 million. Any future sales-based milestone payments will be expensed in the period in which the sales milestone is achieved.

Under the license agreement, profit on our sales of Abraxane® in North America is shared equally between ABI and us. The license agreement defines profit as Abraxane® net sales less cost of goods sold, selling expenses (including pre-launch production and other expenses which we have expensed as incurred, but which will be charged against first profit under the agreement) and an allocation of related general and administrative expenses. We expense ABI’s share of profit earned in our statements of income as an element of cost of sales. During the 4th quarter we expensed $3.3 million of profit sharing fees related to Abraxane®. Any costs and expenses related to product recalls and product liability claims generally will be split equally between ABI and us and expensed as incurred.

In November 2001, along with the license agreement for Abraxane®, we also entered into a manufacturing agreement with ABI under which we agreed to manufacture Abraxane® for ABI and its licensees for sales outside North America. Under this agreement, we have the right to manufacture Abraxane® for sales worldwide. For sales outside of our licensed territories, we will charge ABI and its licensees a customary margin on our manufacturing costs based on whether the product will be used for clinical trials or commercial sale. The initial term of this agreement is ten years and may be extended for successive two-year terms by ABI.

This excerpt taken from the APPX DEF 14A filed Jul 5, 2006.

Product License and Manufacturing Agreements with American BioScience

In November 2001, we signed a perpetual license agreement with ABI under which we acquired the exclusive rights to market and sell Abraxane® in North America for indications relating to breast, lung, ovarian, prostate and other cancers. Under the agreement, we made an initial payment to ABI of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. ABI was responsible for conducting clinical studies in support of Abraxane® and for substantially all costs associated with the development and obtaining regulatory approval for Abraxane®, except that we provided $2.0 million of Abraxane® for use in clinical trials, the cost of which we charged to research and development expense in 2001. Any profit, as defined in the license agreement, resulting from our sales of Abraxane® was shared equally between ABI and us, following the recapture of half of the pre-launch sales, marketing and pre-production start-up costs we have incurred. During the 4th quarter of 2005 we expensed $3.3 million of profit sharing fees related to Abraxane®. Following completion of our merger with ABI, this license agreement effectively ceased to exist.

In November 2001, along with the license agreement for Abraxane®, we also entered into a manufacturing agreement with ABI under which we agreed to manufactureAbraxane® for ABI and its licensees for sales outside North America. Under this agreement, we had the right to manufacture Abraxane® for sales worldwide. Following completion of our merger with ABI, this manufacturing agreement effectively ceased to exist.

This excerpt taken from the APPX 10-K filed Mar 10, 2006.

Product License and Manufacturing Agreements with American BioScience

In November 2001, we signed a perpetual license agreement with ABI under which we acquired the exclusive rights to market and sell Abraxane® in North America for indications relating to breast, lung, ovarian, prostate and other cancers. Under the agreement, we made an initial payment to ABI of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. ABI is responsible for conducting clinical studies in support of Abraxane® and for substantially all costs associated with the development and obtaining regulatory approval for Abraxane®, except that we provided $2.0 million of Abraxane® for use in clinical trials, the cost of which we charged to research and development expense in 2001. Any profit, as defined in the license agreement, resulting from our sales of Abraxane® will be shared equally between ABI and us, following the recapture of half of the pre-launch sales, marketing and pre-production start-up costs we have incurred. Following completion of our pending merger with ABI, this license agreement would effectively cease to exist.

The terms of the license agreement were negotiated to reflect the value of the licensed product rights acquired, then in late-stage development, ABI’s remaining obligation to complete the NDA filing and the potential sales of the product under licensed clinical indications. The license agreement was a product of several months of extensive negotiation with ABI involving outside counsel, investment banks and a nationally recognized valuation firm. Based upon the analysis and recommendations of our advisors, we believe that the overall terms of the agreement were fair to us, including in comparison to similar licenses between unrelated parties. The agreement was unanimously approved by the disinterested members of our Board of Directors, with those directors who also have an affiliation with ABI recusing themselves from the vote. There are no restrictions on how ABI would use payments made under the license agreement and we understand such payments have been

 

89


and will be used both to fund the development of Abraxane® in relation to our licensed product rights and for other purposes.

