On May 24, 2024 Allogene Therapeutics, Inc. (the "Company"), Overland Pharmaceuticals (CY) Inc. ("Overland") and Allogene Overland Biopharm (CY) Limited (the "JV Company") reported to have entered into a Share Exchange Agreement pursuant to which Overland’s cell therapy business merged into the JV Company (the "Organizational Restructuring").
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As background, the JV Company was originally formed on December 14, 2020 by Overland and the Company. Upon formation of the JV Company, the Company contributed an exclusive license to develop, manufacture and commercialize specific Company product candidates targeting BCMA, CD70, FLT3 and DLL3 (the "Licensed Products") in China, Taiwan, South Korea and Singapore (the "Territory"), with the Company retaining exclusive rights to the Licensed Products outside the Territory (the "Exclusive License Agreement"), and Overland contributed $117 million in upfront and certain quarterly cash payments. In return, the Company received a $40 million upfront payment and Seed Preferred Shares representing 49% of the JV Company’s outstanding stock and Overland received Seed Preferred Shares representing 51% of the JV Company’s outstanding stock.
Under the Share Exchange Agreement, the JV Company acquired from Overland a 100% equity interest in Overland Pharmaceuticals (US) Inc. ("Overland US"). Overland US includes certain research and development, clinical, and general and administrative staff, as well as select cell therapy assets, including its lead program, OL-101, an autologous GPRC5D-BCMA bispecific dual targeting CAR-T for refractory multiple myeloma. Upon completion of the closing of the share exchange, Overland US became a wholly owned subsidiary of the JV Company, Overland’s ownership increased to 81.54%, the Company’s ownership decreased to 18%, and the Ordinary Shares issuable under the share incentive plan of the JV Company equaled 0.46% of the capitalization of the JV Company on an as-converted and fully-diluted basis. In addition, the JV Company increased the total number of Ordinary Shares issuable under its share incentive plan, which resulted in diluting Overland’s and the Company’s ownership to 69.63% and 15.37%, respectively, and the Ordinary Shares issuable under the share incentive plan of the JV Company were increased to 15% of the capitalization of the JV Company on an as-converted and fully-diluted basis.
Under a separate agreement between Overland and HH BioPharma Holdings Ltd. ("HBP") executed on May 24, 2024, Overland distributed all Series Seed Preferred Shares of the JV Company held by Overland to HBP and HBP has assumed all rights and obligations attached to such Shares and all rights and obligations of Overland under the Share Exchange Agreement.
In connection with the Organizational Restructuring, on May 24, 2024, the Company and Allogene Overland BioPharm (PRC) Co., Limited (the "Licensee"), an indirect wholly owned subsidiary of the JV Company, entered into a First Amendment to Exclusive License Agreement (the "Amendment") to amend and supplement certain provisions of the Exclusive License Agreement dated December 14, 2020 between the Company and the JV Company which has since assigned all of its rights and obligations under the Exclusive License Agreement to the Licensee. Under the Amendment, the Company continues to grant the JV Company an exclusive license to develop, manufacture, and commercialize the Licensed Products in the Territory, with the Company retaining exclusive rights to the Licensed Products outside the Territory, and the royalty obligations to the Company were amended to a flat mid single-digit royalty on net sales in the Territory that are no longer subject to reductions as previously provided. The Amendment also provides the Company with additional rights to terminate the Exclusive License Agreement in its entirety or with respect to the relevant Licensed Product(s) if the Licensee fails to initiate manufacturing technology transfer with respect to a Licensed Product as agreed in the Amendment, or if HBP commits a funding default or a material breach of its representations, warranties, or covenants under the Share Exchange Agreement. The Amendment also provides that the Exclusive License Agreement will terminate automatically if the Company’s ownership in the JV Company falls below 7.5% (other than due to the Company’s sale of the Shares of the JV Company), unless at that time the JV Company and the Company have mutually agreed on the manufacturing technology transfer plan for the Licensed Product(s) and the JV Company elects to continue the license for such Licensed Product(s) with increased milestones and royalties. Under the Amendment terms such increased milestones and royalties consist of up to $115 million in milestone payments for each Licensed Product and tiered mid single-digit to low double-digit royalties on net sales in the Territory.
In connection with the Organizational Restructuring, on May 24, 2024, the Company, HBP, and the JV Company also entered into an Amended and Restated Shareholders’ Agreement which amends and restates the prior Shareholders’ Agreement dated December 14, 2020 among the Company, Overland, and the JV Company in its entirety. Pursuant to the Amended and Restated Shareholders’ Agreement, the board of directors of the JV Company will be comprised of five directors, with three directors designated by HBP, one director designated by the Company, and one director serving as the chief executive officer of the JV Company. The Amended and Restated Shareholders’ Agreement provides each of the Company and HBP certain shareholder-level consent rights, certain director-level consent rights, registration rights, information rights, and pre-emptive rights for future equity issuances. The Amended and Restated Shareholders’ Agreement shall terminate upon the consent of the parties, provided that its provisions with respect to director designation rights, shareholder-level consent rights, director-level consent rights, information rights, and pre-emptive rights shall terminate upon a qualified IPO or sale of the JV Company or its assets.
The foregoing description of the material terms of the Share Exchange Agreement, the Amended and Restated Shareholders’ Agreement and the Amendment is qualified in its entirety by reference to the complete text of such agreements, which the Company intends to file with the Securities and Exchange Commission as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.