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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 13, 2007
Critical Therapeutics, Inc.
(Exact Name of Registrant as Specified in Charter)
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Delaware
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000-50767
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04-3523569 |
(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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60 Westview Street, Lexington, Massachusetts
(Address of Principal Executive Offices)
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02421
(Zip Code) |
Registrants telephone number, including area code: (781) 402-5700
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
TABLE OF CONTENTS
Item 1.01. Entry into a Material Definitive Agreement.
Zileuton Co-Promotion Agreement
On March 13, 2007, Critical Therapeutics, Inc. (the Company) entered into an agreement with DEY,
L.P. (DEY), an affiliate of Merck KGaA, under which DEY and Critical Therapeutics agreed to
jointly co-promote ZYFLO® (zileuton tablets) and, if approved by the U.S. Food and Drug
Administration (the FDA), the controlled release formulation of zileuton (zileuton CR). Under
the co-promotion and marketing services agreement, the Company granted DEY an exclusive right and
license or sublicense, under patent rights controlled by the Company, to promote and detail ZYFLO
and zileuton CR in the United States, together with the Company and its affiliates, for asthma and,
subject to FDA approval, other respiratory conditions.
Both the Company and DEY have agreed to use diligent efforts to promote the applicable products in
the United States during the term of the co-promotion agreement. In addition, DEY has agreed to
provide a minimum number of details per month for ZYFLO and zileuton CR in the second position to
office-based physicians and other health care professionals, including a minimum number of details
delivered to respiratory specialists, such as allergists and pulmonologists. The Company has
agreed to provide a minimum number of details per month for ZYFLO and zileuton CR in the first
position. From 2008 through 2010, the Company and DEY each have agreed to contribute 50 percent of
out-of-pocket promotion expenses for zileuton CR that are accrued or paid to third-parties and
approved by the joint commercial committee. The Company and DEY each have agreed to contribute a
minimum of $3.0 million per year for these promotion expenses. The Company is responsible for
third-party promotion costs during 2007. DEY also has agreed to provide the support of its managed
care group to negotiate contracts and engage in other activities with third-party payors for
favorable managed care access at an initial rate of approximately $70,000 per calendar quarter.
This managed care support will include advice and logistical support to the Company regarding
managed care strategy.
Under the co-promotion agreement, DEY has agreed to pay the Company a non-refundable upfront
payment of $3.0 million upon signing the co-promotion agreement. In addition, DEY has agreed to
pay the Company milestone payments of $4.0 million following approval by the FDA of the new drug
application for zileuton CR and $5.0 million following commercial launch of zileuton CR. Under the
co-promotion agreement, the Company will retain all quarterly net sales of ZYFLO and zileuton CR, after third party
royalties up
to $1.95 million. The Company has agreed to pay DEY a portion of
quarterly net sales of ZYFLO and zileuton CR, after third-party royalties, in excess of $1.95
million. From the date DEY begins detailing ZYFLO through the commercial launch of zileuton CR,
the Company has agreed to pay DEY 70% of quarterly net sales of ZYFLO, after third party royalties,
in excess of $1.95 million. Following the commercial launch of zileuton CR through December 31,
2010, the Company has agreed to pay DEY 35% of quarterly net sales, after third-party royalties, in
excess of $1.95 million. From January 1, 2011 through December 31, 2013, the Company has agreed to
pay DEY 20% of quarterly net sales, after third-party royalties, in excess of $1.95 million.
Beginning three years after the commercial launch of zileuton CR, either party may terminate the
co-promotion agreement with six-months advance written notice. If the commercial launch of
zileuton CR is delayed beyond May 31, 2008, DEY has the right to terminate the co-promotion
agreement on or before July 1, 2008 by providing written notice, which will be effective 60 days
after receipt by the Company. If DEY exercises this termination right, the Company will be
obligated to pay DEY $2.0 million. In addition, DEY has the right to terminate the co-promotion
agreement with two-months prior written notice if zileuton CR net sales for any four consecutive
calendar quarters after commercial launch of zileuton CR are less than $25 million. Each party has
the right to terminate the co-promotion agreement upon the occurrence of a material uncured breach
by the other party.
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DEY has agreed not to manufacture, detail, sell, market or promote any product containing zileuton
as one of the active pharmaceutical ingredients for sale in the United States until the later of
one year after expiration or termination of the co-promotion agreement and March 15, 2012. However,
if an AB-rated generic product to zileuton CR is introduced, DEY would not be subject to these
non-competition obligations and DEY will have the exclusive right to market the authorized generic
version of zileuton CR. DEY will not be subject to these non-competition obligations if any of the
following occur: DEY exercises its right to terminate the co-promotion agreement if zileuton CR
net sales for any four consecutive calendar quarters after commercial launch of zileuton CR are
less than $25 million; or DEY terminates the agreement upon the occurrence of a material uncured
breach by the Company
Under the co-promotion agreement, the Company granted DEY the exclusive right to negotiate with the
Company for the development and commercialization, including co-promotion, of additional zileuton
products in the United States for the treatment of asthma and, subject to FDA approval, other
respiratory conditions. These exclusive negotiation rights are effective until September 1, 2007
with respect to the injectable formulation of zileuton and December 31, 2007 with respect to other
zileuton products.
A joint commercial committee with two members from the Company and two members from DEY will
oversee co-promotion activities under the agreement. The co-promotion agreement provides that the
joint commercial committee will make decisions by unanimous agreement, with disagreements being
referred for resolution by the Chief Executive Officer of each party and further disputes being
subject to non-binding mediation.
Binding Letter Agreement for COPD Co-Promotion
As contemplated by the terms of the zileuton co-promotion agreement, the Company and DEY entered
into a separate binding letter agreement on March 13, 2007 providing for the Company to co-promote
DEYs product candidate for chronic obstructive pulmonary disease (COPD), if approved by the FDA.
Under the binding letter agreement, DEY agreed to pay the Company a co-promotion fee based on a
percentage of net retail sales of DEYs product candidate for the number of units in excess of a
specified level of unit sales. The Company agreed to provide a specified minimum number of details
per month for DEYs product candidate.
Although the Company and DEY intend to enter into a more detailed written agreement relating to the
co-promotion of DEYs product candidate, the terms of the binding letter agreement will govern the
co-promotion of DEYs product candidate if the Company and DEY fail to agree upon a more detailed
written agreement. The binding letter agreement provides that the Company and DEY anticipate that
they will negotiate and execute a more detailed written agreement within 90 days.
Under the binding letter agreement, the term of the co-promotion arrangement for DEYs COPD product
candidate will expire upon termination of the zileuton co-promotion agreement. In addition, the
Company has the right to terminate the binding letter of intent or any more detailed written
agreement after June 30, 2008 with 90-days advance notice.
Item 7.01. Regulation FD Disclosure
As a result of entering into the co-promotion and marketing services agreement with DEY, prior
financial guidance provided by the Company should no longer be considered accurate or otherwise to
be relied upon. The Company expects to provide updated financial guidance as part of a quarterly
earnings conference call in May 2007 at which the Company also expects to first quarter financial
results, strategy and upcoming milestones.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: March 14, 2007 |
CRITICAL THERAPEUTICS, INC.
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By: |
/s/ Frank E. Thomas
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Frank E. Thomas |
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President and Chief Executive Officer |
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