In December 2001, in conjunction with our initial public offering, we recorded an initial payment due ABI of $60.0 million. In our financial statements, the license agreement was accounted for as an asset contributed by a principal shareholder using the shareholder’s historical cost basis, which was zero, and the $60.0 million payment was accounted for as a distribution of stockholders’ equity. For income tax purposes, the payment was recorded as an asset and is being amortized over a 15-year period. Because there was no corresponding charge to income, the income tax benefit of this payment is being credited to stockholders’ equity as realized.

Under the license agreement, ABI earned milestone payments upon the filing and approval of Abraxane® for the metastatic breast cancer indication. The first such milestone of $10.0 million was achieved in May, 2004 when the FDA accepted American BioScience’s NDA for the metastatic breast cancer indication. This payment was expensed and paid in the second quarter of 2004. The FDA then approved Abraxane® for the filed indication in January 2005, triggering a $15.0 million milestone payment in the first quarter of 2005 which will be capitalized and amortized over the expected life of the product, subject to periodic review for impairment.

Regulatory and publication achievements related to other licensed indications under study, including lung, ovarian and prostate cancers will trigger further milestone payments to ABI. Such payments generally total $17.5 million per agreed indication. As with the indication of breast cancer, those payments earned prior to FDA approval for each indication will be expensed, while amounts earned upon FDA approval of those indications will be capitalized and amortized over the expected life of the product. We have the option not to make one or more of the milestone payments tied to certain indications under study if sales of the product do not meet specified levels.

Upon achievement of major annual one-time Abraxane® sales milestones, we are required to make additional payments which, in the aggregate, could total $110.0 million should annual Abraxane® sales exceed $1.0 billion. The first sales milestone payment of $10.0 million would be triggered upon achievement of annual calendar year Abraxane® sales in excess of $200.0 million and the second sales milestone of $20.0 million upon the achievement of annual calendar year sales in excess of $400.0 million. Any future sales-based milestone payments will be expensed in the period in which the sales milestone is achieved.

Under the license agreement, profit on our sales of Abraxane® in North America is shared equally between ABI and us. The license agreement defines profit as Abraxane® net sales less cost of goods sold, selling expenses (including pre-launch production and other expenses which we have expensed as incurred, but which will be charged against first profit under the agreement) and an allocation of related general and administrative expenses. We expense ABI’s share of profit earned in our statements of income as an element of cost of sales. During the 4th quarter we expensed $3.3 million of profit sharing fees related to Abraxane®. Any costs and expenses related to product recalls and product liability claims generally will be split equally between ABI and us and expensed as incurred.

In November 2001, along with the license agreement for Abraxane®, we also entered into a manufacturing agreement with ABI under which we agreed to manufacture Abraxane® for ABI and its licensees for sales outside North America. Under this agreement, we have the right to manufacture Abraxane® for sales worldwide. For sales outside of our licensed territories, we will charge ABI and its licensees a customary margin on our manufacturing costs based on whether the product will be used for clinical trials or commercial sale. The initial term of this agreement is ten years and may be extended for successive two-year terms by ABI.

This excerpt taken from the APPX DEF 14A filed Apr 29, 2005.

Product License and Manufacturing Agreements with American BioScience

 

In November 2001, we signed a perpetual license agreement with American BioScience under which we acquired the exclusive rights to market and sell ABRAXANE in North America for indications relating to breast, lung, ovarian, prostate and other cancers. Under the agreement, we made an initial payment to American BioScience of $60.0 million and committed to future milestone payments contingent upon achievement of specified regulatory, publication and sales objectives for licensed indications. American BioScience is responsible for conducting clinical studies in support of ABRAXANE and for substantially all costs associated with the development and obtaining regulatory approval for ABRAXANE, except that we provided $2.0 million of ABRAXANE for use in clinical trials, the cost of which we charged to research and development expense in 2001. Any profit, as defined in the license agreement, resulting from our sales of ABRAXANE will be shared equally between American BioScience and us, following the recapture of half of the pre-launch sales, marketing and pre-production start-up costs we have incurred.

