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10-Q
MYOKARDIA INC filed this Form 10-Q on 05/09/2019
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Sanofi License and Collaboration Agreement

In August 2014, we entered into the Collaboration Agreement with Sanofi, for the research, development and potential commercialization of pharmaceutical products for the treatment, prevention and diagnosis of hypertrophic and dilated cardiomyopathy, as well as potential additional indications. Under the Collaboration Agreement, we granted Sanofi royalty-bearing licenses to develop and commercialize products resulting from our lead candidate programs HCM-1, HCM-2 and DCM-1. The licenses provided Sanofi with worldwide rights in the case of DCM-1 and rights outside the United States with respect to the HCM-1 and HCM-2 programs. The terms of the Collaboration Agreement also stated that we are responsible for conducting research and development activities through early human efficacy studies for all three programs, except for specified research activities to be conducted by Sanofi. We were also entitled to receive tiered royalties ranging from the mid-single digits to the mid-teens on net sales of certain HCM-1, HCM-2, and DCM-1 finished products outside the United States and on net sales of certain DCM-1 finished products in the United States. Sanofi was also eligible to receive tiered royalties ranging from the mid-single digits to the low-teens on net sales of certain HCM-1 and HCM-2 finished products in the United States.

Over the course of the collaboration, we received the following from Sanofi:

 

(i)

$105.0 million in cash as upfront, milestone and continuation payments, in exchange for royalty-based license fees in the event of commercialization of these programs, certain of which rights continue post-termination;

 

(ii)

$48.3 million in cash, in exchange for issuances of our common stock, net of offering costs and underwriting fees;

 

(iii)

$43.4 million in cash, as reimbursement for certain research and development costs under the Registration Program Plan and pre-Proof of Concept terms of the agreement; and

 

(iv)

$45.0 million of in-kind research and development support.

Under the terms of the Collaboration Agreement, the agreement was deemed terminated if Sanofi did not notify us that they intended to continue to fund certain programs on or before December 31, 2018. On that date, Sanofi notified us that they did not intend to continue the collaboration with respect to the HCM-1 program and that the agreement was deemed terminated with respect to all other programs. As a result, the agreement has been terminated in its entirety except for Sanofi’s continuing rights to royalties in the event of commercialization of the HCM-1 program. The events leading up to the termination included our belief and discussion with Sanofi that it is critical to our strategy to maintain control of the U.S. commercial rights for mavacamten, as well our desire not to grant additional rights in expanded indications.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are fully described in Note 2 of our Annual Report. We believe that the accounting policies discussed in our Annual Report are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. There have been no changes to our significant accounting policies during the three months ended March 31, 2019, except with respect to changes in our accounting for leases upon the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”).

Components of Operating Results

Collaboration and License Revenue

Up until its discontinuation and termination as of December 31, 2018, we generated revenue from the Collaboration Agreement with Sanofi for the development and commercialization of products under the collaboration.

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