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  • lsddc07 lsddc07 Apr 11, 2013 8:46 AM Flag

    From the 8K

    Affymax, Inc. (the “Company”) and Takeda Pharmaceutical Company Limited (“Takeda,” and collectively with Affymax, the “Parties”)
    entered into the Fourth Amendment (the “Amendment”) to the February 13, 2006 and June 27, 2006 Collaboration and License Agreements to
    amend and restate the ongoing respective roles and responsibilities and related commitments and financial terms between the Parties, including
    the termination of the Collaboration and License Agreement dated as of February 13, 2006, under which Affymax has granted Takeda a certain
    right and license for the development and commercialization in Japan of OMONTYS, as amended by the First Amendment, dated April 1,
    2007, the Second Amendment, dated January 1, 2008 and the Third Amendment, dated November 7, 2011, as well as the related manufacturing
    supply, safety, quality and co-promotion agreements between the parties. The Amendment changes the economics from a profit-sharing
    arrangement to a milestone and royalty-based compensation structure to Affymax effective as of April 1, 2013, and is part of the Company’s
    ongoing restructuring efforts resulting from the voluntary recall announced on February 23, 2013 related to OMONTYS® (peginesatide)
    Injection, the suspension of U.S. marketing and promotional activities, and the ongoing investigation with the U.S. Food and Drug
    Administration, or FDA.
    The Amendment effectuates a transfer of regulatory responsibilities, including the OMONTYS New Drug Application, or NDA, and all
    manufacturing, and development responsibilities from the Company to Takeda as soon as practicable but in any event prior to April 30, 2013
    with related transition services and support. Takeda has agreed to reimburse the Company for certain personnel costs to assist in the transition
    and investigation activities for the month of April in order to support the planned transition. Takeda receives a worldwide, exclusive royaltybearing
    license under Affymax and joint Takeda-Affymax patents to develop, manufacture and commercialize OMONTYS.
    As a result of the Amendment, Takeda assumes full responsibility for OMONTYS, including the ongoing recall and investigation of
    OMONTYS as well as any subsequent decisions as to whether the product may be subject to re-introduction if Takeda is able to complete the
    investigation and address the safety concerns to the satisfaction of the FDA. If Takeda decides to re-introduce OMONTYS, all of which is
    highly uncertain, the Company is eligible to receive royalties and (i) potential commercial milestone payments totaling up to $180 million of
    which $10 million is payable upon the first commercial sale after re-introduction of OMONTYS in the U.S., of which a $10 million and
    another $10 million relates to U.S. sales-based milestones, and of which $150 million relates to sales-based milestones in amounts as
    previously disclosed outside of the U.S. but now including Japan as a result of the Amendment and (ii) a potential development milestone
    payment of $5 million payable either upon regulatory approval in the E.U. or Japan. The royalties are tiered in the range of 13-17% with
    respect to net sales in the U.S. and in the range of 13-24% depending on the level of net sales by Takeda worldwide ex- U.S.
    The foregoing summary of material terms is qualified in its entirety by reference to the Amendment, which will be attached as an exhibit to the
    Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013, portions of which will be subject to a FOIA
    Confidential Treatment Request to the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
    1934, as amended.
    ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
    CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. AND ITEM 8.01. OTHER EVENTS.
    As previously disclosed, on March 18, 2013, the Company announced a reduction in force of approximately 75% of its workforce. As part of
    the Company’s ongoing efforts to restructure its operations in order to further reduce operating costs, and in view of the transfer of
    responsibilities to Takeda which is expected to be completed by April 30, 2013, the Company is commencing a process to notify substantially
    all remaining employees of estimated dates of separation, including named executive officers Anne-Marie Duliege and Karin Walker, pursuant
    to the 60-day notice requirement under the Worker Adjustment and Retraining Notification Act while it evaluates which few individuals may
    continue as employees to support ongoing operations of the Company as the restructuring continues. The Company has initiated efforts to
    retain a restructuring firm during the transition period. As the Company completes its assessment and transition of its business following the
    Takeda amendment, the Company expects that a small number of employees are likely to remain to support the ongoing operations of the
    Company.
    The recall of OMONTYS has severely harmed the Company’s business, financial condition, and prospects as a going concern and even with
    the transition of responsibilities effectuated by the Amendment and the further reductions in force, these planned cost reductions may not be
    sufficient. The Company continues to take steps to reduce its outstanding obligations to third parties, and is dependent on those efforts to
    continue operations even in the near term, which may not be successful. The recall has also limited the Company’s access to funds. The
    Company may be unable to continue its operations or to defend the existing and potential future litigation, particularly with the planned
    reductions in force and in view of the Company’s limited resources and funds. The Company may continue to explore various strategic
    alternatives, including a sale of the Company or its assets or a corporate merger. The Company is considering all possible alternatives,
    including further restructuring activities, wind-down of operations or bankruptcy proceedings.
    2

    Sentiment: Strong Buy

 
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