TRANSACTIONS WITH RELATED PERSONS AND INDEMNIFICATION
The following includes a summary of transactions
sinceduring the
date of our incorporationlast two completed fiscal years to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of our total assets as of our last two completed fiscal years, and in which any of our directors, director nominees, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.
Series A Convertible Preferred Stock Financing Subsequent Closing
In April 2019, we sold an aggregate of 59,844,699 shares of our Series A convertible preferred stock at a purchase price of $1.00259507 per share, for an aggregate purchase price of $60.0 million, to certain investors who purchased shares in the initial closing of the sale of our Series A convertible preferred stock. Upon the closing of our initial public offering in July 2019, each share of our Series A convertible preferred stock automatically converted into 0.125 shares of our common stock.
The following table summarizes purchases of shares of our Series A convertible preferred stock in the April 2019 closing by holders of more than 5% of our capital stock and entities affiliated with members of the Board.
| | | | | | | | |
Participants(1) | | Shares of Series A Convertible Preferred Stock Purchased | | | Aggregate Purchase Price | |
Entities affiliated with New Enterprise Associates(2) | | | 14,961,180 | | | $ | 15,000,005.31 | |
Frazier Life Sciences IX, L.P.(3) | | | 12,467,650 | | | $ | 12,500,004.42 | |
Entities affiliated with Deerfield(4) | | | 12,467,650 | | | $ | 12,500,004.42 | |
Novo Holdings A/S(5) | | | 7,480,590 | | | $ | 7,500,002.65 | |
RiverVest Venture Fund IV, L.P.(6) | | | 5,984,472 | | | $ | 6,000,002.12 | |
(1) | Additional details regarding these stockholders and their equity holdings are included in this Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”
|
(2) | Consists of (i) 28,889,945 shares of Series A convertible preferred stock purchased by NEA 16 and (ii) 12,467 shares of Series A convertible preferred stock purchased by NEA Ventures 2018, L.P. (“NEA Ventures”). Mr. Mathers, a member of the Board, is employed as a Partner at New Enterprise Associates, Inc., which is affiliated with NEA 16 and NEA Ventures.
|
(3) | Mr. Heron, a member of the Board, is one of two managing members of FHMLS IX, L.L.C., an entity affiliated with Frazier IX.
|
(4) | Consists of (i) 12,467,650 shares of Series A convertible preferred stock purchased by Deerfield Healthcare Innovations, and (ii) 12,467,650 shares of Series A convertible preferred stock purchased by Deerfield Private Design IV. Jonathan Leff, a former member of the Board who resigned in July 2019, is employed as a partner at Deerfield Management Company, L.P., an entity affiliated with Deerfield Private Design IV and Deerfield Healthcare Innovations.
|
(5) | Dr. Aynechi, a member of the Board, is employed as a Partner at Novo Ventures, which provides certain consultancy services to Novo.
|
(6) | Dr. O’Donnell, a member of the Board, is a manager at RiverVest Venture Partners IV, LLC, an entity affiliated with RiverVest.
|
Investors’ Rights Agreement
We are party to an Investors’ Rights Agreement (the “Rights Agreement”) with certain holders of our capital stock, including entities affiliated with NEA 16, Frazier IX, Deerfield Healthcare Innovations, Deerfield Private Design IV, Novo, RiverVest and Shire, as well as certain affiliates of our directors. The Rights Agreement
provides such holders with certain registration rights with respect to the registrable securities held by them. The registration rights of each holder terminate upon the earliest to occur of (i) such time as the holder holds less than 1% of our outstanding securities and all of such holder’s registrable securities may be sold without any restriction on volume or manner of sale in any three-month period under SEC Rule 144 or any successor rule and (ii) the fifth anniversary of our initial public offering.
Agreements with Shire International GmbH (Takeda)
Below is a description of the agreements we have entered into with Shire International GmbH (“Shire”), a holder of more than 5% of our capital stock that has been acquired by Takeda, during the last two completed fiscal years.
