Quarterly report pursuant to Section 13 or 15(d)

Contracts and Agreements

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Contracts and Agreements
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Contracts and Agreements

Asset Purchase and License Agreement with Boehringer Ingelheim

 

On July 4, 2018, the Company entered into an Asset Purchase Agreement and License Agreement with Boehringer Ingelheim International GmbH (hereafter, “BII” and the “Asset Purchase Agreement”) centered on MabVax's program targeting a glycan commonly overexpressed on multiple solid tumor cancers. BII has acquired all rights in and to the program. MabVax received a non-refundable $4 million payment upon signing the agreement and expects to receive an additional $7 million in connection with BII reaching certain near-term milestones and downstream regulatory milestones plus further earn-out payments.

 

The Company recognized the initial $4 million non-refundable upfront payment as revenue, as BII obtained the exclusive rights to use the intellectual property and there were no continuing obligations other than to deliver materials and documents of an administrative nature that were completed within 15 days of entering into the agreement. As of September 30, 2018, the Company had not recognized as revenue any of the future milestones given the high risk and uncertainty of continuing development by BII given such risks.

 

In connection with the Asset Purchase Agreement, the Company incurred cost of sales totaling $785,000, including 10% of the $4 million payment or $400,000 to MSK to obtain MSK’s consent to enter into the Asset Purchase Agreement, and $385,000 in a fixed fee to investment banker Greenhill & Co. MabVax agreed to share with MSK 20% or $1.4 million of the $7.0 million in near-term milestones if achieved by BII.

 

The asset acquisition is separate and distinct from other programs under development at MabVax, enabling MabVax to retain all rights to its lead HuMab-5B1 antibody program which is in Phase 1 clinical trials as a therapeutic product candidate and as a diagnostic product candidate, as well as other antibody discovery programs from the Company's antibody discovery portfolio targeting other cancer antigens.

 

Cold Spring Harbor Laboratory License Agreement

 

On September 8, 2018, the Company entered into an agreement with Cold Spring Harbor Laboratory (“CSHL”), a nonprofit New York State education corporation, whereby the Company licensed the exclusive worldwide rights to certain discoveries and technology including exclusive interest in certain patent applications filed by the Company on behalf of CSHL for use of MVT-5873 as a treatment for pancreatitis. The Company paid $20,000 as an upfront license fee and will pay to CSHL a nonrefundable annual license maintenance fee of the same amount beginning on January 1, 2020 and continuing each year thereafter during the term of the agreement and will increase to $50,000 a year upon issuance of the first patent in connection with the technology. The annual license fee will be reduced for any patent prosecution and maintenance costs and will be fully creditable against any royalties or milestone payments earned during the year. Future milestone payments are in the aggregate less than $2.5 million, with royalties that range from 0.25% if no valid claim to patents, to 2.5% if there is a valid claim of the patent in the territory of sales.

 

Sublicense Grant to Y-mAbs Therapeutics, Inc.

 

On June 27, 2018, we granted an exclusive sublicense to Y-mAbs, a privately held clinical stage biopharmaceutical company, for a bi-valent ganglioside-based vaccine intended to treat neuroblastoma, a rare pediatric cancer (the “Y-mAbs Sublicense”). Total value of the transaction to MabVax is $1.3 million plus a share of a Priority Review Voucher (as defined in the sublicense agreement) if granted by the FDA to Y-mAbs on approval of the vaccine and the Priority Review Voucher is subsequently sold. Additionally, Y-mAbs will be responsible for all further development of the product as well as any downstream payment obligations related to this specific vaccine to MSK that were specified in the original MabVax-MSK license agreement dated April 30, 2008. If Y-mAbs successfully develops and receives FDA approval for the neuroblastoma vaccine, it is obligated to file with the FDA for a Priority Review Voucher. If the voucher is granted to Y-mAbs and subsequently sold, then MabVax will receive a percentage of the proceeds from the sale of the voucher by Y-mAbs. Upon entering the Y-mAbs Sublicense, the Company received a non-refundable upfront payment of $700,000 and will receive an additional $600,000 upon the one-year anniversary of entering into the agreement, provided Y-mAbs has not terminated the agreement prior to the one-year anniversary. The Sublicense Agreement contains termination provisions allowing for the termination of the agreement (i) upon material breach if the breaching party fails to cure the breach within 60 days of notice by the non-breaching party, (ii) by Y-mAbs at any time upon 90 days’ advance notice to MabVax, or (iii) the expiration or termination of the underlying license from MSK to MabVax, provided that MSK will assume the agreement if Y-mAbs is in material compliance with the agreement upon the termination of the MSK-MabVax license. There were no continuing obligations on the part of the Company in connection with the agreement other than one-time administrative matters that were completed within thirty (30) days of signing the agreement. Therefore, the Company recognized $700,000 as revenue upon signing the agreement and receiving the funds. Because Y-mAbs has the right to terminate the Y-mAbs Sublicense before the one-year anniversary and the uncertainty of continuing clinical development by Y-mAbs, the Company will not recognize additional revenue until it is likely the termination provisions are no longer applicable. 