 

The terms of the license agreement were negotiated to reflect the value of the licensed product rights acquired, then in late-stage development, American BioScience’s remaining obligation to complete the NDA filing and the potential sales of the product under licensed clinical indications. The license agreement was a product of several months of extensive negotiation with American BioScience involving outside counsel, investment banks and a nationally recognized valuation firm. Based upon the analysis and recommendations of our advisors, we believe that the overall terms of the agreement were fair to us, including in comparison to similar licenses between unrelated parties. The agreement was unanimously approved by the disinterested members of our board of directors, with those directors who also have an affiliation with American BioScience recusing themselves from the vote. There are no restrictions on how American BioScience would use payments made under the license agreement and we understand such payments have been and will be used both to fund the development of ABRAXANE in relation to our licensed product rights and for other purposes.

 

Under the license agreement, American BioScience earned milestone payments upon the filing and approval of ABRAXANE for the metastatic breast cancer indication. The first such milestone of $10.0 million was achieved in May, 2004 when the FDA accepted American BioScience’s NDA for the metastatic breast cancer indication. This payment was expensed and paid in the second quarter of 2004. The FDA then approved ABRAXANE for the filed indication in January 2005, triggering a $15.0 million milestone payment which was paid in the first quarter of 2005 and will be capitalized and amortized over the expected life of the product, subject to periodic review for impairment.

 

27


Regulatory and publication achievements related to other licensed indications under study, including lung, ovarian and prostate cancers will trigger further milestone payments to American BioScience. Such payments generally total $17.5 million per agreed indication. As with the indication of breast cancer, those payments earned prior to FDA approval for each indication will be expensed, while amounts earned upon FDA approval of those indications will be capitalized and amortized over the expected life of the product. We have the option not to make one or more of the milestone payments tied to certain indications under study if sales of the product do not meet specified levels.

 

Upon achievement of major annual one-time ABRAXANE sales milestones, we are required to make additional payments which, in the aggregate, could total $110.0 million should annual ABRAXANE sales exceed $1.0 billion. The first sales milestone payment of $10.0 million would be triggered upon achievement of annual calendar year ABRAXANE sales in excess of $200.0 million and the second sales milestone of $20.0 million upon the achievement of annual calendar year sales in excess of $400.0 million. Any future sales-based milestone payments will be expensed in the period in which the sales milestone is achieved.

 

Under the license agreement, profit on our sales of ABRAXANE in North America will be shared equally between American BioScience and us. The license agreement defines profit as ABRAXANE net sales less cost of goods sold, selling expenses (including pre-launch production and other expenses which we have expensed as incurred, but which will be accumulated and charged against first profit under the agreement) and an allocation of related general and administrative expenses. We will expense American BioScience’s share of profit earned in our statements of income as an element of cost of sales. Any costs and expenses related to product recalls and product liability claims generally will be split equally between American BioScience and us and expensed as incurred. Pursuant to an agreement that we entered into with American BioScience, certain costs of any unsaleable ramp-up inventory of ABRAXANE that was manufactured in preparation for its launch may, subject to certain conditions, be shared equally between us and American BioScience.

 

In November 2001, along with the license agreement for ABRAXANE, we also entered into a manufacturing agreement with American BioScience under which we agreed to manufacture ABRAXANE for American BioScience and its licensees for sales outside North America. Under this agreement, we have the non-exclusive right to manufacture ABRAXANE for sales worldwide. For sales outside of our licensed territories, we will charge American BioScience and its licensees a customary margin on our manufacturing costs based on whether the product will be used for clinical trials or commercial sale. The initial term of this agreement is ten years and may be extended for successive two-year terms by American BioScience.

 

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