Assignment and License Agreement
In November 2018, we entered into an assignment and license agreement (the “Shire License Agreement”), with Shire. Pursuant to the Shire License Agreement, Shire assigned, transferred and conveyed all of its right, title and interest in and to certain agreements with Satiogen Pharmaceuticals, Inc. (“Satiogen”), Pfizer Inc. and Sanofi-Aventis Deutschland GmbH (“Sanofi”).
In addition, Shire granted us an exclusive, royalty bearing, sublicensable, worldwide license under certain regulatory materials as well as patents and know-how relating to the maralixibat compound and the volixibat compound in development by Shire as of that date (collectively, the “Shire Licensed Products”), to develop, have developed, make, have made, use, sell, have sold, offer for sale or import the Shire Licensed Products worldwide for the therapeutic or prophylactic application in human health. We have sole authority and responsibility over development and commercialization activities for the Shire Licensed Products, and we are required to use commercially reasonable efforts to perform certain development, regulatory and commercialization activities with respect to the progressive familial intrahepatic cholestasis (“PFIC”), Alagille syndrome (“ALGS”) and biliary atresia (“BA”) indications for maralixibat and unspecified indications with respect to volixibat. We will solely own all inventions and discoveries arising out of activities conducted by us under the Shire License Agreement. We will also be responsible for the preparation, filing, prosecution and maintenance of patents under the Shire License Agreement and the cost thereof. We have the first right, but are not obligated, to enforce any patent licensed under the Shire License Agreement.
We are also required to pay Shire up to an aggregate of $107.0 million upon the achievement of certain other clinical development and regulatory milestones for maralixibat in the PFIC, ALGS and BA indications, and a $25.0 million payment upon regulatory approval of maralixibat for each and every other indication. Each such milestone payment will be paid only once for each such indication during the term of the Shire License Agreement, the first time maralixibat reaches such milestone event, regardless of the number of times such milestone is reached by maralixibat for the same indication. In addition, we are required to pay up to an aggregate of $30.0 million upon the achievement of certain clinical development and regulatory milestones for volixibat solely for the first indication sought. Each such milestone payment will be paid only once for the first indication for which volixibat is developed during the term of the Shire License Agreement, the first time volixibat reaches such milestone event, regardless of the number of products or the number of indications for which volixibat is developed.
In July 2019, we achieved a development milestone under the Shire License Agreement related to the initiation of the Phase 3 MARCH clinical trial and made a $2.5 million payment to Shire and a $0.5 million payment to Satiogen accordingly. In December 2020, we achieved a further development milestone related to the submission of the marketing authorization application for maralixibat for the treatment of PFIC2 and made a $10.0 million payment to Shire.
Upon achievement of certain thresholds for aggregate worldwide net sales for all Shire Licensed Products, we are required to pay Shire, on a one-time, non-refundable and non-creditable basis, up to an aggregate of $30.0 million in tiered sales milestone payments. Lastly, upon certain annual worldwide net sales of all Shire
Licensed Products, we are required to pay Shire, on a non-refundable and non-creditable basis, tiered royalties with rates ranging from low double-digits to mid-teens (the “Shire royalties”). If we actually make royalty payments to Sanofi under the agreement with Sanofi that Shire assigned to us under the Shire License Agreement, the Shire royalties will be reduced by low to high single digit percentages of certain net sales thresholds. Similarly, if we actually make royalty payments to Satiogen under the agreement with Satiogen that Shire assigned to us under the Shire License Agreement, the Shire royalties will be reduced by a low single digit percentage of net sales.
