|ARRAY BIOPHARMA INC filed this Form 10-K on 08/11/2017|
Ono Pharmaceutical Co., Ltd.
Effective May 31, 2017, the Company entered into a License, Development and Commercialization Agreement (the “Ono Agreement”) with Ono, pursuant to which Array granted Ono exclusive rights to commercialize binimetinib and encorafenib in Japan and the Republic of Korea (the “Ono Territory”), along with the right to develop these products in the Ono Territory. Array retains all rights outside the Ono Territory, as well as the right to conduct development and manufacturing activities in the Ono Territory.
Under the terms of the Ono Agreement, Array received an upfront cash payment of ¥3.5 billion, or $31.2 million, and Array retains all rights to conduct, either itself or through third parties, all clinical studies and file related regulatory filings with respect to binimetinib and encorafenib and to develop, manufacture and commercialize binimetinib and encorafenib outside the Ono Territory (subject to rights Array has granted to Pierre Fabre in certain countries). Array is entitled to receive up to ¥1.8 billion for achievement of four development milestones, ¥5.0 billion in milestone payments from Ono if eight regulatory milestones are achieved relating to certain Marketing Authorization Application filings and approval in Japan for two specified indications, and five commercialization milestones totaling ¥10.5 billion if certain annual net sales targets are achieved. A portion of these milestones represent Ono’s co-funding obligation as part of Ono’s participation in the Phase 3 BEACON CRC trial. The Company is further eligible for tiered double-digit royalties on annual net sales of binimetinib and encorafenib in the Ono Territory, starting at 22% for annual net sales under ¥10.0 billion and increasing to 25% for annual net sales in excess of ¥10.0 billion subject to certain adjustments. As of June 30, 2017, ¥1.0 billion was the equivalent of approximately $8.9 million.
All ongoing clinical trials involving binimetinib and encorafenib, including the BEACON CRC and COLUMBUS trials, continue as planned as of the effective date of the Ono Agreement, and Ono is entitled to the data derived from such studies. As part of the Ono Agreement, Ono obtained the right to participate in any future global development of binimetinib and encorafenib by contributing 12% of those future costs. Ono is responsible for seeking, and for any development of binimetinib and encorafenib specifically necessary to obtain, regulatory and marketing approvals for products in the Ono Territory. Array will furnish clinical supplies of drug substance to Ono for use in Ono’s development efforts, and Ono may elect to have Array provide commercial supplies of drug product to Ono pursuant to a commercial supply agreement to be entered into by Array and Ono, in each case the costs of which will be borne by Ono. Array has also agreed to discuss and agree on a strategy with Ono to ensure the supply to Ono of companion diagnostics for use with binimetinib and encorafenib in certain indications in the Ono Territory.
Each party has also agreed not to distribute, sell or promote competing MEK or RAF products in the Ono Territory during the term of the Ono Agreement. Each party has also agreed to indemnify the other party from customary matters specified in the Ono Agreement.
The Ono Agreement will continue in effect on a product-by-product, country-by-country basis for a period that expires ten years after the later of expiration of patent protection or marketing exclusivity for the applicable product. The Ono Agreement may be terminated by either party for breach of the Ono Agreement by the other party, in the event of the insolvency or bankruptcy of the other party, by Ono with 180 days’ prior notice after the fifth year after first commercial sale of either binimetinib or encorafenib in the Ono Territory, or by Ono on a product-by-product basis for certain safety reasons.
The Company determined that the license granted to Ono does not have stand-alone value apart from the services that Array will provide. Accordingly, the non-refundable $31.5 million upfront under the Ono Agreement is recorded as deferred revenue and is being recognized on a straight-line basis over 8.5 years, the period during which management expects that substantial development activities will be performed. License revenue recognized under this agreement was $0.3 million for the year ended June 30, 2017; at June 30, 2017 deferred revenue associated with this agreement was approximately $31.2 million. The Company incurred a foreign currency exchange loss related to the upfront payment in the amount of $0.3 million which was expensed as realized in fiscal 2017.