Item 1.01. Entry into a Material Definitive Agreement.
On April 12, 2021 (the “Effective Date”), Cerevel Therapeutics, Inc. (the “Company”), a wholly-owned subsidiary of Cerevel Therapeutics Holdings, Inc., entered into a funding agreement with NovaQuest Co-Investment Fund XVI, L.P. (“NovaQuest” and the “NovaQuest Funding Agreement”) and a funding agreement with BC Pinnacle Holdings, LP (“Bain,” the “Bain Funding Agreement” and, together with the NovaQuest Funding Agreement, the “Funding Agreements”), pursuant to which NovaQuest and Bain will provide funding to the Company to support its development of tavapadon for the treatment of Parkinson’s disease.
Pursuant to the Funding Agreements, the Company will receive up to $62.5 million in funding from each of NovaQuest and Bain, for a combined total of up to $125 million in funding (the “Total Funding Commitment”), of which approximately $31.3 million (25% of the Total Funding Commitment) will be received within 10 business days of the Effective Date, and $37.5 million (30% of the Total Funding Commitment), approximately $31.3 million (25% of the Total Funding Commitment) and $25.0 million (20% of the Total Funding Commitment) will be received on the first, second and third anniversaries of the Effective Date, respectively, subject to certain customary funding conditions.
In return, the Company agreed to pay to NovaQuest and Bain (1) upon approval of tavapadon by the FDA, a combined $187.5 million (1.5x of the Total Funding Commitment) (the “Approval Milestone Payment”), with 50% of the Approval Milestone Payment due within 30 days of FDA approval and 12.5% of the Approval Milestone Payment due on each of the first four anniversaries of FDA approval, (2) upon first reaching certain cumulative U.S. net sales thresholds, certain sales milestone payments and (3) combined tiered, mid-single digit to low-double digit royalties on annual net sales of tavapadon in the U.S.
At the time that NovaQuest and Bain collectively receive an aggregate of approximately $531.3 million (4.25x of the Total Funding Commitment), the Company’s payment obligations under the Funding Agreements will be fully satisfied. The Company has the option to satisfy its payment obligations to NovaQuest and Bain upon the earlier of FDA approval or May 1, 2025 by paying an amount equal to the Total Funding Commitment multiplied by a certain factor (which will initially be 3.00x and will increase over time to a maximum of 4.25x), less amounts previously paid to NovaQuest and Bain.
During the term of the Funding Agreements, the Company will use commercially reasonable efforts to develop and commercialize tavapadon in the United States, except that, upon the occurrence of certain significant safety, efficacy and regulatory technical failures of the program (each, a “Technical Failure”), the Company will have the right to terminate the development of tavapadon and, upon such termination, will not be obligated to make any payments to NovaQuest and Bain. If the Company suspends or terminates the development of tavapadon or fails to perform certain diligence obligations for any reason other than a Technical Failure, the Company will pay NovaQuest and Bain a combined amount equal to the total amount funded by NovaQuest and Bain up to the date of termination, plus 12% interest compounded annually.
The Company will grant NovaQuest and Bain a security interest in the assets material to the development and commercialization of tavapadon in the U.S., provided that the Company will be permitted to incur certain indebtedness and NovaQuest and Bain will agree to customary subordination in connection therewith. The Funding Agreements also include customary representations and warranties and covenants.
The foregoing description of the Funding Agreements does not purport to be complete and is qualified in its entirety by the full text of the Funding Agreements, copies of which will be filed as exhibits to a subsequent filing with the Securities and Exchange Commission.
Item 7.01. Regulation FD Disclosure.
On April 13, 2021, Cerevel Therapeutics Holdings, Inc. issued a press release announcing the entry into the Funding Agreements. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
