Keryx Biopharmaceuticals Inc fka KERX

[KarlDieGlatze]

10Q expanded data surrounding License Agreement with Vifor:

Vifor (International) Ltd. License Agreement

Summary of Agreement

In May 2017, the Company entered into a License Agreement with Vifor (International) Ltd., or Vifor, the Vifor Agreement, pursuant to which the Company will grant Vifor an exclusive license to sell vadadustat solely to Fresenius Kidney Care Group LLC, or FKC, an affiliate of Fresenius Medical Care North America, in the United States (the “Territory”).

The parties’ rights under the Vifor Agreement are conditioned upon the approval of vadadustat for DD-CKD patients by the FDA, inclusion of vadadustat in a bundled reimbursement model, and payment by Vifor of a $20.0 million milestone upon the occurrence of these two events. The Vifor Agreement is structured as a profit share arrangement between the Company and Vifor in which the Company will receive a majority of the profit from Vifor’s sales of vadadustat to FKC in the Territory. The Company will share the milestone payment and the revenue from the profit share with Otsuka pursuant to the Otsuka U.S Agreement. The Company retains all rights to commercialize vadadustat for use in the NDD-CKD market and in other dialysis organizations in the Territory, which will be done in collaboration with Otsuka following FDA approval.

Prior to FDA approval of vadadustat, the Company and Vifor will enter into a commercial supply agreement for vadadustat pursuant to which the Company will supply all of Vifor’s requirements for vadadustat in the Territory. In addition, Vifor will enter into a supply agreement with FKC that will govern the terms pursuant to which Vifor will supply vadadustat to FKC for use in patients at its dialysis centers. During the term of the Vifor Agreement, Vifor will not sell to FKC or its affiliates any HIF product that competes with vadadustat in the Territory.

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Unless earlier terminated, the Vifor Agreement will expire upon the later of the expiration of all patents that claim or cover vadadustat, or expiration of data or regulatory exclusivity for vadadustat in the Territory. Vifor may terminate the Vifor Agreement in its entirety upon 12 months’ prior written notice after the release of the first topline data in the vadadustat global Phase 3 program for dialysis-dependent CKD patients. Either party may terminate the Vifor Agreement in the event of the other party’s uncured material breach. The Company may also terminate the Vifor Agreement upon the occurrence of other events, such as for specific violations of the Vifor Agreement or if there are changes in Vifor’s relationship with FKC.

Investment Agreement

In connection with the Vifor Agreement, in May 2017, the Company and Vifor entered into an investment agreement, the Investment Agreement, pursuant to which the Company sold an aggregate of 3,571,429 shares of common stock, the Shares, par value $0.00001 per share, to Vifor at a price per share of $14.00 for a total of $50.0 million dollars. The amount representing the premium over the closing stock price of $12.69 on the date of the transaction, totaling $4.7 million, was determined by the Company to represent consideration related to the Vifor Agreement. As the parties’ rights under the Vifor Agreement are conditioned upon (a) the approval of vadadustat for DD-CKD patients by the FDA; (b) inclusion of vadadustat in a bundled reimbursement model; and (c) payment by Vifor of a $20.0 million milestone upon the occurrence of these two events, in accordance with ASC 605, the Company cannot currently determine the extent of its responsibility to supply all of Vifor’s requirements for vadadustat in the Territory. Accordingly, the $4.7 million is recorded as deferred revenue in the accompanying consolidated balance sheets. Upon the satisfaction of the aforementioned conditions, revenue will be recognized as the Company supplies vadadustat to Vifor using a proportional performance method.

Vifor has agreed to a lock-up restriction such that it agrees not to sell its shares for a period of time following the effective date of the Investment Agreement as well as a customary standstill agreement. In addition, the Investment Agreement contains voting agreements made by Vifor with respect to the Shares. The Shares have not been registered pursuant to Securities Act of 1933, the “Act”, and were issued and sold in reliance upon the exemption from registration contained in Section 4(a)(2) of the Act and Rule 506 promulgated thereunder.



