Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies



Master Services Agreement


On December 30, 2015, the Company entered into a Master Service Agreement with a clinical research organization, with an effective date of December 29, 2015. During the six months ended June 30, 2018, the Company settled a balance with this clinical research organization resulting in a $894,000 decrease in accounts payable and a reduction in research and development expense under the Master Service Agreement.


On May 1, 2018, the Company entered into an Amended and Restated Master Services Agreement (“Service Agreement”) with a different clinical research organization (“CRO”), pursuant to which the CRO will perform certain services related to the management and execution of certain clinical trials involving the Company’s lead product candidate, RP-G28. The Services Agreement supersedes the Master Service Agreement, dated August 30, 2016, by and between the Company and the CRO. The precise services to be performed by the CRO under the Services Agreement will be mutually agreed upon by the parties in writing and set forth in one or more task orders. The Company is not obligated to purchase any minimum or specific volume or dollar amount of services under the Services Agreement.


The term of the Services Agreement is four years from the Effective Date unless earlier terminated. The Company may terminate the Services Agreement or any task without cause immediately upon giving the CRO notice of such termination. The CRO may terminate a task order if the Company has materially defaulted on its obligations under the Services Agreement or any task order and has not cured such material default with advance notice to the Company, as described in the Services Agreement.


Clinical Supply and Cooperation Agreement


Effective July 24, 2015, the Company entered into an amended Clinical Supply and Cooperation Agreement (the “Amended Supply Agreement”) with a contract manufacturer (“Manufacturer”) of active pharmaceutical ingredients and one of its affiliates. The Amended Supply Agreement amends certain terms of the Clinical Supply and Cooperation Agreement, dated December 16, 2009, amended on September 25, 2010.


Under the Existing Supply Agreement, the Manufacturer granted the Company an exclusive worldwide option in a specified field and territory to assignment of all right, title and interest to a purified galacto-oligosaccharides product (“Improved GOS”), the composition of matter of the Improved GOS and any information relating to the Improved GOS, including certain specified technical information and other intellectual property rights (the “Improved GOS IP”). Pursuant to the amended terms, the Company could exercise the option by paying the Manufacturer $800,000 within ten days after the effective date of the Amended Supply Agreement. The Company exercised this option on July 30, 2015 and the Manufacturer transferred the Improved GOS IP to the Company. Under the terms of the Amended Supply Agreement, if a further option payment of $1 million due in the future is not made, the Company may be required to return the Improved GOS IP to the Manufacturer.


The Amended Supply Agreement also provides that the Company must pay the Manufacturer $400,000 within 10 days following FDA approval of a new drug application for the first product owned or controlled by the Company using Improved GOS as its active pharmaceutical ingredient.


Separation Agreement and Consulting Agreement with Michael D. Step


On June 26, 2018, the board of directors of the Company appointed Andrew J. Ritter as the Company’s new Chief Executive Officer, effective June 27, 2018, to succeed Michael D. Step, who resigned effective June 27, 2018, as part of a planned transition. Mr. Step will remain on the Company’s board of directors and serve as a consultant for the Company.


In connection with his resignation as Chief Executive Officer, on June 30, 2018 (the “Separation Agreement Effective Date”), the Company and Mr. Step entered into an Agreement and General Release (the “Separation Agreement”) and a Consulting Agreement (the “Consulting Agreement”).


Under the terms of the Separation Agreement, the Company will pay Mr. Step $300,000 within 60 days of the Separation Agreement Effective Date, in exchange for his execution of a general release. The Separation Agreement also provides for COBRA continuation coverage under the Company’s medical insurance plan for 12 months and clarifies that all stock options held by Mr. Step will continue to vest in accordance with their terms for so long as Mr. Step continues to serve as a consultant to, director of and/or service provider to the Company.


Pursuant to the terms of the Consulting Agreement, Mr. Step has agreed to provide consulting services to the Company from time to time, as requested by the Company, for an initial term of 12 months, which may be extended upon the mutual agreement of the parties in writing. Under the terms of the Consulting Agreement, Mr. Step will be paid $11,250 per month for his services and will be reimbursed for his actual expenses. Mr. Step may terminate the Consulting Agreement for any reason by giving the Company at least 14 days’ prior written notice.


Lease Agreement


On July 9, 2015, the Company entered into a lease with Century Park, a California limited partnership, pursuant to which the Company leased approximately 2,780 square feet of office space in Los Angeles, California for its headquarters. The lease provides for a term of sixty-one (61) months, commencing on October 1, 2015. The Company paid no rent for the first month of the term and paid base rent of $9,174 per month for months 2 through 13 of the term, with increasing base rent for each twelve-month period thereafter under the term of the lease to a maximum of $10,325 per month for months 50 through 61. The base rent payments do not include the Company’s proportionate share of any operating expenses, including real estate taxes. The Company has the option to extend the term of the lease for one five-year term, provided that the rent would be subject to market adjustment at the beginning of the renewal term.


Rent expense, which is recognized on a straight-line basis over the lease term, was approximately $29,000 for the three months ended June 30, 2018 and 2017, and $58,000 for the six months ended June 30, 2018 and 2017 and is recorded in general and administrative expenses in the accompanying unaudited condensed statements of operations.




The Company is not currently involved in any legal matters arising in the normal course of business. From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.