On May 9, 2012, our wholly owned subsidiary, Arena Pharmaceuticals GmbH, or Arena GmbH, and Eisai Inc., or Eisai, entered into anAmended and Restated Marketing and Supply Agreement, or the Amended Agreement, which amends the Marketing and Supply Agreement, or Original Agreement , the parties entered into in July 2010. The Original Agreement provided Eisai exclusive rights to commercialize lorcaserin in the United States and its territories and possessions, subject to the approval by the U.S. Food and Drug Administration, or FDA, of our New Drug Application, or NDA, for lorcaserin. The Amended Agreement expands the territories such that Eisai now also has exclusive rights to commercialize lorcaserin in most of North and South America (including Canada, Mexico and Brazil), or Additional Territories, subject to applicable regulatory approval.
As in the Original Agreement, Arena GmbH will manufacture lorcaserin at its facility in Switzerland, and Eisai will purchase all of its requirements of lorcaserin from Arena GmbH. Arena GmbH will sell lorcaserin to Eisai for marketing and distribution in the United States and in the Additional Territories for a purchase price starting at 31.5% and 30.75%, respectively, of Eisai’s aggregate annual net product sales in all of the territories on an aggregate basis. The purchase price will increase on a tiered basis in the United States and in the Additional Territories to as high as 36.5% and 35.75%, respectively, on the portion of Eisai’s annual net product sales exceeding $750 million, subject to reduction (for sales in a particular country) in the event of generic competition in the applicable country. The Amended Agreement includes certain payments by Eisai if certain annual minimum sales requirements in the Additional Territories are not met during the first ten years after initial commercial sale in Canada, Mexico or Brazil.
Arena GmbH’s eligibility to receive up to an aggregate of $1.19 billion in one-time purchase price adjustment and other payments based on Eisai’s annual net sales of lorcaserin in the United States under the Original Agreement will now be based on the annual net sales of lorcaserin in the United States and the Additional Territories on an aggregate basis, with the first and last amounts payable, as they were under the Original Agreement, with annual net sales of $250 million and $2.5 billion, respectively. Of these payments, Eisai will pay Arena GmbH a total of $330 million for annual net sales of up to $1 billion. Arena GmbH is also now eligible to receive up to an additional $185 million in onetime purchase price adjustment payments based on Eisai’s annual net sales of lorcaserin in the Additional Territories, with the first and last amounts payable upon first achievement of annual net sales of $100 million and $1 billion in the Additional Territories, respectively.
In addition, under the Amended Agreement, we will receive from Eisai an upfront payment of $5 million, and an additional $5 million milestone payment upon regulatory approval of lorcaserin in, whichever may occur first, the United States or in a European Union country.
Under the Amended Agreement, $4.5 million in additional regulatory and development milestone payments, based on achievement of regulatory filings or approvals in the Additional Territory, were also added, so that the total of such milestones (including those under the Original Agreement) is $74.5 million. In addition, the milestone payment due upon regulatory approval in the United States and delivery of product supply for launch continues to be $40 million or $60 million, depending on the approved drug label
We are responsible for regulatory activities related to the lorcaserin NDA until transfer of the NDA to Eisai, and Eisai is responsible for regulatory activities related to the lorcaserin NDA thereafter as well as the regulatory activities for obtaining regulatory approval in any country in the Additional Territories.
With respect to the United States, if the FDA requires development work following approval of the lorcaserin NDA, Eisai will bear 90% and Arena GmbH will bear 10% of the expenses for such work, except that the parties will share equally the costs of certain pediatric or adolescent studies. If additional development work is required by the FDA prior to approval of the lorcaserin NDA, the parties will share equally the development expenses for such work. With respect to the Additional Territories, Eisai is responsible for most of the costs and expenses associated with seeking and obtaining regulatory approval in such territories. If the regulatory authority for a country in the Additional territories requires development work before or following approval of lorcaserin in such country, Eisai will bear 90% and Arena GmbH will bear 10% of the expenses for such work, with the exception of the expenses for stability testing which will be shared equally by the parties.
