Item 1.02 Termination of a Material Definitive Agreement.
CStone Pharmaceuticals
On May 8, 2023, EQRx, Inc. (EQRx) provided written notice to CStone
Pharmaceuticals (CStone) of its termination of the Exclusive License Agreement
dated October 26, 2020 between EQRx and CStone (as amended, the CStone
Agreement), which termination will be effective in accordance with the terms of
such agreement. The parties are in discussions regarding their respective
transition obligations.
Under the CStone Agreement, EQRx acquired a worldwide exclusive license for the
research, development and commercialization of sugemalimab (EQ165) and
nofazinlimab (EQ176), with the exception of mainland China, Taiwan, Hong Kong
and Macau. EQRx made an upfront non-refundable, non-creditable payment of
$150.0 million under the CStone Agreement. Additionally, if EQRx had achieved
all of the development and commercialization milestone events under the CStone
Agreement, CStone would have been eligible to receive in total (i) $182.5
million in development and regulatory milestone payments, and (ii) $970.0
million in sales milestone payments. CStone would have also been entitled to
royalty payments under the CStone Agreement.
Lynk Pharmaceutical (Hangzhou) Co., Ltd.
On May 8, 2023, EQRx provided written notice to Lynk Pharmaceutical (Hangzhou)
Co., Ltd. (Lynk) of its termination of the Exclusive License Agreement dated
April 1, 2020 between EQRx and Lynk Pharmaceuticals (as amended, the Lynk
Agreement), which termination will be effective in accordance with the terms of
such agreement.
Under the Lynk Agreement, EQRx acquired an exclusive license for the research,
development and commercialization of LNK-207, a novel, highly selective JAK-1
inhibitor (EQ121) worldwide, with the exception of mainland China, Hong Kong,
Macau and Taiwan (the Lynk Territory). The Lynk Agreement also provided EQRx
with a non-exclusive license in the Lynk Territory to research and develop EQ121
for purposes of obtaining regulatory approval, and to manufacture and/or package
EQ121 for use in EQRx's territory. EQRx made an upfront non-refundable,
non-creditable payment under the Lynk Agreement. Additionally, if EQRx had
achieved all of the development and commercialization milestone events under the
Lynk Agreement, Lynk would have been eligible to receive in total (i) $52.0
million in development and regulatory milestone payments, and (ii) $120.0
million in sales milestone payments. Lynk would have also been entitled to
royalty payments under the Lynk Agreement.
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2023, EQRx issued a press release announcing its financial results for
the first quarter ended March 31, 2023. A copy of the press release is attached
hereto as Exhibit 99.1 and incorporated herein by reference.
The information contained or incorporated in this Item 2.02, including Exhibit
99.1 attached hereto, is being furnished and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act) or otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On April 28, 2023, the board of directors of EQRx approved a restructuring plan
(the Plan) as a result of its decision to reset EQRx's business and focus on
clinically differentiated, high-value medicines. Pursuant to the Plan, in
addition to the termination of the CStone Agreement and Lynk Agreement (see Item
1.02), EQRx will undertake several cost-reduction actions, including a decrease
in headcount of approximately 170 positions, resulting from a reduction in force
and not filling positions following previous departures. Restructuring payments
such as employee-related termination costs associated with the reduction in
force and contract termination costs associated with the termination of the
CStone Agreement and Lynk Agreement (see Item 1.02 above) are currently
estimated to be between $15.0 million and $21.0 million and are expected to be
substantially incurred by the end of 2023.
EQRx also expects to incur additional costs as it completes the wind-down of
various activities related to the terminations of the CStone Agreement and Lynk
Agreement and may also incur additional costs not currently contemplated due to
events that may occur as a result of, or that are associated with, the other May
2023 strategic decisions. Therefore, EQRx currently estimates total
restructuring costs for 2023 will be in the range of $45.0 million to $55.0
million.
Each departing employee of EQRx has played an integral role in EQRx's commitment
to develop and commercialize innovative medicines for some of the most prevalent
disease areas. EQRx would like to sincerely thank its departing employees for
their commitment, passion and contributions and wishes them well in their future
endeavors.
As the Plan is implemented, EQRx's management will re-evaluate the estimated
costs set forth above and will finalize the estimated restructuring charge,
consistent with generally accepted accounting principles. The estimated costs
that EQRx expects to incur in connection with the Plan are subject to a number
of assumptions, and actual results may differ materially from these estimates.
EQRx may also incur additional costs not currently contemplated due to events
that may occur as a result of, or that are associated with, the Plan.
Forward-Looking Statements.
This Current Report on Form 8-K contains certain forward-looking statements
within the meaning of the federal securities laws. These forward-looking
statements may be identified by the use of words such as "believe," "project,"
"expect," "anticipate," "estimate," "intend," "design," "strategy," "future,"
"opportunity," "continue, "aim," "goal," "plan," "may," "look forward,"
"should," "will," "would," "will be," "will likely result," and similar
expressions. These forward-looking statements include, but are not limited to,
express or implied statements regarding the effects of the license agreement
terminations and expected costs from the reduction in force and contract
terminations; among others. Forward-looking statements are predictions,
projections and other statements about future events that are based on current
expectations and assumptions and, as a result, are subject to risks and
uncertainties. Many factors could cause actual future events to differ
materially from the forward-looking statements in this Current Report on Form
8-K, including but not limited to risks that EQRx's termination of two of its
license agreements may impact its ability to license in additional programs in
the future; the risk of delays or unforeseen costs in terminating such
arrangements; risks that restructuring costs and charges may be greater than
anticipated or incurred in different periods than anticipated; the risk that
EQRx's restructuring efforts may adversely affect its programs and its ability
to recruit and retain skilled and motivated personnel, and may be distracting to
employees and management; the risk that EQRx's restructuring efforts may
negatively impact its business operations and reputation with or ability to
serve customers; and the risk that EQRx's restructuring efforts may not generate
their intended benefits to the extent or as quickly as anticipated. The
foregoing list of factors is not exhaustive. You should carefully consider the
foregoing factors and the other risks and uncertainties described in the "Risk
Factors" section in EQRx's most recent Annual Report on Form 10-K as well as any
other filings with the SEC. These filings identify and address other important
risks and uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Forward-looking statements speak only as of the date they are made. Readers are
cautioned not to put undue reliance on forward-looking statements, and EQRx
assumes no obligation, and does not intend, to update or revise these
forward-looking statements, whether as a result of new information, future
events, or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
99.1 Press Release dated May 8, 2023 (Furnished herewith)
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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