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Resverlogix and Hepalink Announce a Combination Licensing and Equity Arrangement
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Resverlogix and Hepalink Announce a Combination Licensing and Equity Arrangement

Resverlogix and Hepalink Announce a Combination Licensing and Equity Arrangement
News

Resverlogix and Hepalink Announce a Combination Licensing and Equity Arrangement

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Resverlogix Corp. has announced that it has entered into a Framework Agreement which sets forth the principal business terms for an equity investment and a license of RVX-208, for all indications, to Shenzhen Hepalink Pharmaceutical Co., Ltd. ("Hepalink") for China, Hong Kong, Taiwan and Macau (the "Territories"). The completion of the transaction remains subject to execution of a definitive stock purchase agreement and license agreement.

Under the terms of the transaction, Hepalink will subscribe for 13,270,000 Resverlogix common shares and 1,000,000 common share purchase warrants, for aggregate proceeds of approximately CAD$35 million, or CAD$2.67 per unit. Each warrant is exercisable into one common share at CAD$2.67 per share for a period of five years. After giving effect to the transaction, Hepalink will hold approximately 12.69% of Resverlogix's common shares. The common shares and warrants issued to Hepalink will be subject to a three year lock-up period. Hepalink will also be entitled to nominate one mutually agreed representative for election to the board of directors of the Company.

In addition, subject to completion of the Hepalink transaction, Eastern Capital Limited ("Eastern") will purchase 5,600,000 common shares and 422,005 common share purchase warrants for aggregate consideration of approximately CAD$15 million, or CAD$2.67 per unit. Therefore, total equity investment by Hepalink and Eastern exceeds CAD$50 million. Eastern holds 14,965,307 shares of Resverlogix which represents 17.46% of the 85,699,287 common shares outstanding before giving effect to any outstanding warrants.

Eastern currently holds 7,578,232 common share purchase warrants of Resverlogix. Assuming all warrants are exercised before giving effect to the transaction, Eastern will hold approximately 24.17% of the common shares outstanding. After giving effect to the transaction, assuming all warrants held by Eastern are exercised, Eastern would hold 28,565,544 common shares of Resverlogix representing 25.38% of Resverlogix's issued and outstanding common shares based on shares outstanding as at today's date.

The subscription for common shares and warrants by Eastern is a related party transaction within the meaning of applicable Canadian securities laws as Eastern is an insider of the Company. The transaction is exempt from the formal valuation and minority approval requirements applicable to related party transactions on the basis that the value of the transaction insofar as it involves related parties is less than 25 percent of the Company's market capitalization.

Under the license between Resverlogix and Hepalink, should RVX-208 reach certain annual sales milestones ranging from 500 million renminbi ("RMB") to RMB 10 billion, Resverlogix is eligible to receive sales-based milestone payments from Hepalink, each ranging from US$5 million to US$90 million. In addition, Hepalink shall pay royalties based on net sales. Total sales based milestones and royalty payments are estimated in excess of US$400 million. The license shall expire on a region-by-region basis on the later of the 15th anniversary of the first commercial sale in such region or the expiry date of the last-to-expire of any licensed patent.

Hepalink will be responsible for all clinical and development costs in the Territories, including a patient population that will be included in Resverlogix's planned Phase 3 BETonMACE trial.

Resverlogix intends to use the net proceeds to fund its: (i) research and development activities (alone or through strategic collaboration) including clinical development (including clinical trials and the clinical development of our product candidates), non-clinical development, research, discovery, chemistry and regulatory costs; (ii) repayment of outstanding indebtedness and/or payment of interest thereon; and (iii) general and administrative expenses, capital expenditures, working capital needs and other general corporate purposes.

Under the agreement between Resverlogix and Hepalink, Hepalink's price shall be the manufacturing cost plus 10%. Resverlogix also granted Hepalink an option to manufacture and supply products comprising RVX-208 outside the Territories. Resverlogix's price will be the manufacturing cost plus 10%. Resverlogix has the right to select a qualified third party to manufacture RVX-208 outside the Territories if Hepalink fails to meet the industry standards required.

The closing of the transaction will also be subject to, among other things, execution of definitive agreements, customary closing conditions for a transaction of this nature, shareholder approval of the majority of the votes cast by the shareholders of Resverlogix (excluding Eastern in certain circumstances) at a special meeting of the shareholders of Resverlogix, approval of the Toronto Stock Exchange and other regulatory approvals.

The Framework Agreement requires that definitive agreements be executed by July 26, 2015, failing which the Framework Agreement will automatically terminate. The transaction is anticipated to close in June 2015. Resverlogix has agreed not to enter into negotiations with third parties with regards to the grant of license of RVX-208 in the Territories for three months.

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