Item 1.01. Entry Into a Material Definitive Agreement.
On February 21, 2017, Aevi Genomic Medicine,
Inc., a Delaware corporation, through its wholly owned subsidiary Medgenics Medical Israel Ltd., a company organized under the
laws of the State of Israel (collectively, the “
Company
”), entered into Amendment No. 2 (the “
Second
Research Agreement Amendment
”) to the Sponsored Research Agreement by and between the Company and Children’s
Hospital of Philadelphia, a Pennsylvania nonprofit corporation (“
CHOP
”), dated November 12, 2014 (the
“
Research Agreement
”).
The Second Research Agreement
Amendment, effective as of February 16, 2017, extends the term of the Research Agreement until June 30, 2018, and provides
the Company with options to extend the term of the Research Agreement on written notice to CHOP for rolling two year periods
beginning on June 30, 2017 and each anniversary thereafter. Pursuant to the Second Research Agreement Amendment, the Company
is obligated to pay CHOP, in addition to $1,856,023 already committed for 2017 under Amendment No. 1 to the Research
Agreement, $2,893,977 in 2017 (for a total of $4,750,000 in 2017), and a total of $3,561,795 in the first and second quarters
of 2018 (for a total of $6,455,772 through June 30, 2018 under the Second Research Agreement Amendment). If the Company
extends the term of the Research Agreement, the Company will be obligated to pay CHOP $4,750,000 during each twelve month
extension period beyond June 30, 2018.
Under the terms of the Research Agreement,
the Company agreed to sponsor research at CHOP with respect to the recruitment and genetic analysis of pediatric patients with
rare and orphan diseases to accelerate discovery of diagnostic and therapeutic targets. In exchange for the Company’s sponsorship
of the research program, CHOP has granted the Company options over certain intellectual property created in the course of the research.
Also on February 21, 2017, the Company
entered into Amendment No. 1 (the “
License Agreement Amendment
” and, collectively with the Second Research
Agreement Amendment, the “
Amendments
”) to the License Agreement by and between the Company and CHOP,
dated November 12, 2014 (the “
License Agreement
”).
Pursuant to the License Agreement Amendment,
effective as of February 14, 2017, the Company received options to extend its exclusive access to certain rare and orphan disease
data and samples from a CHOP biobank and its exclusive right of first refusal to fund certain sponsored research to identify genetic
mutations underlying specific rare and orphan pediatric diseases. The Company will utilize these data to inform the rational search
and acquisition process used to identify development candidates for advancement into therapeutic and diagnostic products for sick
children. The Company will have to pay CHOP an annual option fee of $125,000 for each twelve (12) month period during which the
Company maintains such exclusive rights.
The License Agreement Amendment also adjusts
provisions related to the defense of patents licensed by CHOP to the Company, termination rights, termination procedures and dispute
resolution.
Under the terms of the License Agreement,
CHOP granted the Company (i) an exclusive, sublicensable license to use certain patent rights covering potential diagnostic and
therapeutic targets, (ii) an exclusive, non-sublicensable license to use certain biospecimen and phenotypic data collected from
patients with rare and orphan diseases and their family members, (iii) a non-exclusive, sublicensable license to use certain know
how related to such patent rights, biospecimen and phenotypic data, (iv) a non-exclusive and non-sublicensable license to use
certain biospecimen and phenotypic data collected from patients with non-rare and orphan diseases, and (v) an exclusive option
to negotiate licenses to commercialize certain inventions that may be created in the future that target rare and orphan diseases.
In consideration of the licenses and option granted under the License Agreement, the Company paid to CHOP a license issuance fee
of $500,000 and will pay to CHOP certain maintenance fees, certain milestone payments, low single-digit royalties on net sales
of all licensed products and a percentage of amounts received from sublicensing activities.
The Research Agreement and the License
Agreement (in each case, with certain portions redacted pursuant to a confidential treatment order) were included as Exhibits
10.28 and 10.29, respectively, to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2014,
filed with the Securities and Exchange Commission (“
SEC
”) on February 13, 2015. Amendment No. 1 to the
Research Agreement was described in, and filed with, a Current Report on Form 8-K filed with the SEC on December 22, 2015.
The Company is considering seeking confidential
treatment for certain terms of the Amendments and will file the Amendments (as applicable, with certain portions redacted pursuant
to a confidential treatment request) with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ending March
31, 2017.