License Agreement With Duke
|12 Months Ended|
Nov. 30, 2022
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|License Agreement With Duke||
NOTE 18 – LICENSE AGREEMENT WITH DUKE
On February 23, 2021, the Company entered into a Patent and Technology License Agreement (the “Duke Agreement”) with Duke, pursuant to which Duke has granted to the Company an exclusive license to make, have made, use, import, offer for sale, sell and otherwise commercially exploit (with the right to sublicense) certain licensed products and to practice certain licensed processes, and the exclusive right to use certain regulatory data and technical information in connection with such licensed patent rights, in the treatment, prevention, cure, reduction, mitigation or other management of certain diseases in humans, except, with regard to certain patent rights, in certain excluded fields of use and in certain territories, subject to Duke’s reserved rights to practice the licensed rights for all research, public service, internal (including clinical) and/or educational purposes.
Duke has completed or in progress a total of 19 FDA approved clinical trials related to the Duke License Agreement. The Company intends to fund additional clinical trials, as necessary, to provide the proof of efficacy that is required by the FDA to issue BLAs for some or all of the indications mentioned above.
In addition, Duke has provided its manufactured MSCs for one arm of a four arm, placebo controlled, multi-site, double blinded Phase 3 clinical trial, run by Emory University to treat osteoarthritis of the knee, in which cells from three different sources are compared to the current standard of care. If the Duke MSCs prove to be the most efficacious, the Company intends to design and fund a Phase 3 registration trial for that indication. The readout from the Emory trial is expected in 2023.
The Company purchased a 56,000 square feet facility in Durham in which it plans to open the Cryo-Cell Institute for Cellular Therapies. Previously, the FDA has granted Duke the right to treat certain patients with infusions of cord blood under its Expanded Access Program. The Company intends to file an IND to conduct a clinical trial for either cerebral palsy or autism and will ask for similar rights to treat pediatric patients with certain neurological disorders (such as CP or autism) at its clinic. There can be no assurance that the FDA will approve of this or any IND filed by the Company.
The Agreement extends until expiration of the last Royalty Term, unless sooner terminated as provided in the Agreement. Royalty Term generally means the period beginning on the first commercial sale of each licensed product or licensed process and ending fifteen (15) years thereafter. Upon expiration of the applicable Royalty Term with respect to a particular licensed product or licensed processes, the licenses and rights granted by Duke to the Company under the Agreement with respect to such product or process become fully paid-up, royalty-free, perpetual and irrevocable.
In accordance with the original Duke License Agreement, the Company is required to pay Duke a license fee equal to $12,000,000, of which $10,000,000 has been paid to date and an additional $2,000,000 was due on February 23, 2023. In addition, during the Royalty Term, subject to certain minimum royalties, the Company is required to pay Duke royalties based on a portion of the net sales varying from 7% - 12.5% based on volume. The Company is also obligated to pay certain legal fees and expenses associated with related patents.
On February 17, 2023, subsequent to the balance sheet date, the Company entered into a Second Amendment to the License Agreement (the “Second Amendment”) with Duke. The Second Amendment changes the license fee due to Duke. The final $2,000,000 payment that was due on February 23, 2023 was removed and the license fee is paid in full. The Second Amendment added a new milestone payment of $1,000,000 upon FDA approval of the first licensed product comprising cord tissue derived MSC (“ctMSC”) for autism spectrum disorder. The Second Amendment also added a new ctMSC milestone that the Company will open a manufacturing facility for the licensed product prior to the first initiation of a Phase III clinical trial using ctMSC’s. As part of the Second Amendment, the Company also agreed to enter into a sponsored research agreement (the “Research Agreement”) with Duke to provide funding to complete the Duke IMPACT Study. If the Research Agreement is not entered into by March 1, 2023, the Second Amendment will be voided and the License Agreement will be unchanged. The Company has executed the sponsored research agreement and is waiting for Duke’s signature. If fully executed, in consideration for the work to be performed under the Research Agreement, the Company will be obligated to make 14 equal monthly payments of $187,407 commencing in March or April, 2023 and a final payment of $187,400 upon the submission of a draft proposed publication for peer review and delivered to the Company of the completed IMPACT Study. Duke agrees this will be no later than September 30, 2024.
Unless the Agreement is terminated or renegotiated as permitted per the Agreement, the Company is also required to pay Duke minimum annual royalties beginning on the second anniversary of the effective date as follows:
Year 2: $500,000
Year 3: $1,000,000
Year 4: $2,500,000
Year 5 and each year thereafter during the term of this Agreement: $5,000,000
In addition, the Company is required to pay Duke certain milestone payments, as follows:
$2,000,000 upon initiation of the first Phase III clinical trial for an indication other than Autism Spectrum Disorder, for a licensed product comprising cord tissue; and
A number of shares of the Company’s common stock equal to the corresponding percentage of the Company’s fully-diluted equity ownership outstanding as of February 23, 2021 as follows:
5.0% upon execution of the Agreement;
2.5% upon cumulative net sales of licensed product and licensed process of $10,000,000;
2.5% upon cumulative net sales of licensed product and licensed process of $75,000,000;
2.5% at each of the following market cap of the Company (based on a rolling 30-day average closing market cap) triggers:
Equal to or greater than $300,000,000, provided such trigger occurs within eighteen (18) months of February 23, 2021; and
Equal to or greater than $500,000,000, provided such trigger occurs within twenty-four (24) months of February 23, 2021.
On February 4, 2022, the Company entered into a First Amendment to License Agreement (the "Amendment") with Duke. The Amendment changes the requirements of the Company with regard to the minimum annual royalties payable to Duke. As amended, the minimum annual royalties are as follows:
Year 3: $500,000
Year 4: $1,000,000
Year 5: $2,500,000
Year 6 and each year thereafter during the term of this Agreement: $5,000,000
The Amendment also changed the requirements of the Company to pay Duke certain milestone payments, as follows:
$2,000,000 two years after the first patient or subject is treated in the first Phase III clinical trial of a licensed product comprising cord tissue derived MSC for an indication other than Autism Spectrum Disorder.
During the first quarter of fiscal 2021, the Company capitalized $15,372,382 as a Duke license agreement which represented the costs to obtain the Agreement and also recorded a corresponding liability to Duke for the license agreement. The costs that were capitalized as a Duke license agreement includes the present value of the $12,000,000 license fee, $3,585,172, or 409,734 shares, of the Company’s common stock transferred to Duke and certain acquisition costs. The Company is amortizing these costs over 16 years. As of the twelve months ended November 20, 2022 and November 30, 2021, the Company recorded $960,774 and $720,580, respectively, in amortization expense which is reflected in amortization expense on the accompanying consolidated statements of income.
Through this Agreement, the Company intends to expand to a triad of core business units to include: (1) its cord blood bank and other storage services; (2) cord blood and cord tissue infusion clinic services initially under the FDA’s Expanded Access Program and in conjunction with the undertaking of cord blood and cord tissue clinical trials to obtain BLA approvals for new indications, and (3) biopharmaceutical manufacturing if BLA(s) are approved by the FDA. Due to equipment delivery delays, the Company is projecting to open the Cryo-Cell Institute for Cellular Therapies and begin infusing patients during fiscal 2024.
The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef