Item 1.01 Entry into a Material Definitive Agreement.
On March 5, 2024, we entered into a collaboration, option and license agreement (“Collaboration Agreement”) and Share Subscription Agreement (the “Subscription Agreement”) with Gilead Sciences, Inc. (“Gilead”). Under the terms of the Collaboration Agreement, we and Gilead agreed to collaborate on the use of Merus’ proprietary Triclonics® platform to develop certain trispecific T-cell engaging multi-specific antibody products for the treatment of certain indications. The collaboration shall include at least two, but may include up to three, separate preclinical research programs (each, a “Program”) for the design and validation of candidates directed to the applicable program targets selected by Gilead. On a Program-by-Program basis, we have granted Gilead an exclusive option to obtain an exclusive license for such Program. If Gilead exercises the license option with respect to a Program, Gilead will be responsible for the development and commercialization of the products arising from the Program.
Gilead will pay an upfront, non-refundable payment of $56 million for the rights granted under the Collaboration Agreement. If Gilead exercises its option to an additional Program, we will receive an initiation fee of $28 million. If Gilead exercises its license option for all Programs, we will receive up to a total of approximately $1.5 billion across all three programs. We are further eligible to receive, with respect to all products arising from a Program and country-by-country basis, tiered royalties based on the level of worldwide aggregate annual net sales at percentages ranging from the mid-single digits to low double digits until the royalty term expires, subject to customary reductions.
We also have an option to forego unachieved development milestones and royalties to enter into a 50/50 split of net profits and net losses arrangement for the third program upon a specified time period triggered by the first investigational new drug application filing for the third Program.
The Collaboration Agreement will continue in full force and effect, on a Program-by-Program basis, until Gilead fails to exercise the license option for such Program or the expiration of the royalty term. If we have exercised the option for a profit and loss share with respect to the third Program, the Collaboration Agreement will continue with respect to such third Program until the parties have ceased exploiting all related products. Gilead may terminate the Collaboration Agreement upon a specified notice period for any reason at any time or for futility. Either party may terminate the Collaboration Agreement for the material breach of the other party that remains uncured after the specified notice period or for insolvency. We have the right to terminate the agreement in the event Gilead challenges one of our patents.
Item 3.02 Unregistered Sales of Equity Securities.
In connection with entering into the Collaboration Agreement, pursuant to the Subscription Agreement, Gilead purchased 452,527 common shares of the Company (the “Shares”) at a price per share of $55.2454 for aggregate gross proceeds to the Company of approximately $25 million (the “Private Placement”). Gilead agreed not to transfer, sell, or otherwise dispose of the Shares for a period of time following the purchase of the Shares, subject to certain customary exceptions.
The Shares were issued in reliance upon an exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company relied on this exemption from registration for private placements based in part on the representations made by Gilead, including the representations with respect to Gilead’s status as an accredited investor, as such term is defined in Rule 501(a) of the Securities Act, and Gilead’s investment intent. Accordingly, the Shares have not been registered under the Securities Act.
Forward-Looking Statements
This Current Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Current Report are forward-looking statements, including without limitation, statements regarding the parties’ performance under the Collaboration Agreement, the potential economics of the Collaboration Agreement, including any payments we may receive, our cash, cash equivalents and marketable securities, and the sufficiency of our cash, cash equivalents,
