Item 1.01 Entry Into a Material Definitive Agreement
On May 16, 2014, Zogenix, Inc. (the "Company") closed (the "Closing") the
previously announced sale of its SUMAVEL® DosePro® Needle-free Delivery System
(sumatriptan injection) product line to Endo Ventures Bermuda Limited ("Endo
Ventures Bermuda") and Endo Ventures Limited ("Endo Ventures" and, together with
Endo Ventures Bermuda, the "Buyers"), pursuant to an Asset Purchase Agreement,
dated as of April 23, 2014, between the Company and the Buyers.
At the Closing, the Company and Endo Ventures Bermuda entered into a license
agreement (the "License Agreement"), pursuant to which the Company granted Endo
Ventures Bermuda an exclusive, perpetual, irrevocable (unless terminated as set
forth in the License Agreement), fully paid-up, royalty-free license to make and
have made (subject to the limitations in the License Agreement), use and
research, develop and commercialize SUMAVEL DosePro (the "Product") throughout
the world under a specified subset of Zogenix's DosePro technology patents and
know-how. Zogenix retained all rights to the DosePro technology patents and
know-how for use with other products.
Under the License Agreement, Zogenix has the right to review and comment on
pre-clinical, non-clinical and clinical trial protocols for the Product to the
extent they implicate the DosePro technology more broadly. In addition, Zogenix
has the right to review and comment on drafts of regulatory filings and
correspondence regarding major or material issues proposed to be made or sent
with respect to the Product to the extent they implicate the DosePro technology
more broadly, prior to their submission to regulatory authorities.
Zogenix agreed that, during the term of the License Agreement, neither it nor
its affiliates will, directly or indirectly, research, develop and commercialize
any needle-free, injection, drug delivery device administering sumatriptan as
the sole active ingredient for use in humans anywhere in the world, subject to
certain exceptions described in the License Agreement.
Either party may terminate the License Agreement in the event of the other
party's uncured material breach.
At the Closing, the Company and Endo Ventures also entered into a supply
agreement (the "Supply Agreement"), pursuant to which the Company will retain
the sole and exclusive right and the obligation to manufacture, have
manufactured, supply or have supplied the Product to Endo Ventures, subject to
Endo Venture's right to qualify and maintain a back-up manufacturer. Endo
Ventures will exclusively purchase the Product supplied by the Company at the
cost of goods sold plus two and one-half percent.
Under the Supply Agreement, Endo Ventures will support the Company's Product
manufacturing operations with a working capital advance equivalent to the book
value of the inventory of materials and unreleased finished goods held by the
Company in connection with the manufacture of the Product minus the accounts
payable associated with such materials and unreleased finished goods, capped
initially at $7 million and subject to adjustment. The working capital advance
will be evidenced by a promissory note (the "Note") and will be secured by liens
on materials and unreleased finished Product.
If the Product is the only product manufactured with the Company equipment and
processes, all capital investment and improvement projects will be paid by Endo
The Supply Agreement may be terminated by either party upon three years prior
written notice, provided that the notice cannot be given prior to the fifth
anniversary of the Closing Date. Either party may also terminate the Supply
Agreement in the following circumstances: (i) if the other party breaches any
material term of the agreement and fails to
cure such breach within a specified time period following written notice; or
(ii) upon the occurrence of certain financial difficulties. Endo Ventures also
may terminate the Supply Agreement in the following circumstances: (i) if the
Product has been deemed ineffective or unsafe by the applicable governmental
authorities; or (ii) if the Company fails to supply to Endo Ventures a minimum
quantity of Product over the course of a six month period which results in Endo
Ventures being unable to supply the Product to its trade customers.
The foregoing descriptions do not purport to be complete and are qualified in
their entirety by reference to the License Agreement, the Supply Agreement and
the Note, copies of which the Company expects to file with the Company's
Quarterly Report on Form 10-Q for the quarter ending June 30, 2014.
Item 1.02 Termination of a Material Definitive Agreement
On May 16, 2014, in connection with the sale of the SUMAVEL® DosePro®
Needle-free Delivery System (sumatriptan injection) product line to the Buyers,
Cowen Healthcare Royalty Partners II, L.P. ("HRP") exercised its right to
terminate the Financing Agreement, dated June 30, 2011, between the Company and
HRP (the "Financing Agreement"). Pursuant to the Financing Agreement, the
Company was required to make a final payment of $40 million to HRP. The Company
no longer has any payment obligations under the Financing Agreement, and all
encumbrances on the Company's intellectual property and personal property under
the Financing Agreement were terminated.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation Under an Off-Balance Sheet Arrangement.
The information provided in Items 1.01 and 1.02 of this Form 8-K is hereby
incorporated by reference into this Item 2.04.
Zogenix cautions you that statements included in this report that are not a
description of historical facts are forward-looking statements. The inclusion of
forward-looking statements should not be regarded as a representation by Zogenix
that any of its plans will be achieved. Actual results may differ materially
from those set forth in this report due to the risks and uncertainties inherent
in Zogenix's business, including, without limitation: the ability of the Buyers
to achieve the pre-determined sales and manufacturing milestones; Zogenix's
dependence on third-party suppliers to ensure continued adequate supply of
SUMAVEL DosePro to affiliates of the Buyers; and other risks detailed in
Zogenix's prior public periodic filings with the Securities and Exchange
Commission. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. All
forward-looking statements are qualified in their entirety by this cautionary
statement and Zogenix undertakes no obligation to revise or update this report
to reflect events or circumstances after the date hereof. This caution is made
under the safe harbor provisions of Section 21E of the Private Securities
Litigation Reform Act of 1995.