Related Party Transactions |
12 Months Ended |
|---|---|
Dec. 31, 2017 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
Related Party Transactions
In November 2017, the Company acquired Zylera Pharmaceuticals, LLC. Each of Zylera's previous owners beneficially own more than 5% of the outstanding common stock of the Company. In addition both individuals serve on the Company’s Board of Directors and one of the individuals served through March 27, 2018 as the Company’s President and COO.
Zylera, entered into the First Amended and Restated Distribution Agreement (the “Lachlan Agreement”) with Lachlan Pharmaceuticals, an Irish company controlled by Zylera's previous owners (“Lachlan”), effective December 18, 2015. Pursuant to the Lachlan Agreement, Lachlan named Zylera as its exclusive distributor of Ulesfia in the U.S. and agreed to supply Ulesfia to Zylera exclusively for marketing and sale in the U.S. The Lachlan Agreement provides that all trademark rights used in connection with Ulesfia will remain the intellectual property of Lachlan, and all goodwill associated with the use of the trademarks for the marketing and sale of Ulesfia in the territory will inure to the sole benefit of Lachlan. The Lachlan Agreement term continues as long as (i) there exists an issued and unexpired patent right for the product in the United States, or (ii) no generic version of the product is being sold in the United States. The Lachlan Agreement can be terminated by Zylera upon the introduction of a generic product in the territory or upon the expiration or invalidity of all patent rights for the product in the territory.
Zylera is obligated to purchase a minimum of 20,000 units per year, or approximately $1,177,000 of product, from Lachlan, subject to certain termination rights. The Lachlan Agreement also requires that Zylera make certain cumulative net sales milestone payments and royalty payments to Lachlan with a $3,000,000 annual minimum payment unless and until there has been a “Market Change” involving a new successful competitive product. Zylera has asserted that a “Market Change” has occurred pursuant to the terms of this agreement and litigation is pending with respect to that assertion). Lachlan is obligated to pay identical amounts to an unrelated third party from which it obtained rights to Ulesfia, and there is an ongoing arbitration proceeding with the ultimate recipient of the royalties over whether a Market Change has occurred. Additionally, Zylera must pay Lachlan management and handling fees that were equal to $3.66 per unit of fully packaged Ulesfia in 2018 and escalate at a rate of 10% annually, as well as reimburse Lachlan for all product liability insurance fees incurred by Lachlan. The aggregate gross amount the Company paid to Lachlan in 2017 under the Lachlan Agreement (from the acquisition date through year-end) was $0.
TRx entered into a Master Quality Agreement with Concordia and Lachlan Pharma Holdings, Ltd., effective January 1, 2014 (the date the First Amended and Restated Exclusive Distribution Agreement between Concordia and Lachlan was effective). The purpose of the agreement is to specify the regulatory, quality, and current good manufacturing practices responsibilities of the respective parties in relation to the maintenance of NDA 22-129 for the supply and marketing of Ulesfia® (benzyl alcohol) 5% lotion pursuant to the First Amended and Restated Exclusive Distribution Agreement between Concordia and Lachlan (the “EDA”). The agreement continues in effect for the term of the EDA, but Concordia or Lachlan may terminate the agreement upon thirty days written notice to the other party, following early termination or expiration of the EDA.
On December 10, 2016, Zylera informed Lachlan that a market change had occurred due to the introduction of Arbor Pharmaceutical’s lice product, Sklice®. According to the terms of the distribution agreement if there is a market change, the minimum purchase obligation is void. On June 5, 2017, Lachlan and Zylera entered into joint legal representation along with other unrelated third parties in negotiation and arbitration of dispute with Summers Laboratory, Inc regarding the an ongoing arbitration proceeding with the ultimate recipient of the royalties over whether a Market Change has occurred. The Company has not made any payments to Lachlan in 2017 under the Lachlan Agreement (from the acquisition date through year-end).
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