Item 1.01 Entry into a Material Definitive Agreement
On May 11, 2020, Adamis Pharmaceuticals Corporation (the "Company") announced in
a press release that it had entered into an agreement (the "Termination
Agreement") with Sandoz Inc. to terminate the Distribution and Commercialization
Agreement dated as of July 1, 2018 (the "Sandoz Agreement") previously entered
into between the Company and Sandoz relating to the Company's SYMJEPI ®
(epinephrine) Injection 0.3mg, SYMJEPI® (epinephrine) Injection 0.15mg products
for the emergency treatment of allergic reactions (Type I) including
anaphylaxis, which are currently marketed by Sandoz and available in the United
States pursuant to the Sandoz Agreement, and reacquire the rights to the SYMJEPI
products. The Company also announced that it had entered into an exclusive
distribution and commercialization agreement (the "USWM Agreement") with USWM,
LLC ("USWM" or "US WorldMeds") for the United States commercial rights for the
SYMJEPI products, as well as for the Company's ZIMHI™(naloxone HCI Injection,
USP) 5mg/0.5mL product candidate intended for the emergency treatment of opioid
overdose.
The Termination Agreement provides for the mutually agreed return to Adamis of
the marketing, promotion, and distribution rights, and certain marketing and
promotional materials, relating to the SYMJEPI products, and the termination of
the Sandoz Agreement, following a transition period, supported by a transition
services agreement that Sandoz and the Company or its designee agree to use
commercially reasonable efforts to enter into, concerning certain transition
services, activities and arrangements relating to the SYMJEPI products. As part
of the Termination Agreement, Sandoz will continue to support the products in
the U.S. under the Sandoz Agreement through the end of the transition period to
help reduce or minimize any potential impact to patients and customers. The
Termination Agreement also provides for a future resolution following the end of
the transition period and termination of the Sandoz Agreement of any amounts
that may be payable or owed with respect to the net sales and profit sharing
provisions of the Sandoz Agreement, and for survival of certain provisions of
the Sandoz Agreement.
Under the terms of the USWM Agreement, the Company appointed USWM as the
exclusive (including as to the Company) distributor of the SYMJEPI products in
the United States and related territories ("Territory") effective upon the
termination of the Sandoz Agreement, and of the ZIMHI product, following receipt
of regulatory approval, and granted USWM an exclusive license under the
Company's patent and other intellectual property rights and know-how to market,
sell, and otherwise commercialize and distribute the products in the Territory,
subject to the provisions of the USWM Agreement, in partial consideration of an
initial payment by USWM and potential regulatory and commercial based milestone
payments totaling up to $26 million, if the milestones are achieved. There can
be no assurances that any of these milestones will be met or that any milestone
payments will be paid to the Company. The Company retains rights to the
intellectual property subject to the USWM Agreement and to commercialize both
products outside of the Territory. In addition, the Company may continue to use
the licensed intellectual property (excluding certain of the licensed
trademarks) to develop and commercialize other products (with certain
exceptions), including products that utilize the Company's injection device
platform.
The USWM Agreement provides that, subject to certain adjustments, USWM will pay
to the Company 50% of the net profit from net sales, as each such term is
defined in the USWM Agreement, of the products in the Territory to third
parties, determined on a quarterly basis. The Company will be the supplier of
the products to USWM, and USWM will order and pay the Company a supply price for
quantities of products ordered. Under the USWM Agreement, net profit is
determined based on the amount of net sales less the supply price that USWM pays
the Company for quantities of the products sold in the applicable period, less
certain additional amounts relating to sales, distribution and other allocations
and expenses and amounts allocable to the products and less certain other
adjustments and amounts, and net sales is determined based on the net sales
recorded by USWM for sales of the products and reflecting a number of customary
deductions allocable to the products including, without limitation, product
recalls or returns, discounts and credits, rebates, and certain other items.
The Company will be responsible for all manufacturing, component and supply
costs related to manufacturing and supplying the products to USWM at a supply
price based on Adamis' direct product costs. The Company is responsible for
component sourcing and regulatory compliance in the supply chain and for testing
of lots of products. The USWM Agreement includes customary provisions relating
to ordering, delivering and payment for products ordered by USWM. The Company
will also be responsible for all regulatory and registration activities related
to the products in the Territory, including all costs of protecting and
maintaining the Company's intellectual property and costs related to obtaining
and maintaining regulatory approvals for the products.
