Novan, Inc. announced that the company has entered into an exclusive license agreement with Sato Pharmaceutical Co. Ltd. Upon execution of the agreement, Sato will pay to Novan an initial payment of 1.25 billion JPY (approximately $11.0 million) for the exclusive rights to develop and commercialize in Japan Novan’s topical nitric oxide-releasing product candidate SB204 and related dosage forms for the treatment of acne vulgaris. In addition, Novan will receive from Sato certain development and commercialization milestone payments and, subject to product approval by Japan’s Ministry of Health, Labor and Welfare, certain sales-based milestone payments and a royalty on net sales of such products in Japan. The SB204 development program includes two completed Phase 2 studies, in which topical application of a nitric oxide-releasing gel has demonstrated statistically significant percent reductions in acne lesions, the primary efficacy analyses required for recent topical acne drugs approved by Japan’s Ministry of Health, Labor and Welfare. Additionally, the favorable tolerability profile of SB204 is a particularly attractive attribute for the Japanese patient population that has experienced a greater incidence of skin irritation with retinoid and benzoyl peroxide therapies than the U.S. population. Sato is responsible for funding the development and commercial costs for the program that are specific to Japan. Novan retains the rights to manufacture the active pharmaceutical ingredient of SB204, which Novan will supply to Sato for commercial purposes. Novan is preparing to support Sato’s initiation of clinical development in Japan by the end of 2017.