If vadadustat is approved by the United States Food and Drug Administration, or FDA, we plan to establish our own commercial organization in the United States while leveraging our collaborations with Otsuka Pharmaceutical Co. Ltd., or Otsuka, and its well-established commercial organization in the United States, Europe, China and other markets. In Japan and other countries in Asia, we plan to commercialize vadadustat through our collaboration with Mitsubishi Tanabe Pharma Corporation, or MTPC. In May 2017, we entered into an exclusive license agreement with Vifor Pharma, or Vifor, to sell vadadustat solely to Fresenius Kidney Care Group LLC Fresenius Medical Care, or FKC, dialysis clinics in the United States upon approval by the FDA and inclusion of vadadustat in a bundled reimbursement model. During the term of the license agreement, Vifor may not sell to FKC or its affiliates any HIF product that competes with vadadustat in the United States.

In addition to vadadustat, we are developing a HIF-based portfolio of product candidates that target serious diseases of high unmet need. Our portfolio includes product candidates developed internally as well as in-licensed product candidates, such as AKB-5169. In February 2017, we signed an exclusive agreement with Janssen Pharmaceutica NV, or Janssen, a subsidiary of Johnson & Johnson, for access to an extensive library of well-characterized HIF pathway compounds with potential applications across multiple therapeutic areas. The lead compound, AKB-5169, is a differentiated preclinical compound in development as an oral treatment for inflammatory bowel disease, or IBD. We intend to complete further preclinical development of this compound with the goal of submitting an Investigational New Drug application to the FDA in 2018.

Since our inception in 2007, we have devoted the largest portion of our resources to our development efforts relating to vadadustat, including preparing for and conducting clinical studies of vadadustat, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through equity offerings and strategic collaborations.

We have never been profitable and have incurred net losses in each year since inception. Our net losses were $66.1 million and $61.6 million for the six months ended June 30, 2017 and 2016, respectively. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant operating expenses and increased operating losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:



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complete the development of vadadustat for anemia secondary to CKD;



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conduct the FO2RWARD and TRILO2GY clinical studies;



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seek regulatory approvals for our product candidates that successfully complete clinical trials;



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have our product candidates manufactured for clinical trials and for commercial sale;



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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;



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initiate and continue preclinical and clinical development of our HIF compounds and product candidates;



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initiate additional preclinical, clinical or other studies for additional indications for vadadustat;

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seek to discover and develop additional product candidates;



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acquire, in-license and develop other commercial products, product candidates and technologies;



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make royalty, milestone or other payments under any in-license agreements;



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maintain, protect and expand our intellectual property portfolio;



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attract and retain skilled personnel; and



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create additional infrastructure to support our operations as a public company.

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party contract research organizations, or CROs, to carry out our clinical development activities, and we do not yet have a sales organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to fund our operations through public or private equity or debt financings or other sources including geographic partnerships. However, we may be unable to raise additional funds or enter into other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our products.

Through June 2017, we have raised approximately $255.7 million of net proceeds, including $230.0 million from three underwritten public offerings and $25.7 million of net proceeds in an at-the-market offering, or ATM, pursuant to a Sales Agreement with Cantor Fitzgerald & Co.

In July 2017, we completed a follow-on-public offering whereby we sold 4,600,000 shares of common stock, including 600,000 shares of common stock pursuant to the full exercise of an over-allotment granted to the underwriters in connection with the offering, at a price of $14.50 per share. The aggregate net proceeds received by us from the offering were approximately $62.6 million, net of underwriting discounts and commissions and estimated offering expenses payable by us.

In addition to proceeds from our public offerings, in May 2017, we received $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma. Our collaborators have committed up to $373.0 million or more in license payments and cost-share funding, which the Company continues to receive on a quarterly prepaid basis.

https://www.sec.gov/Archives/edgar/data/1517022/000156459017016542/akba-10q_20170630.htm