4. Collaboration and Stock Purchase Agreements

Caelum

Agreement with Alexion

In January 2019, Caelum entered into a Development, Option and Stock Purchase Agreement (the “DOSPA”) and related documents by and among Caelum, Alexion Therapeutics, Inc. (“Alexion”), the Company and Caelum security holders as parties thereto (such security holders, including Fortress, the “Sellers”). Under the terms of the agreement, Alexion purchased a 19.9% minority equity interest in Caelum for $30 million. Additionally, Alexion has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which Alexion obtained a contingent exclusive option to acquire the remaining equity in Caelum. The agreement also provides for potential additional payments, in the event Alexion exercises the purchase option, for up to $500 million, which includes an upfront option exercise payment and potential regulatory and commercial milestone payments.

In December 2019, following the U.S. Food and Drug Administration (“FDA”) feedback which resulted in the redesign and expansion of Caelum’s planned clinical development program for its lead product candidate, CAEL-101, Caelum entered into an Amended and Restated DOSPA, which amended the terms of the existing agreement with Alexion. The amendment modified the terms of Alexion’s option to acquire the remaining equity in Caelum based on data from the expanded Phase 2/3 trials. The amendment also modified the development-related milestone events associated with the initial $30 million in contingent payments, provided for an additional $20 million in upfront funding, as well as funding of $60 million in exchange for an additional equity interest in Caelum at fair value upon achievement of a specific development-related milestone event.

In September 2020, following its Phase 2 open-label dose escalation study, Caelum announced the initiation of its Cardiac Amyloid Reaching for Extended Survival (“CARES”) Phase 3 clinical program to evaluate CAEL-101 a first-in-class amyloid fibril targeted therapy, in combination with standard-of-care (SoC) therapy in AL amyloidosis. The CARES clinical program includes two parallel Phase 3 studies – one in patients with Mayo stage 3a disease and one in patients with Mayo stage 3b disease – and will collectively enroll approximately 370 patients globally. Enrollment is underway in both studies. The primary objective of the clinical program is to assess overall survival.   The Phase 2 program continues with the addition of a study arm to evaluate CAEL-101 in combination with SoC therapy plus daratumumab.

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Avenue

Agreement with InvaGen

On November 12, 2018, the Company’s partner company, Avenue, entered into a Stock Purchase and Merger Agreement (“Avenue SPMA”) with InvaGen Pharmaceuticals Inc. (“InvaGen”) and Madison Pharmaceuticals Inc., a newly formed, wholly-owned subsidiary of InvaGen. Pursuant to the Avenue SPMA, and following approval by Avenue’s stockholders on February 8, 2019, InvaGen purchased a number of shares of Avenue common stock representing 33.3% of Avenue’s fully diluted capital stock for net proceeds to Avenue of $31.5 million (after deducting fees and other offering-related costs).

Upon the achievement of certain closing conditions (including most notably FDA approval for IV Tramadol, Avenue’s product candidate), InvaGen will be obligated to acquire Avenue via reverse subsidiary merger (the “Merger Transaction”). Under the Merger Transaction, InvaGen will pay $180 million (subject to certain potential reductions) to the holders of Avenue’s capital stock (other than InvaGen itself). In October 2020, InvaGen communicated to Avenue that it believes a Material Adverse Effect (as defined in the Avenue SPMA) has occurred, due to the COVID-19 pandemic, which means that it is possible that InvaGen is attempting to avoid their obligations to consummate the second stage closing under the Avenue SPMA. Avenue disagrees with InvaGen’s assertion that a Material Adverse Effect has occurred, and Avenue has advised InvaGen of this position.

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Subject to the terms and conditions described in the Avenue SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $7.0 million during the time period between February 8, 2019 and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

Prior to the closing of the Merger Transaction, Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights agent, pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones. If, during the period commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates at least $325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled to receive their pro rata share of (i) if the product generated less than $400 million in Net Sales during such calendar year, 10% of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $400 million and $500 million in Net Sales during such calendar year, 12.5% of Gross Profit, or (iii) if the product generated more than $500 million in Net Sales during such calendar year, 15% of Gross Profit. Additionally, at any time beginning on January 1, 2029 that IV Tramadol has generated at least $1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates $100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20% of the Gross Profit generated by IV Tramadol. These additional payments will terminate on the earlier of December 31, 2036 and the date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application (“NDA”) or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.

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On October 12, 2020, Avenue announced that it had received a Complete Response Letter (“CRL”) from the FDA regarding Avenue’s NDA for IV Tramadol.   The CRL cited deficiencies related to the terminal sterilization validation and stated that IV Tramadol, intended to treat patients in acute pain who require an opioid, is not safe for the intended patient population. Avenue requested a meeting with the FDA to resolve the issues described in the CRL and the meeting has been scheduled for the fourth quarter of 2020.

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Also in October 2020, InvaGen Pharmaceuticals Inc. (“InvaGen”) communicated to Avenue that it believes a Material Adverse Effect (as defined in the Stock Purchase and Merger Agreement (“Avenue SPMA”)) has occurred, due to the COVID-19 pandemic, which means that it is possible that InvaGen is attempting to avoid their obligations to consummate the second stage closing under the Avenue SPMA. Avenue disagrees with InvaGen’s assertion that a Material Adverse Effect has occurred, and Avenue has advised InvaGen of this position.