 

Letter Agreement with MSK

 

On June 27, 2018, we entered into a letter agreement with MSK (the “MSK Letter”) in connection with obtaining the consent from MSK for the Company to enter into the Y-mAbs Sublicense and allow Y-mAbs to “step into the shoes” of the obligations that the Company would have had to pay MSK if the Company had continued development of the neuroblastoma vaccine, including future payment obligations of the Company regarding future milestones. As part of the agreement, the Company and MSK agreed that MabVax would receive 100% of both the $700,000 upfront payment and $600,000 upon the one-year anniversary of the Y-mAbs Sublicense. All of the obligations to MSK in the MSK Letter were fully expensed as of June 30, 2018.

 

May 2017 Letter Agreement

 

On May 15, 2017, as a condition to the participation of HS Contrarian Investments, LLC (“HS Contrarian”) in the public offering of the Company’s common stock and Series G Preferred Stock in May 2017 (the “May 2017 Public Offering”), the Company entered into a Letter Agreement with HS Contrarian (the “May 2017 Letter Agreement”) where the Company agreed to offer incentive shares (the “May 2017 Inducement Shares”) to investors who (i) participated in both the Company’s August 2016 public offering and the Company’s April 2015 private offering, (ii) purchased securities in the May 2017 Public Offering equal to at least 50% of their original investment in the August 2016 public offering or 25% of their original investment in the April 2015 private offering, and (iii) still hold 100% of their common stock or preferred stock purchased in those investments.

 

Further, the Company agreed to the following in the May 2017 Letter Agreement:

 

Board Nomination:  

To nominate one (1) candidate to the Board of Directors acceptable to the holder of a majority of the Series G Preferred Stock by December 31, 2017, and that (2) two current Board members would resign.

 

Executive Hire:  

To hire a new C-level executive in a leadership role by July 15, 2017.

 

Board Compensation:  

To issue an aggregate of 350,000 options to certain employees and members of the Board of Directors, at a price not less than $6.00 per share, and 16,667 options to each other member of the Board of Directors at the current market price in connection with this offering. The options were issued pursuant to the Company’s option plan, subject to the requisite approvals and availability under the plan. The company was responsible for obtaining the approval of the Board of Directors and stockholders of the Company to the extent the company needed their approval to increase the number of shares available under the plan. All Board of Director fees were waived for 2017.

 

Funds Held in Escrow:  

$500,000 of the funds from the May 2017 Public Offering were to be held in escrow and released to one or more investor relations services acceptable to the Company following the closing of this offering.

 

Additionally, we granted HS Contrarian consent rights: the right to approve future (i) issuances of our securities, (ii) equity or debt financings and (iii) sales of any development product assets currently held by us, subject to certain exceptions, if such securities are sold at a price below $7.50 per share and for as long as HS Contrarian in the offering holds 50% or more of the shares of Series G Preferred Stock purchased by HS Contrarian in the May 2017 Public Offering (the “Consent Rights”). All other prior consent rights of HS Contrarian were superseded by these consent rights. As of September 30, 2018, none of the shares of Series G Preferred Stock is outstanding. Thus, HS Contrarian no longer holds the Consent Rights.

 

For the period from the May 2017 Public Offering to December 31, 2017, the Company exceeded the minimum $500,000 in expenses related to outside investor relations services fulfilling the Company’s obligation for spending on investor relations. HS Contrarian elected not to hold the funds in escrow. Further, the Company issued the May 2017 Inducement Shares and adjusted the Board of Directors compensation per the May 2017 Letter Agreement. Also, two members of the Board of Directors resigned during 2017, achieving one of the conditions of HS Contrarian. The Company did not nominate a new member to the Board of Directors, nor did it hire a new C-level executive in light of limited amount of cash available to the Company.

