Business Context and Reporting Period
Company: Exicure, Inc. (XCUR)
Filing Type: Form 8-K (Current Report)
Date of Report: November 14, 2019
Event Date: November 13, 2019
Context: The Company entered into a Collaboration, Option and License Agreement with Allergan Pharmaceuticals International Limited, a wholly-owned subsidiary of Allergan plc. The agreement focuses on spherical nucleic acid (SNA) based therapeutics for the treatment of hair loss disorders.
Key Financial Metrics and Deal Terms
This filing details a strategic partnership rather than periodic financial results. Key financial terms include:
- Upfront Payment: $25 million received immediately upon execution.
- Option Exercise Fees: $10 million per program if exercised during the initial period; $15 million per program if exercised during an extension period.
- Option Extension Payment: $10 million per program to extend the option exercise period.
- Development and Regulatory Milestones: Up to $195 million aggregate if both options are exercised (triggered by clinical trial initiation and regulatory filings).
- Commercial Milestones: Up to $530 million aggregate if both options are exercised (triggered by first commercial sales and sales thresholds).
- Royalties: Tiered royalties ranging from mid-single digits to mid-teens on future net product sales.
- Third-Party Obligations: A percentage of payments is payable to Northwestern University under existing license agreements.
Material Changes and Operational Impact
The primary material change is the establishment of a two-program collaboration with Allergan. Under the agreement:
- Exicure retains responsibility for discovery and development costs through initial preclinical activities and, if an extension payment is made, activities necessary for the first Investigational New Drug (IND) filing.
- Allergan assumes responsibility for further development and commercialization upon exercising an option.
- Allergan receives exclusive, royalty-bearing, worldwide rights to develop, manufacture, use, and commercialize the SNA therapeutics.
Outlook, Risks, and Contingencies
Management Commentary and Outlook: The agreement provides a pathway for potential significant future revenue through milestones and royalties, contingent on Allergan exercising options and achieving clinical and commercial success.
Risks and Contingencies:
- Option Exercise Risk: Future payments are contingent on Allergan electing to exercise options within specific timeframes.
- Termination: The agreement allows for termination by Allergan for convenience or by either party for breach. Termination results in the cessation of licenses granted to Allergan.
- Intellectual Property: The agreement includes a Side Letter with Northwestern University to clarify sublicense rights and ensure survival of Allergan's rights under specific termination scenarios of the underlying university licenses.
Investor Verification Checklist
- Verify the receipt of the $25 million upfront payment in the Company's cash flow statement for the quarter ending December 31, 2019.
- Review the full text of the Collaboration Agreement and Side Letter (filed as exhibits to the 2019 Form 10-K) for specific definitions of "initial preclinical activities" and "IND filing" milestones.
- Confirm the specific percentage of payments allocated to Northwestern University to assess net cash flow impact.
- Monitor future 8-K filings for announcements regarding Allergan's exercise of options or extension payments.