Business Context and Reporting Period
This Form 6-K filing by CollPlant Holdings Ltd. (the "Company") covers the month of October 2018. The report details a strategic partnership entered into on October 19, 2018, between CollPlant Ltd., a wholly-owned subsidiary of the Company, and Lung Biotechnology PBC ("LB"), a subsidiary of United Therapeutics Corporation.
Key Financial Metrics and Transaction Value
The filing describes a License, Development and Commercialization Agreement with significant potential financial value, though no historical revenue or profit data is provided in this specific document.
- Upfront Payment: $5 million cash payment upon effectiveness of the Agreement.
- Option Payments: One-time non-refundable payments of $3 million per Option Product, totaling up to $9 million for three additional organs.
- Milestone Payments: Up to $30 million in aggregate, including:
- $5 million upon completion of U.S. facility design.
- $5 million upon production of a specified amount of Bioink.
- Up to $20 million for FDA marketing approvals ($5 million per Covered Product).
- Recurring Revenue: Fixed-fee royalty payments on commercial sales, fees for Bioink supply, and cost reimbursements for the U.S. facility and Israel Innovation Authority (IIA) payments.
Material Changes and Strategic Developments
The primary material change is the execution of the exclusive, perpetual, royalty-bearing license granting LB rights to use CollPlant's rhCollagen and BioInk for engineered lungs and lung substitutes via 3D bioprinting. Key operational changes include:
- Exclusivity: CollPlant is restricted from conducting research or granting licenses for Covered Products during the term, unless options expire.
- Facility Construction: LB is required to build or engage a manufacturer to build a U.S. facility for rhCollagen and BioInk production, with CollPlant collaborating on design.
- Supply Terms: LB will purchase Bioink non-exclusively; CollPlant will supply a limited quantity free of charge for the first two years.
Guidance, Risks, and Contingencies
The Agreement is subject to specific conditions precedent before substantive terms and payments become effective:
- Regulatory Approval: Requires approval by the Israel Innovation Authority (IIA) and acceptance by LB.
- Representations: CollPlant's representations and warranties must remain accurate.
- Reimbursement Agreement: Written agreement on the maximum portion of IIA payments LB must reimburse.
Risks and Termination:
- LB may terminate the entire Agreement or specific patent licenses with 30 days' written notice.
- CollPlant may terminate if LB challenges patents or discontinues development for one year.
- Either party may terminate for material breach or bankruptcy.
- Certain terms are omitted due to a Confidential Treatment Request.
Investor Verification Checklist
- Verify the status of the Israel Innovation Authority (IIA) approval required for the Agreement to become effective.
- Confirm the timeline for the construction of the U.S. manufacturing facility by LB.
- Review the full text of the Agreement (Exhibit 10.1) to understand omitted confidential terms.
- Assess the financial impact of the $5 million upfront payment once the effectiveness conditions are met.
- Monitor LB's development progress to ensure the one-year discontinuation clause is not triggered.