 

Letter Agreement Regarding Future Financing Transactions

 

On August 9, 2017, in connection with an offering in the aggregate amount of $1,312,500 in which the Company sold shares of its Series J Preferred Stock (the “August 2017 Offering”), we entered into a Letter Agreement with HS Contrarian (the “August 2017 Letter Agreement”), whereby HS Contrarian consented to and agreed that, the Company may sell securities to the investors set forth below, of an aggregate amount of up to $2,350,000, and the Company would issue incentive shares in the form of newly designated shares of Series K Preferred Stock convertible into an aggregate of 2,166,667 shares of common stock to be distributed to the following individuals or entities, as directed by HS Contrarian, as an incentive (the “Inducement Shares”) for HS Contrarian and these entities and individuals to invest in the August 2017 Offering.

 

HS Contrarian Investments, LLC
GRQ Consultants, Inc. Roth 401K FBO Barry Honig Trustee
GRQ Consultants, Inc. Roth 401K FBO Renee Honig Trustee
Grander Holdings, Inc. 401K
Robert B. Prag
David Moss
Paradox Capital Partners, LLC
Melechdavid, Inc.
Melechdavid, Inc. Retirement Plan
Robert S. Colman Trust UDT 3/13/85
Sargeant Capital Ventures, LLC
Edward W. Easton TTEE The Easton Group ORP PSP U/A DTD 02/09/2000
Donald E. Garlikov
Airy Properties
Ryan O'Rourke
Corey Patrick O'Rourke

 

In addition, the Company agreed to the following in the August 2017 Letter Agreement:

 

To file a proxy statement for a special meeting of stockholders within 10 days of closing the August 2017 Offering. Proposals were to include (i) an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of its issued and outstanding common stock by a ratio of not less than one-for-two and not more than one-for-twenty at any time prior to one year from the date of the special meeting, with the exact ratio to be set at a whole number within this range as determined by the Board of Directors, (ii) the issuance of securities in one or more non-public offerings where the maximum discount at which securities will be offered will be equivalent to a discount of 30% below the market price of the common stock, as required by and in accordance with Nasdaq Marketplace Rule 5635(d), (iii) the issuance of securities in one or more non-public offerings where the maximum discount at which securities will be offered will be equivalent to a discount of 20% below the market price of the Common Stock, as required by and in accordance with Nasdaq Marketplace Rule 5635(d), (iv) the issuance of common stock upon the conversion of Series J Preferred Stock and (v) the issuance of incentive shares in the form of shares of Series K Preferred Stock convertible into an aggregate of 2,166,667 shares of common stock.

 

Subject to agreement on terms and conditions of the investment, HS Contrarian committed to a $1,000,000 lead order in an offering amount of $8,000,000 (the “$8,000,000 Financing”). The $8,000,000 Financing was subject to the Company obtaining approval of a reverse stock split, issuance of the Series J Preferred Stock, and filing a proxy statement for stockholder approval of the Inducement Shares as identified in the August 2017 Letter Agreement.

 

That the employment terms of all management be reduced to two years from three years and that management defer portions of their salary for the remainder of the year, which would be paid upon the earlier of completion of the $8,000,000 Financing or a business transaction that represents, or transactions in the aggregate that represent, in excess of $10,000,000.

 

In connection with HS Contrarian’s and the Company’s obligations under the August 2017 Letter Agreement, neither the $8,000,000 Financing nor the change in employment terms from three years to two years were completed as of November 13, 2018.

 

Memorial Sloan Kettering Cancer Center

 

Since 2008, the Company has engaged in various research agreements and collaborations with MSK including licensed rights to cancer vaccines and the blood samples from patients who have been vaccinated with MSK’s cancer vaccines. Total sponsored research contracts outstanding in 2016 amounting to approximately $800,000 in 2016 were 100% complete as of the year ended December 31, 2016. Such sponsored research agreements provide support for preclinical work on the Company’s product development programs. The work includes preparing radioimmunoconjugates of the Company’s antibodies and performing in vitro and in vivo pharmacology studies for our therapeutic antibody product candidate, imaging agent product candidate, and radioimmunotherapy product candidate programs. For the three months ended September 30, 2018, there were no expenses incurred related to these contracts.

 

Patheon Biologics LLC Agreement

 

On April 14, 2014, the Company entered into a development and manufacturing services agreement with Patheon Biologics LLC (f.k.a. Gallus Biopharmaceuticals) to provide a full range of manufacturing and bioprocessing services, including cell line development, process development, protein production, cell culture, protein purification, bio-analytical chemistry and QC testing. Total amount of the contract is estimated at approximately $3.0 million. For the three months ended September 30, 2018 and 2017, the Company recorded no expenses associated with the agreement, as no manufacturing was completed during either period.