In return for the services provided by Cognate during 2013 in excess of the services that the Company had contracted for under the Prior Services Agreement, and in return for the completion of milestones by Cognate, and to cover the initiation of substantially expanded DCVax®-L manufacturing services following execution of the DCVax®-L Manufacturing and Services Agreement, the Company will make a Milestone and Initiation Payment. Such payment is comprised of 1,020,273 shares of common stock of the Company and a warrant to purchase 486,802 shares of common stock of the Company. The warrants are exercisable at $4.00 per share, and have an exercise period of five years from issuance.
The DCVax®-L Manufacturing and Services Agreement provides for substantial expansion of the manufacturing capacity and services dedicated to the Company’s DCVax®-L products along with expansion of the Company’s DCVax®-L program. This includes a substantial increase in the dedicated facilities and the number of production lots per month. The payment structure will remain the same as under the Prior Services Agreement, with payment of capacity fees for the amount of dedicated production capacity elected by the Company, and product lot production fees. The Company will elect the amounts of manufacturing capacity it wishes to obtain, specifying the minimum and maximum numbers of product lots per month. The Company will pay corresponding monthly capacity fees and product lot production fees (each subject to a minimum amount).
If the Company desires to start up, change or shut down a DCVax®-L program or facility, Cognate will prepare budgets for the capital expenditures required, in each case subject to the Company’s approval, and the Company will pay the approved budget amounts. If the Company elects to shut down, suspend or incur substantial delay in a DCVax®-L program in whole or in part, the Company will pay fees to cover costs associated with such a shutdown, suspension or substantial delay, the amount of which will depend on the stage of the program at the time of such shutdown, suspension or substantial delay. The prior shut-down, suspension or delay fee relating to our Glioblastoma multiforme (GBM) brain cancer clinical trial, which, as the Company previously reported, Cognate was entitled to receive under the prior manufacturing services agreement, is carried over to and incorporated in the DCVax®-L Manufacturing and Services Agreement.
The DCVax®-Direct Manufacturing and Services Agreement covers the manufacturing and related services for the DCVax-Direct program, which have been provided for well over a year. Throughout 2013, the Company requested that Cognate provide, and Cognate did provide, manufacturing services for DCVax®-Direct products prior to and in anticipation of execution of the DCVax®-Direct Manufacturing Services Agreement. Cognate also completed a number of significant milestones in the DCVax®-Direct program. Cognate completed certain pre-clinical development work both as to the DCVax®-Direct product and ingredients, and as to the DCVax®-Direct production system and methods. Cognate prepared and submitted product related regulatory filings and undertook regulatory compliance for the product aspects of DCVax-Direct, and launched the clinical trial manufacturing.
The DCVax®-Direct Manufacturing and Services Agreement provides for these services to continue and to expand substantially along with expansion of the Company’s DCVax®-Direct program. In return for the services provided by Cognate during 2013, and the completion of milestones by Cognate, and to cover the initiation of substantially expanded DCVax®-Direct manufacturing services following execution of the DCVax®-Direct Manufacturing and Services Agreement, the Company will make a Milestone and Initiation Payment. Such payment is comprised of 1,683,451 shares of common stock of the Company and a warrant to purchase 803,224 shares of common stock of the Company. The warrants are exercisable at $4.00 per share, and have an exercise period of five years from issuance.
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