Item 1.01. Entry into a Material Definitive Agreement.
On October 14, 2020, Sorrento Therapeutics, Inc. ("Sorrento") and ACEA
Therapeutics, Inc. ("ACEA") entered into a binding term sheet (the "Binding Term
Sheet") setting forth the terms and conditions by which Sorrento will, through a
subsidiary, purchase all of the issued and outstanding equity of ACEA (the
"Acquisition"). Contingent upon the execution of a definitive agreement between
the parties (the "Definitive Agreement") and subject to certain conditions,
Sorrento will, at the closing of the Acquisition (the "Closing"), make an
initial payment of $38,000,000, subject to certain adjustments (the "Initial
Consideration").
In addition to the Initial Consideration, Sorrento shall issue contingent value
rights to the equityholders of ACEA representing the right to receive the
following payments: (i) the amounts that would otherwise be due to ACEA under
that certain License Agreement, dated July 13, 2020 (the "License Agreement"),
between Sorrento and ACEA (as previously disclosed in Sorrento's Current Report
on Form 8-K filed with the Securities and Exchange Commission on July 17, 2020),
(ii) with respect to specified royalty-bearing products, five percent of the
annual net sales thereof in a manner consistent with the royalty payment terms
of the License Agreement, and (iii) up to $265,000,000 in additional payments,
subject to the receipt of certain regulatory approvals and achievement of
certain net sales targets with respect to the assets acquired pursuant to the
Acquisition.
Under the Binding Term Sheet, ACEA has agreed to negotiate exclusively with
Sorrento with respect to the Acquisition for a period of 90 days.
The final terms of the Acquisition are subject to the negotiation and
finalization of the Definitive Agreement and any other agreements relating to
the Acquisition, and the material terms of the Acquisition may differ from those
set forth in the Binding Term Sheet. In addition, the Closing will be subject to
various customary and other closing conditions, including the approval of ACEA's
equityholders.
The foregoing description of terms of the Binding Term Sheet does not purport to
be complete and is qualified in its entirety by reference to the full text of
the (i) Binding Term Sheet that will be filed with the Securities and Exchange
Commission as an exhibit to an amendment to this Current Report on Form 8-K or
to Sorrento's Annual Report on Form 10-K for the fiscal year ending December 31,
2020, and (ii) the License Agreement that will be filed with the Securities and
Exchange Commission as an exhibit to Sorrento's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2020.
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