Guided Therapeutics (OTC:GTHP) said that it inked an exclusive licensing agreement with Shandong Yaohua Medical Instrument Corp., to manufacture its LuViva advanced cervical scan system and related disposables. The deal also gives SMI exclusive distribution rights in China, Macau, Hong Kong and Taiwan.
SMI is slated to pay a $1.0 million licensing fee in 5 installments until Oct. 2017. The company will also underwrite the cost of regulatory approval with the Chinese Food and Drug Administration, Guided Therapeutics said. Once SMI wins CFDA approval, the company will pay a $1.90 royalty on each disposable sold by directly purchasing a controlled programmable chip that is necessary to operate the unit.
According to the deal, SMI needs to become capable of manufacturing LuViva by the 2nd anniversary of the agreement and win CFDA approval by July 22, 2019 or the company will lose its license.
In 2017, SMI is required to buy at least 10 devices at $13,000 apiece, Guided Therapeutics said, but can push 4 devices to 2018 if there is a snafu in winning regulatory approval from the CFDA.
In the 3 years following CFDA approval, SMI must sell at least 3,500 devices – 500 in the 1st year, 1,000 in the 2nd and 2,000 in the 3rd – and buy at least 25.2 million controlled programmable chips from Guided Therapeutics. All told, Guided Therapeutics said it expects to bring in $47.9 million from the deal over 3 years.
SMI will sell the devices and disposables to Guided Therapeutics for no more than the company’s current costs, according to the deal. Guided Therapeutics said it agreed to issue $1 million in shares of its common stock to SMI at a price per share equal to the average closing price for the 5 days prior to issuance.
In June last year, Guided Therapeutics inked a licensing agreement with Shenghuo Medical for its LuViva device. Under the new agreement, Shenghuo gave up its manufacturing license and distribution rights in SMI’s newly-acquired territories and waived its rights under the initial deal.
Guided Therapeutics said it has agreed to split the licensing feeds and net royalties from SMI with Shenghuo and that if the deal with SMI falls through, Guided Therapeutics will re-issue the original license back to Shenguo under the original terms.