Item 1.01.
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Entry into a Material Definitive Agreement.
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Entry into European Transaction
On May 9, 2016, ARIAD Pharmaceuticals, Inc. (ARIAD) and its wholly-owned subsidiary ARIAD Pharmaceuticals (Cayman) L.P. (the
Seller) entered into a Share Purchase Agreement (the Share Purchase Agreement) with Incyte Corporation (Incyte) (as guarantor) and its wholly-owned subsidiary Incyte Europe S.a.r.l. (Incyte Europe),
pursuant to which Incyte Europe has agreed to acquire from the Seller all of the outstanding shares of ARIAD Pharmaceuticals (Luxembourg) S.a.r.l., the parent company of ARIADs European subsidiaries responsible for the commercialization of
Iclusig
®
(ponatinib) in the European Union (EU) and 22 other countries, including Switzerland, Norway, Turkey, Israel and Russia (the Territory), for an upfront payment
of $140 million (the Upfront Payment).
In connection with the transactions contemplated by the Share Purchase Agreement, the
parties have also agreed on an Amended and Restated Buy-in License Agreement to be entered into between ARIAD, Incyte (as guarantor) and ARIAD Pharmaceuticals (Europe) S.a.r.l., one of the entities that will be owned by Incyte upon the closing of
the transactions contemplated by the Share Purchase Agreement (the License Agreement). Under the terms of the License Agreement, Incyte will be granted an exclusive license to develop and commercialize Iclusig in the Territory (the
License). ARIAD will be entitled to receive tiered royalties from Incyte of between 32% and 50% of net sales of Iclusig in the Territory (the Royalty Payments). The Royalty Payments will be subject to adjustment for certain
events, including events related to the expiration of statutory or regulatory exclusivity periods for the commercialization of Iclusig in the Territory. In addition, ARIAD will be eligible to receive up to $135 million in potential development and
regulatory milestones for Iclusig in new oncology indications in the Territory, together with additional milestones for non-oncology indications, if approved, in the Territory (collectively, the Milestone Payments). Incyte has agreed to
contribute up to $7 million in each of 2016 and 2017 to fund ARIADs OPTIC and OPTIC-2L clinical trials (the Development Costs).
The terms of the License Agreement also include an option (the Option) for an acquirer of ARIAD to re-purchase the licensed rights
from Incyte, subject to certain conditions. Upon exercise of the Option, ARIADs acquirer would be required to make a payment to Incyte equivalent to the Upfront Payment and any Milestone Payments or Development Costs previously paid to ARIAD,
and an additional payment based on Iclusig sales in the Territory in the 12 months immediately prior to the exercise of the Option. Following exercise of the Option, Incyte would also be eligible to receive royalties of between 20% to 25% of net
sales of Iclusig in the Territory by an acquirer of ARIAD following the effective date of the re-purchase of the License. The Option cannot be exercised before the two year anniversary, or after the six year anniversary, of the effective date of the
License Agreement. Following exercise of the Option, there is a further transition period of up to one year before the re-purchase of the License can be made effective.
ARIAD and Incyte will establish a joint steering committee and joint commercialization committee to oversee product development and
commercialization of Iclusig in the Territory, including oversight of any development or commercialization plan. Each of ARIAD and Incyte has ultimate decision making authority with respect to a specified limited set of issues, and for all other
issues, the matter must be resolved by consensus or by an expedited arbitration process.
Unless terminated earlier in accordance with its
provisions, the License Agreement will continue in effect on a country-by-country basis until the latest to occur of (1) the expiration date of the composition patent in the relevant country, (2) the expiration of any regulatory marketing
exclusivity period or other statutory designation that provides similar exclusivity for the commercialization of Iclusig in such country and (3) the seventh anniversary of the first commercial sale of Iclusig in such country; and thereafter, in
the absence of generic competition, for a specified period of time in which Incyte will be obligated to pay royalties at a reduced rate. The License
Agreement may be terminated in its entirety by Incyte for convenience on twelve months notice after the third anniversary of the effective date of the License. The License Agreement may also be
terminated by either party under certain other circumstances, including material breach, force majeure and bankruptcy or insolvency of the other party.
The closing under the Share Purchase Agreement and effectiveness of the License Agreement is currently expected to occur on or about
June 1, 2016, subject to satisfaction of customary closing conditions. The Share Purchase Agreement is not conditioned upon Incyte Europes ability to obtain financing. In addition, the Share Purchase Agreement includes a standstill
provision that precludes Incyte from acquiring more than a specified percentage of shares of ARIADs common stock or from taking certain other actions intended to acquire or influence control of ARIAD without the consent of ARIADs board
of directors for a specified period following the effective date of the agreement, subject to certain customary exceptions.
The foregoing
descriptions of the Share Purchase Agreement and the License Agreement do not purport to be complete and are qualified in their entirety by reference to the full agreements, which ARIAD intends to file as exhibits to its Quarterly Report on Form
10-Q for the quarter ending June 30, 2016. A copy of the press release announcing the transactions described herein is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
Amendment to Royalty Financing
On
July 28, 2015, ARIAD entered into a Revenue Interest Assignment Agreement (the RIAA) with PDL BioPharma, Inc. (PDL). Under the RIAA, PDL agreed to pay ARIAD $100 million for the right to receive a mid-single-digit
percentage of worldwide net revenues from sales of Iclusig until it receives a fixed internal rate of return. In addition, ARIAD received an option to require PDL to fund to ARIAD up to an additional $100 million in either one or two tranches
between January and July 2016.
On May 9, 2016, in connection with the transactions with Incyte described above, ARIAD and PDL agreed
to amend the RIAA to, among other things, include in the Iclusig net sales calculation under the RIAA net sales of Iclusig made by Incyte in the Territory under the License Agreement. In addition, ARIADs option to receive additional
funding was restructured so that ARIAD may require PDL to fund up to an additional $40 million (instead of the original $100 million) in July 2017 (instead of between January and July 2016). In connection with the amendment to the RIAA, ARIAD and
PDL also agreed to release ARIADs European patents and certain other European assets from the collateral. These agreements with PDL are subject to and effective upon the closing of the Incyte transaction.
The foregoing summary of the amendment to the RIAA and the release of security interests does not purport to be complete and is qualified in
its entirety by reference to the full agreements, which ARIAD intends to file as exhibits to its Quarterly Report on Form 10-Q for the quarter ending June 30, 2016.
Except for their status as contractual documents between the parties, the Share Purchase Agreement, License Agreement and amendments to the
RIAA and security agreement are not intended to provide factual information about the respective parties. The representations and warranties contained in each of these agreements were made only for purposes of each such agreement and as of the dates
specified therein, were solely for the benefit of the respective parties to such agreements, and may be subject to limitations agreed to by the contracting parties, including being qualified by disclosures between the parties. These representations
and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Accordingly, they should not be relied upon by investors as statements of factual information.