| Item 1.01 | Entry Into a Material Definitive Agreement |
Letter Agreement with Ortho
On September 4, 2020, Quotient Limited (the “Company”) and Ortho-Clinical Diagnostics, Inc. (“Ortho”) entered into a binding letter agreement (the “Letter Agreement”) pursuant to which the Company and Ortho agreed:
| | • | | to confirm the termination of the parties’ prior Distribution and Supply Agreement, dated as of January 29, 2015, between QBD (QS-IP) Limited, Quotient Suisse SA and Ortho (the “Prior Ortho Agreement”) and various related contracts; |
| | • | | to end the parties’ disputes regarding the Prior Ortho Agreement by executing mutual releases and terminating their pending arbitration proceeding related to the Prior Ortho Agreement; and |
| | • | | to negotiate in good faith, and use their respective reasonable best efforts to execute, a new distribution agreement (the “New Distribution Agreement”) based on the terms set forth in the Letter Agreement, but if for any reason no such definitive agreement is reached, the Letter Agreement will govern the parties’ respective rights and obligations as a binding contract. |
Pursuant to the Letter Agreement, Ortho made an initial, non-refundable milestone payment of $7.5 million to the Company on the date of the Letter Agreement.
In the Letter Agreement the Company and Ortho have agreed that:
Ortho will have the right to distribute, market and sell a dedicated MosaiQ microarray optimized for the patient transfusion diagnostics market (the “IH3 Microarray”) in the European Territory (defined as the European Economic Area plus the United Kingdom and Switzerland) and in the United States, solely for use in testing the immuno-hematological profile of the blood of medical patients in the course of their care or treatment. Ortho’s rights in the two territories each will be for one ten-year term commencing on the receipt of specified regulatory approvals in the respective territory. The Company will retain the right to distribute, market and sell the immunohematology Microarrays for use in blood donor testing worldwide and in the patient testing market outside of the European Territory and the United States. Ortho’s rights in respect of the IH3 Microarray are exclusive provided it satisfies annual minimum purchase volume requirements in each territory. Ortho will also have the non-exclusive right to sell and distribute MosaiQ instruments in the United States and the European Territory for use in testing the immuno-hematological profile of blood of medical patients in the course of their care or treatment. Ortho will be required to purchase the IH3 Microarrays, and the instruments, controls and reagents required for their use, only from the Company at specified prices.
In addition to the initial $7.5 million milestone payment, Ortho will be required to make up to another $60 million of additional “milestone” payments upon achievement of certain regulatory milestones and commercial sales benchmarks, including up to $25 million upon the achievement by Ortho of certain cumulative gross revenue hurdles.
Under the Letter Agreement, the Company retains full control over the development of the IH3 Microarray and the Company will bear the costs of completing development of the IH3 Microarray and obtaining the requisite regulatory approvals in Europe and the United States. Although the Letter Agreement sets out target specifications for the IH3 Microarray, it provides that the Company will have no liability to Ortho if the Company alters them. The Company will be required to notify Ortho if the Company materially alters the target specifications. Ortho will then have 90 days within which to terminate the Letter Agreement (or the New Distribution Agreement, if one has been executed). Upon such a termination, neither party will have any further rights or obligations in respect of the IH3 Microarray or other microarrays.
The Letter Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Letter Agreement attached hereto.
