| Item 1.01. | Entry into a Material Definitive Agreement. |
On August 15, 2022 (the
“Effective Date”), Accelerate Diagnostics, Inc. (the “Company”) entered into a Sales and Marketing Agreement (the
“Sales Agreement”) with Becton, Dickinson and Company (“BD”) appointing BD as the Company’s worldwide exclusive
sales agent to commercialize the Company’s Pheno 1.0 and Arc instruments and kits (“Products”) in the field of microbiology
and in territories in which the necessary regulatory approvals are achieved and granting to BD certain other rights to future Company
products. The term of the agreement is five (5) years (the “Initial Term”) and is subject to automatic one year renewals unless
prior notice is provided to a party.
Pursuant to the Sales
Agreement, the Company engages BD to be generally responsible for sales-related support activities for the Products in exchange for commissions
on Product sales by the Company. BD will provide such sales activities pursuant to a mutually acceptable commercialization plan and strategy.
These services will be agreed to by the parties and set forth in a commercialization plan, the first one to be negotiated by the parties
shortly after the Effective Date, and are expected to include sales, marketing, technical and order support. The Company and BD shall
agree on rolling 12-month sales forecasts on a quarterly basis for the Products. BD must use reasonable efforts to meet or exceed each
Product forecast and the Company must use reasonable efforts to produce sufficient quantities of Products to meet each Product forecast.
The Company retains the responsibility for all other commercialization necessary to market the Products, including negotiating and booking
sales for customer orders, manufacture and provision of inventory of Products, and marketing materials and collateral support.
The Company is responsible
for all regulatory approvals in the United States and other countries where Products are marketed as of the Effective Date. The Company
is also responsible for obtaining and maintaining regulatory approvals in additional countries until December 31, 2023 (“Additional
Countries”). The Additional Countries are to be agreed upon by the parties and the Company must deliver existing and new registrations
for the Arc instruments and kits in such Additional Countries. The Company will hold the regulatory approvals for the existing countries
and the Additional Countries. Beginning on January 1, 2024, BD will lead the registration process for regulatory approvals in any other
countries (“BD Countries”) other than the existing countries as of the Effective Date and any Additional Countries. BD will
hold the regulatory approvals for the BD Countries. Expenses associated with BD obtaining regulatory approvals will be agreed upon by
the parties’ steering committee and set forth in a commercialization plan. For the Additional Countries and BD Countries, the steering
committee will assess and approve specific regulatory approval requirements at the appropriate time in relation to the commercialization
plan. Once regulatory approvals are obtained in an Additional Country or by BD in a BD Country, BD shall be responsible, at its expense,
for the commercial launch of Products in those countries, except that costs associated with strategic marketing for such commercial launch
of Products in any Additional Country will be paid for by the Company. In the event the steering committee does not approve specific regulatory
approval requirements within a specific region or area, BD will lose the exclusivity granted to it in such region or area and BD will
not be prohibited from selling, promoting, distributing or otherwise commercializing any third-party products that directly compete with
the Products.
The Parties each have
made certain exclusivity commitments with respect to the Products and the promotion of directly competitive products. Subject to certain
limitations, the Company has granted exclusive global commercial rights to BD and is required to wind down any existing agreements with
third-party sales agents or distributors within one year of the Effective Date. In addition, BD has agreed not enter into any new agreements
with a third party for BD to sell, promote, distribute or otherwise commercialize any directly competing products. However, BD may continue
to perform its obligations under any existing agreement. BD is not precluded from (i) making an expenditure to acquire or invest in third-party
property or assets of directly competing products, or (ii) developing, improving, and/or commercializing its BD PhoenixTM automated
identification and susceptibility testing system. Either party has the right to terminate the Sales Agreement upon 90 days’ notice
to the other party following the first public announcement of BD’s acquisition of any directly competing product. The Company’s
sole and exclusive remedy in the event of such termination is to receive any remaining balance of the Commercial Fee (as defined below).
The Sales Agreement also
grants BD certain rights with respect to the Company’s next generation antibiotic susceptibility test system of microbiology (“Pheno
2.0”). BD has an exclusive right of first negotiation to be the exclusive sales agent to commercialize Pheno 2.0, which will be
triggered if the Company proposes to license Pheno 2.0 or sell its rights to Pheno 2.0, or if the Company and BD mutually agree that Pheno
2.0 clinical data is ready to be submitted to the U.S. Food and Drug Administration for 510(k) clearance. The terms of such subsequent
agreement would have to be negotiated by the parties.
BD also has certain rights
regarding a potential acquisition or financing of the Company. BD has the right to receive notice of an acquisition proposal or the initiation
of a sale process. BD also has a right to receive information and a non-exclusive negotiation right regarding such potential change of
control transaction. In the event of an acquisition of the Company by a third party, other than BD, either party will have the right to
terminate the Sales Agreement on three (3) months prior notice. Upon such termination, the Company or the acquiring party must pay BD
20% of revenue recognized for the shorter of one year or the remainder of the Initial Term, and any remaining unpaid Commercial Fee will
be forgiven. Further, BD has the right to provide up to 20% of all future financings of the Company, the terms of which would be subject
to negotiation by the parties.
In consideration of the
rights granted, BD will pay the Company an exclusive commercial arrangement fee of $15 million (the “Commercial Fee”). The
Commercial Fee is payable in equal $3 million installments commencing on the date the parties agree BD will start providing services and
for the next four subsequent calendar years. The Commercial Fee is payable in the event of a termination of the Sales Agreement, except
in the event of a termination (i) for convenience by the Company, (ii) by BD within one year of the Effective Date as a result of the
Company’s insolvency, (iii) by BD for the Company’s material breach of the Sales Agreement, or (iv) by either party following
a change of control to a third party. Additionally, the Commercial Fee or any unpaid balance will be forgiven in the event that a Product
infringes a third party’s intellectual property rights. The Company also is obligated to pay BD sales commissions on the revenue
recognized by the Company in accordance with U.S. generally accepted accounting principles on sales of Products (“Sales Commissions”).
For existing business, the parties will define a base book listing of accounts in the commercialization plan and an annual base book fee
for the Sales Commissions. For new business, the parties have established target revenue amounts and the Sales Commissions will be based
on such revenue target amounts. New business is cumulative, including new accounts obtained in the previous year. Once the target level
or the above target level is achieved, the Company will pay BD the target rate or the above target rate, as applicable, for all new business
in that calendar year. In the event the Sales Agreement is terminated, the Company shall pay Sales Commissions for nine months past the
effective date of such termination.
The Sales Agreement contains
rights for each of the Company and BD to terminate the Sales Agreement based on a material breach, insolvency and other circumstances.
The Company and BD each may terminate the Sales Agreement for material breach by, or insolvency of, the other party following notice,
and if applicable, a cure period. After the second anniversary of the Effective Date, the Company and BD each has the right to terminate
the Sales Agreement and any commercialization plan with 12 months’ prior written notice to the other party. The Company may also
terminate the Sales Agreement if BD fails to meet certain targets for Products in any 12 month period following a cure period.
The foregoing description
of the Sales Agreement is not complete and is qualified in its entirety by reference to the full text of the Sales Agreement, which will
be filed with the U.S. Securities and Exchange Commission as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ending September 30, 2022.