USWM will purchase all the products from the Company at a supply price and will
be responsible for the marketing, sales, and distribution of the products in the
Territory, subject to the provisions of the USWM Agreement. USWM will also be
responsible for regulatory compliance with federal, state, and local government
purchasing, pricing, and reimbursement programs. USWM will record revenues from
. . .
Item 1.02 Termination of a Material Agreement
See the disclosure under Item 1.01 above regarding termination of the Sandoz
Agreement between the Company and Sandoz Inc., which is incorporated herein by
reference.
Item 2.06 Material Impairments
As a result of entering into the Termination Agreement described in Item 1.01
above, providing for the termination of the Sandoz Agreement with Sandoz, the
Company has determined that its financial results for the quarter ending June
30, 2020, will include an impairment of the capitalized cost to obtain a
contract reflected on its consolidated balance sheets as of December 31, 2019
and March 31, 2020. The total amount of $1,750,000 as of March 31, 2020,
represented the remaining unamortized portion of the $2.0 million fee paid by
the Company to a financial advisor in connection with the entering into of the
original Sandoz Agreement with Sandoz. Such capitalized cost will no longer be
capitalized and amortized over the 10-year estimated economic benefit period of
the contract and will instead be recognized as an expense during the quarter
ended June 30, 2020. For further information, see Note 4 to the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2019, and the notes to the financial statements that will be
included in the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 2020.
Item 1.02 Termination of a Material Definitive Agreement
See the disclosure under Item 1.01 above regarding termination of the Sandoz
Agreement with Sandoz, which is incorporated herein by reference.
Item 8.01 Other Events
On May 11, 2020, the Company issued a press release announcing the execution of
the Termination Agreement with Sandoz and the USWM Agreement with US WorldMeds
described in Item 1.01 above. The press release is filed as Exhibit 99.1 to this
Current Report on Form 8-K.
Forward Looking Statements
This Report on Form 8-K contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements may
relate to future events or our future results of operations and may include,
without limitation, the following statements: the Company's beliefs concerning
the ability of its Symjepi product and, if approved by the FDA, its ZIMHI
product, to compete successfully in the market; the Company's beliefs concerning
the safety and effectiveness of its product candidates; whether a transition
services agreement will be entered into as contemplated by the Termination
Agreement and the services and activities undertaken pursuant to any such
transition services agreement; the timing of commercialization activities
undertaken by US WorldMeds concerning the SYMJEPI and ZIMHI products; future
levels of sales of the SYMJEP products and, if approved for marketing by the
FDA, the ZIMHI product; the amount of milestone payments and net profit share
payments that may become payable to the Company under the USWM Agreement; and
whether the FDA will approve the Company's ZIMHI product. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors beyond the Company's control, which may cause the Company's actual
results to be materially different from those anticipated by such
forward-looking statements. Actual results may differ materially from those
indicated by such forward-looking statements as a result of various important
factors. There can be no assurances, among other factors: (i) regarding whether
a transition services agreement will be entered into; (ii) what activities may
be undertaken pursuant to a transition services agreement; (iii) regarding the
date by which USWM will undertake commercialization activities pursuant to the
USWM Agreement relating to the SYMJEPI or ZIMHI products; (iv) regarding the
amount of future sales of the products or net profit or milestone payments to
the Company under the USWM Agreement; (v) regarding any particular level of
sales of SYMJEPI products or, if approved, ZIMHI products; (vi) regarding the
success of commercialization activities undertaken by USWM pursuant to the USWM
Agreement; (vii) that the Company will be able to supply the quantities of
products that are required under the USWM Agreement; (viii) that unexpected
labeling, manufacturing, supply, safety, recall, or other regulatory issues will
not arise; or (ix) that the FDA will approve the Company's New Drug Application
relating to the ZIMHI product, or concerning the timing of any such approval. We
cannot assess the impact of each factor on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. You should
not place undue reliance on any forward-looking statements. In addition, the
forward-looking statements included in this Form 8-K represent the Company's
views as of the date of this Form 8-K. The Company anticipates that subsequent
events and developments may cause its views to change. However, while the
Company may elect to update these forward-looking statements at some point in
the future, it specifically disclaims any obligation to do so, except as
required by applicable laws. These forward-looking statements should not be
relied upon as representing the Company's views as of any date after the date of
this Form 8-K. Certain of these risks, uncertainties, and other factors are
described in greater detail in the Company's filings from time to time with the
SEC, all of which are available free of charge on the SEC's web site
at http://www.sec.gov.
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