LONDON (dpa-AFX) - Drug maker AstraZeneca plc.(AZN, AZN.L) said that it has entered into an agreement with Aspen Global Incorporated or AGI, part of the Aspen Group, under which AGI will now acquire the residual rights to the established anaesthetic medicines comprising of Diprivan, EMLA, Xylocaine/Xylocard/Xyloproct, Marcaine, Naropin, Carbocaine and Citanest.
AstraZeneca entered into an agreement with AGI in June 2016, under which AGI gained the exclusive commercialisation rights to the medicines in markets outside the US.
As per the terms of the new agreement, AGI will now acquire the remaining rights to the intellectual property and manufacturing know-how related to the anaesthetic medicines for an upfront consideration of $555 million.
Additionally, AGI will pay AstraZeneca up to $211 million in performance-related milestones based on sales and gross margin during the period from 1 September 2017 to 30 November 2019. AstraZeneca will continue to manufacture and supply the medicines to AGI during a transition period of up to five years.
Under the terms of the original agreement, entered into in June 2016, AGI made an upfront payment to AstraZeneca of $520 million and agreed to make future Product Sales-related payments of up to $250 million, as well as paying double-digit percentage royalties on Product Sales. AstraZeneca agreed to continue to manufacture and supply the medicines to AGI on a cost-plus basis for an initial period of 10 years.
The new agreement does not impact the first Product Sales-related payment of $150 million due to AstraZeneca, for which the contingent terms have now been met. This income will be recorded as Externalisation Revenue in the Company's financial statements in the third quarter of 2017.
As per the new agreement, AGI will no longer pay royalties to AstraZeneca. The remaining $100 million Product Sales-related payment from the original agreement will be made to AstraZeneca in 2018, if the contingent terms are met, and will be recorded as Other Operating Income to reflect the reduced ongoing interest in the medicines as a result of the new agreement.
Further, as AstraZeneca will transition the manufacture and supply of the medicines to AGI, and therefore will have a reduced ongoing interest, the $555 million upfront and up to $211 million sales and gross margin-related payments from the new agreement will also be recorded as Other Operating Income in the Company's financial statements.
The new, additional agreement is expected to close in the fourth quarter of 2017, subject to customary closing conditions and regulatory clearances. It does not impact AstraZeneca's financial guidance for 2017.
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