14. Subsequent Events

Collaboration Agreement

 

On January 8, 2018, the Company and Incyte Corporation entered into a Target Discovery, Research Collaboration and Option Agreement (the “Collaboration Agreement”). Under the Collaboration Agreement, the Company will use its proprietary gene control platform to identify novel therapeutic targets with a focus on myeloproliferative neoplasms, and Incyte will receive options to obtain exclusive worldwide rights to intellectual property resulting from the collaboration for the development and commercialization of therapeutic products directed to up to seven validated targets. Incyte will have exclusive worldwide rights to develop and commercialize any therapies under the collaboration that modulate those validated targets.

 

Under the terms of the Collaboration Agreement, Incyte paid the Company $10.0 million in up-front consideration, consisting of $2.5 million in cash and $7.5 million in pre-paid research funding. The Company’s activities under the Collaboration Agreement are subject to a joint research plan and, subject to certain exceptions, Incyte will be responsible for funding the Company’s activities under the research plan, including amounts in excess of the pre-paid research funding amount. The Company is obligated to make a payment to Whitehead representing a percentage of the up-front cash consideration received under the Collaboration Agreement.

 

The Company will be eligible to receive target selection milestone payments and option exercise fees of up to an aggregate of $54.0 million if Incyte selects the maximum number of targets for validation and exercises its option to obtain exclusive rights to collaboration intellectual property for therapeutic products directed to all seven validated targets.  Should any therapeutic product be developed by Incyte against a target as to which Incyte has exercised its option to obtain exclusive rights to collaboration intellectual property, the Company will be eligible to receive milestone payments and, if approved and commercialized, royalty payments from Incyte. For each of the seven validated targets, the Company would become eligible to receive from Incyte a total of up to $50.0 million in development and regulatory milestone payments. If products arising from the collaboration are approved, the Company would become eligible to receive from Incyte, for each validated target, a total of up to $65.0 million in commercial milestone payments. Upon approval and commercialization of any therapeutic product resulting from the collaboration, the Company would become eligible to receive low single-digit royalties on net sales of such product.

 

The term of Collaboration Agreement began on January 8, 2018 and, unless terminated by a party early, will continue until all royalty obligations for products arising from the collaboration expire. The Collaboration Agreement may be terminated by Incyte for convenience on sixty (60) days’ prior written notice to the Company, or by the Company on thirty (30) days’ written notice in the event Incyte or one of its affiliates or sublicensees challenges the validity or enforceability of certain patent rights controlled by the Company. The Collaboration Agreement may also be terminated by either of the parties on thirty (30) days’ prior written notice in the event of an uncured material breach of the Collaboration Agreement by the other party or immediately in the case of certain bankruptcy events. Incyte’s right to terminate for convenience and each party’s right to terminate for uncured material breach may be exercised either with respect to the Collaboration Agreement in its entirety or, as applicable, in relation to the relevant validated target and associated therapeutic products.

 

Following entry into the Collaboration Agreement, the Company’s Board of Directors accelerated the vesting of 63,793 shares underlying performance-based stock options granted to members of the Company’s management team.

 

Stock Purchase Agreement

 

On January 8, 2018, the Company entered into a Stock Purchase Agreement with Incyte (the “SPA”), pursuant to which Incyte agreed to purchase 793,021 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $10.0 million in cash, or $12.61 per share, in a private placement. The purchase price represents a thirty percent (30%) premium to the volume-weighted sale price of the shares of the Company’s common stock over the fifteen (15) trading day period immediately preceding the date of the SPA. The Company is obligated to make a payment to Whitehead representing a percentage of the equity premium received under the SPA. The Shares are subject to a lock-up restriction and a market stand-off agreement for a period of 12 months following the closing of the sale of the shares (the “Closing”). Pursuant to the terms of the SPA, the Company filed a registration statement covering the resale by Incyte of the Shares on January 19, 2018.

 

In addition, from the Closing until the earlier of the second anniversary of the Closing or the expiration or termination of the Collaboration Agreement, the Company has granted to Incyte the right to purchase up to its pro rata share of the securities offered in certain subsequent offerings of the Company’s common stock or common stock equivalents, subject to the terms and conditions set forth in the SPA.

 

Sale of Securities through Public Offering

 

On January 30, 2018, the Company issued and sold an aggregate of 4,188,481 shares of its common stock in a public offering at a price per share $9.55 per share, resulting in gross proceeds of $40.0 million before deducting underwriting commissions and fees estimated to be approximately $2.7 million. Additionally, on February 2, 2018, the underwriters exercised their option to purchase an additional 628,272 shares at a price per share of $9.55, resulting in additional gross proceeds of $6.0 million.

 

In addition, on February 2, 2018, we also closed a concurrent private placement of 125,656 shares of our common stock to Incyte Corporation at a price of $9.55 per share, resulting in proceeds to us of $1.2 million. The Company closed an additional private placement of 18,849 shares of its common stock to Incyte on February 7, 2018 at a price of $9.55 per share, resulting in gross proceeds to the Company of $0.2 million.