Avid Bioservices Inc (CDMO)

[freethemice]

From the 2012 Annual report. Maybe another reason to partner with Genentech (Roche)?
https://materials.proxyvote.com/Approved/713661/20120822/AR_140648/
In-Licensing Collaborations
The following discussions cover our collaborations and in-licensing obligations related to our
products in clinical trials:
PS-Targeting Program
During fiscal year 2011, we expensed $114,000 associated with milestone obligations under inlicensing
agreements covering our PS-targeting program, which is included in research and development
expense in the accompanying consolidated statements of operations. We did not incur any milestone related
expenses during fiscal years 2012 and 2010. In addition, no product revenues have been generated from the
PS-targeting program to date. The following represents a summary of our current potential milestone
obligations under our various agreements covering our bavituximab and PGN650 programs:
Bavituximab
In August 2001 and August 2005, we exclusively in-licensed the worldwide rights to the PS-targeting
technology platform from the UT Southwestern Medical Center at Dallas (“UTSWMC”), including
bavituximab. During November 2003, we entered into a non-exclusive license agreement with Genentech,
Inc., to license certain intellectual property rights covering methods and processes for producing antibodies
used in connection with the development of our PS-targeting program. During December 2003, we entered
into an exclusive commercial license agreement with Avanir Pharmaceuticals, Inc., (“Avanir”) covering the
generation of a chimeric monoclonal antibody. In March 2005, we entered into a worldwide non-exclusive
license agreement with Lonza Biologics (“Lonza”) for intellectual property and materials relating to the
expression of recombinant monoclonal antibodies for use in the manufacture of bavituximab.
Under our in-licensing agreements relating to bavituximab, we typically pay an up-front license fee,
annual maintenance fees, and are obligated to pay future milestone payments based on potential clinical
development and regulatory milestones, plus a royalty on net sales and/or a percentage of sublicense income.
The applicable royalty rate under each of the foregoing in-licensing agreements is in the low single digits.
The following table provides certain information with respect to each of our in-licensing agreements relating to our bavituximab program.

(1) Potential future milestone obligations are generally tied to regulatory progress to gain product approval, which approval significantly
depends on positive clinical trials results. In addition, potential future milestone obligations vary by license agreement (as defined in each
license agreement) and depend on valid claims under each of these underlying agreements at the time the potential milestone is achieved,
however, the following clinical development and regulatory milestones are typical of such potential future milestone events: upon dosing
of first patient in a Phase I, Phase II, and/or Phase III clinical trial; completion of patient enrollment in a phase II trial; submission of a
biologics license application in the U.S.; and upon FDA approval.
(2) Expiration date of the license agreement occurs upon expiry of underlying patents. These patents, and certain related patent applications
that may issue as patents, are currently set to expire between 2019 and 2021.
(3) Expiration date of the license agreement occurs upon expiry of underlying patents. These patents, and certain related patent applications
that may issue as patents, are currently set to expire between 2023 and 2025.
(4) Expiration date of the license agreement is 15 years from first commercial sale or upon expiry of underlying patents, whichever occurs last.
The last patent covered under this license agreement expires in November 2016.
(5) In fiscal year 2011, we incurred a milestone fee of 37,500 pounds sterling ($64,000 U.S.) upon commencement of patient enrollment in our
first randomized phase II clinical trial using bavituximab, which amount would continue as an annual license fee thereafter until completion
of patient enrollment, at which time the annual license fee would increase to 75,000 pounds sterling per annum. During fiscal year 2012,
we completed patient enrollment of the aforementioned phase II clinical trial, which triggered the annual license fee to increase to 75,000
pounds sterling per annum (or approximately $122,000 U.S. based on the exchange rate at April 30, 2012). In addition, in the event we
utilize an outside contract manufacturer other than Lonza to manufacture bavituximab for commercial purposes, we would owe Lonza
300,000 pounds sterling per year (or approximately $488,000 U.S. based on the exchange rate at April 30, 2012).
(6) Expiration date of license agreement is 10 years from first commercial sale in each respective country.

Of the total potential future milestone obligation of $6,800,000, we anticipate milestone obligations not
to exceed $200,000 during fiscal year 2013. In addition, of the total potential future milestone obligations of
$6,800,000, up to $6,400,000 would be due upon the first commercial approval of a drug candidate developed
under our PS-targeting program, including bavituximab, with the technologies licensed pursuant to such license
agreements. However, given the uncertainty of the drug development and the regulatory approval process, we
are unable to predict with any certainty when any of these milestones will occur, if at all.
PGN650
In October 1998, we exclusively in-licensed worldwide rights from UTSWMC, to certain patent
families, which was amended in January 2000 to license patents related to aminophospholipid targeting
conjugates, such as PGN650. Under the October 1998 license agreement, as amended, we are obligated to
pay UTSWMC future milestone payments of up to $300,000 for PGN650 based on the achievement of certain
potential clinical development and commercial milestones, plus a low single digit royalty on net sales. Under
this agreement, we do not anticipate any milestone obligations during fiscal year 2013.
In addition, during fiscal year 2007, we entered into a research collaboration agreement and a
development and commercialization agreement with Affitech A/S regarding the generation and
commercialization of a certain number of fully human monoclonal antibodies under our platform technologies
to be used as possible future clinical candidates, including our imaging agent PGN650. Under the terms of
the development and commercialization agreement, we have elected to enter into a license agreement for the
PS-targeting antibody used to create PGN650, and therefore, are obligated to pay future milestones payments
of up to $1,971,000 based on the achievement of certain potential clinical development and regulatory
milestones, plus a low single digit royalty on net sales. We anticipate milestone obligations for PGN650
under this agreement to not exceed $101,000 during fiscal year 2013.