I am highlighting the following agreement which was announced last December between US clinical-stage biotech, Kodiak Sciences and Baker Brothers Advisors, not because I’m suggesting that this is the direction that Neuren will take, but rather to give some insight into the potential variety and complexity of deal proposals that could come Neuren's way.
And in case anyone is wondering how this Baker Bros.’ arrangement was perceived by the market, I’ve also provided KOD’s stock price graph below. From US$30 just prior to announcement of the funding deal, the stock price later rose to a peak of $82.75. The public offering which was obligated as part of the funding deal was announced the same day as the deal. The offer was priced at US$46 and raised a further US$317m for Kodiak. Baker Bros. took its full entitlement in the offer – 1.9 million of the 6 million shares offered.
Funding Agreement
On December 1, 2019, Kodiak Sciences Inc. and its subsidiary Kodiak Sciences GmbH (the “Company” entered into a funding agreement (the “Funding Agreement” with Baker Bros. Advisors, LP, on behalf of its affiliate (together, “BBA”, pursuant to which BBA purchased the right to receive a capped 4.5% royalty on future net sales of the Company’s anti-VEGF antibody biopolymer conjugate therapy known as KSI-301 in exchange for $225,000,000 in committed development funding payable to the Company (the “Funding Amount”. Unless earlier terminated or re-purchased by the Company, the royalty terminates upon the date that BBA has received an aggregate amount equal to 4.5 times the Funding Amount paid to the Company. Under the terms of the agreement, BBA is required to pay to the Company the first $100,000,000 of the Funding Amount at the closing of the Funding Transaction (expected to occur on January 10, 2020) and the remaining $125,000,000 of the Funding Amount following the achievement of, among other things, 50% enrollment in each of (i) the planned Phase 3 clinical trial of KSI-301 for branch retinal vein occlusion and (ii) the planned Phase 3 clinical trial of KSI-301 for central retinal vein occlusion (estimated to occur in late 2020).
The Company has the option, exercisable at any point during the term of the Funding Agreement, to repurchase from BBA 100% of the royalties due to BBA under the Funding Agreement for a purchase price equal to the Funding Amount paid to the Company as of such time times 4.5 less amounts paid by the Company to BBA.
Under the Funding Agreement, BBA also received a right to a royalty interest on future net sales of other Company products that employ an anti-vascular endothelial growth factor A (VEGF-A) biology as a sole molecular or chemical biology (a “VEGF-A Product”. In the event the Company commercializes related products that contain both an anti-VEGF-A biology together with at least one additional molecular or chemical biology(ies), BBA would have the right to receive a fractional royalty up to 2.25% for one additional molecular or chemical biology or 1.5% for two additional molecular or chemical biologies provided that such other products are being progressed in indications for, or patient populations with, retinal vein occlusion, wet AMD or diabetic macular edema, or indications or patient populations in which KSI-301 or a VEGF-A Product has received marketing approval. Total royalty payments under the Funding Agreement are not to exceed the cap of 4.5 times the Funding Amount paid to the Company.
The Funding Agreement was the result of a competitive process overseen by independent and disinterested members of the board of directors of Kodiak Sciences Inc. with the assistance of outside counsel.
The Funding Agreement contains various representations and warranties, covenants, indemnification obligations and other provisions customary for transactions of this nature.
The foregoing description of the Funding Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Funding Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Letter Agreement
On December 1, 2019, in connection with the Funding Agreement, the Company entered into a letter agreement with BBA that, subject in all cases to compliance with applicable securities laws and regulations, requires that in the event the Company offers, on or before June 30, 2020, shares of common stock in an equity financing registered under the Securities Act of 1933, as amended (“Qualified Offering”, the Company will use its best efforts to cause the managing underwriters of such Qualified Offering to allow BBA to participate in the Qualified Offering in an amount up to (but not in excess of) (a) 25% of the shares offered in the Qualified Offering, as the case may be (excluding any option to purchase additional shares that may be granted to the underwriters), plus (b) additional shares equal to $25 million divided by the price per share to the public in the Qualified Offering.
entered into a funding agreement (the “Funding Agreement”
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