On December 3, 2019 (the "Closing Date"), Veracyte, Inc. (the "Company") reported that it has entered into a License and Asset Purchase Agreement (the "LAPA") with NanoString, Inc. ("NanoString"), pursuant to which the Company (the "Transaction") (i) obtained an exclusive worldwide license to NanoString’s nCounter FLEX Analysis System (the "FLEX System") for in vitro diagnostic use and for the development and commercialization of in vitro diagnostic tests, including in vitro diagnostic devices (IVDs) or laboratory developed tests (LDTs), for use on the FLEX System (collectively, the "License") and (ii) acquired certain assets, including NanoString’s rights with respect to the Prosigna Breast Cancer Prognostic Gene Signature Assay ("Prosigna"), the LymphMark Lymphoma Subtyping Test ("LymphMark") and the assay software modules that operate together with the FLEX System (Filing, 8-K, Veracyte, DEC 3, 2019, View Source [SID1234551880]). In connection with the Transaction, the Company will assume certain liabilities associated with the assets purchased under the LAPA, including ongoing third-party royalty obligations related to Prosigna and LymphMark. As part of the Transaction, the Company will also offer certain employees of NanoString employment. In connection with entering into the LAPA, the Company and NanoString also entered into various service and supply agreements relating to the manufacture and supply of Prosigna, LymphMark, and other in-vitro diagnostic tests that may be developed by or on behalf of the Company for use on the FLEX System and for the manufacture and supply of the FLEX System.
As consideration under the LAPA, the Company will pay NanoString $40,000,000 in cash. NanoString is also entitled to receive 376,732 shares of the Company’s common stock (the "Equity Consideration"), which shares represent a value of approximately $10,000,000 based on the average closing price of the Company’s common stock for the ten consecutive trading days ending on the third trading day prior to the Closing Date. The Company is required under the LAPA to register the Equity Consideration for resale within 90 days of the Closing Date as set forth in the registration rights schedule to the LAPA (the "Registration Rights Schedule").
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Pursuant to the terms of the LAPA, NanoString may not sell the Equity Consideration for the first 90 days following the Closing Date. Thereafter, NanoString may, subject to limited exceptions, not sell Equity Consideration representing more than 10% of the average daily trading volume of the Company’s common stock for the 30-day period preceding any such sale.
Pursuant to the LAPA, NanoString is also eligible to receive three additional payments, based upon the achievement of certain commercialization milestones, totaling $10,000,000 in the aggregate (the "Milestone Payments"). The individual Milestone Payments of $3,500,000, $3,500,000 and $3,000,000 will be due, respectively, upon the Company’s commercial launch of the first, second and third diagnostic test for use on the FLEX System, other than Prosigna or LymphMark, in each case as measured by the processing of the first commercial patient sample.
The foregoing summaries of the LAPA and Registration Rights Schedule are not complete and are qualified in their entirety by reference to the LAPA and Registration Rights Schedule, copies of which are filed as Exhibits 2.1 and 4.1 to this Current Report on Form 8-K and are incorporated herein by reference. The LAPA contains customary representations and warranties, covenants and indemnities. The representations, warranties and covenants contained in the LAPA were made only for the purposes of the LAPA, were made as of specific dates, and were made solely for the benefit of the parties to the LAPA, and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties. The assertions embodied in those representations and warranties may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating their respective terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to the Company’s stockholders. For the foregoing reasons, none of the Company’s stockholders or any other person should rely on such representations and warranties, or any characterizations thereof, as statements of factual information at the time they were made or otherwise.