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SEC Filings

S-1/A
OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 02/16/2007
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Table of Contents

 
OREXIGEN THERAPEUTICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS — (Continued)

Cypress Bioscience, Inc.
 
In January 2005, the Company entered into a license agreement with Cypress whereby the Company sublicensed certain of its rights under the Duke Agreement to Cypress for specified uses. As consideration for this license, Cypress paid the Company non-refundable upfront fees of $1,500,000. The term of the license agreement generally extends until the licensed patent expires, which is expected to occur in 2023. Cypress can require the Company to provide clinical support for any of the specified uses over the term of the agreement. Accordingly, this $1,500,000 is being recognized over 17 years, the estimated term of the agreement. In addition, Cypress is obligated to pay the Company a royalty on net sales of any products covered by the sublicensed technology. Cypress may also be required to make future milestone payments to the Company of up to $57,000,000 upon its achievement of various regulatory milestones. In June 2006, Cypress announced that the results of a completed Phase IIa trial did not support continuing its development program for obstructive sleep apnea, one of the specified uses under the agreement. Therefore, the Company’s receipt of $20,000,000 of milestone payments related to sleep apnea is unlikely at this time.
 
For the years ended December 31, 2005 and 2006 and for the period September 12, 2002 (inception) to December 31, 2006, the Company recognized revenues under this agreement of $88,230, $88,239 and $176,469, respectively. At December 31, 2005 and 2006, deferred revenue under this agreement totaled $1,411,765 and $1,323,529, respectively.
 
As a result of the Company’s sublicensing of the Duke technology to Cypress for specified uses, the Company may be required to make future payments to Duke of up to $5.7 million ($3.7 million excluding milestone payments related to sleep apnea) upon Cypress’s achievement of various regulatory milestones. The term of the Cypress agreement generally extends until the last licensed patent right expires, which is expected to occur in 2023. Either party may terminate the agreement upon delivery of written notice if the other party commits fraud, willful misconduct, or illegal conduct of the other party with respect to the subject matter of the agreement. In addition, either party may terminate the agreement upon delivery of written notice if the other party commits a material breach of its obligations and fails to remedy the breach within a specified period. Cypress may terminate the agreement for any reason upon delivery of written notice within the specified period. Cypress may also terminate with no notice if an unfavorable judgment is entered against the Company or any other party relating to the patents we have sublicensed to Cypress. In addition, Cypress may terminate the agreement upon specified bankruptcy, liquidation or receivership proceedings.
 
Eli Lilly and Company
 
In December 2004, the Company entered into a Drug Study Agreement with Eli Lilly whereby the Company and Eli Lilly would enter into a joint Drug Study program. Eli Lilly was required to make a payment of $87,068 upon execution of the agreement and $87,069 upon the completion of the pre-clinical study, which was completed in December 2005. For the year ended December 31, 2005 and for the period from September 12, 2002 (inception) to December 31, 2006, the Company recognized revenue totaling $174,137 under this agreement.
 
Credit and Security Agreement
 
On December 15, 2006, the Company entered into a credit and security agreement with Merrill Lynch Capital providing for potential borrowing until June 30, 2007 of up to $17.0 million. In connection with this agreement, the Company has paid a non-refundable fee totaling $85,000 and additional costs related to the transaction totaling $98,000. The Company will be required to make monthly payments of principal and interest and all amounts outstanding under the credit and security agreement will become due and payable on the earlier of June 30, 2010 or three years after the last funding of any amounts under the agreement. Interest accrues on amounts outstanding at a base rate set forth in the agreement plus an applicable margin, which


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