Under the Shire License Agreement, we are prohibited from developing any competing product prior to the five year anniversary of the first commercial sale of a Shire Licensed Product, or commercializing any competing product prior to the eight year anniversary of the first commercial sale of a Shire Licensed Product. For purposes of the Shire License Agreement, a competing product is any product that is or contains a compound (A) where the primary method of action is apical sodium-dependent bile acid transporter (“ASBT”) inhibition activity or (B) that is commercialized or developed for any PFIC, ALGS or BA indication, except (B) shall not apply with respect to (1) a given indication if a product failure has occurred with respect to such indication (e.g., if a product failure has occurred for a Shire Licensed Product for the BA indication, we may thereafter develop and commercialize a product for the BA indication if such product uses a different primary method of action than ASBT inhibition activity) or (2) a given product if such product is a product that is not deleterious to the sales or pricing of a Shire Licensed Product.
The Shire License Agreement will remain in effect on a country-by-country and Shire Licensed Product-by-Shire Licensed Product basis and will continue on such basis until the later of the (i) expiration of the last patent or patent application licensed under the Shire License Agreement that covers a Shire Licensed Product, (ii) expiration of any regulatory exclusivity period, and (iii) tenth anniversary of the first commercial sale of such Shire Licensed Product in such country. The term of the last patent or patent application licensed under the Shire License Agreement ends on October 26, 2032, absent patent term adjustment or extension. After November 5, 2021, we may unilaterally terminate the Shire License Agreement for any reason or no reason upon 90 days’ written notice to Shire. In addition, we may also terminate the Shire License Agreement if we reasonably determine that we are precluded from further development due to materially adverse pre-clinical or clinical pathology or toxicology data. Either party may terminate the Shire License Agreement in the event of the other party’s insolvency or for the other party’s material breach of the Shire License Agreement that remains uncured after 90 days of receiving written notice of such breach. Shire may terminate the Shire License Agreement upon our or our affiliates’ challenge to the validity of the patents licensed under the Shire License Agreement.
Transition Services Agreement
In January 2019, we entered into a Transition Services Agreement (the “TSA”) with Shire. The TSA covers services to be provided by Shire to transfer certain research and development activities on the compounds acquired and the related know-how from Shire to us, including continuation of work on any existing trials until fully transferred to us. We will reimburse Shire for the applicable fair trade equivalent cost plus Shire’s reasonable and documented out-of-pocket costs incurred on behalf of Shire or its affiliates for the conduct of its services under the TSA, up to an amount not to exceed 105% of such costs. Under the TSA, we are obligated to use commercially reasonable efforts to effectuate the transition of existing trials as promptly as practicable. In addition, two employees of Shire became employees of our company under the TSA. The TSA will remain in effect until the earlier of (i) the last date on which Shire is obligated to provide any service under the TSA, (ii) the mutual written agreement of us and Shire, or (iii) the termination of the Shire License Agreement. We completed the activities under the TSA and finalized amounts due to Shire for services and pass-through expenses on existing trials and manufacturing activities in the second quarter of 2019.
Participation in Initial Public Offering
Certain holders of more than 5% of our capital stock, specifically entities affiliated with NEA 16, Frazier IX, RiverVest, Deerfield Healthcare Innovations, Deerfield Private Design IV, and Novo, purchased, and we directed
allocations for, an aggregate of approximately $31.6 million of shares of our common stock in our initial public offering in July 2019 at the public offering price and on the same terms as the other purchasers in such offering and not pursuant to any pre-existing contractual rights or obligations.
Indemnification Agreements
Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws also provide the Board with discretion to indemnify our employees and other agents when determined appropriate by the Board. In addition, we have entered into an indemnification agreement with each of our directors and executive officers, which will require us to indemnify them. For more information regarding these agreements, see “Executive Compensation—Limitations on Liability and Indemnification Matters.”
Policies and Procedures for Transactions with Related Persons
We maintain a written policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the approval or ratification of our board of directors or our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $120,000 (or, if less, 1% of the average of our total assets in a fiscal year) and such person would have a direct or indirect interest, must be presented to the Board or the Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, the Board or the Audit Committee is to consider the material facts of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.