SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 000-21589
TRIANGLE PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 56-1930728
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 University Place
4611 University Drive
Durham, North Carolina 27707
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (919) 493-5980
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
As of March 31, 2000, there were 38,096,599 shares of Triangle
Pharmaceuticals, Inc. Common Stock outstanding.
<PAGE>
Triangle Pharmaceuticals, Inc.
Table of Contents
Part I. Financial Information
Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31,
2000 (unaudited) and December 31, 1999..................... 3
Condensed Consolidated Statements of Operations
(unaudited) - Three Months Ended March 31, 2000 and
March 31, 1999 and Period From Inception (July 12,
1995) Through March 31, 2000............................... 4
Condensed Consolidated Statements of Cash Flows
(unaudited) - Three Months Ended March 31, 2000 and
March 31, 1999 and Period From Inception (July 12,
1995) Through March 31, 2000............................... 5
Condensed Consolidated Statements of Stockholders'
Equity - Period From Inception (July 12, 1995)
Through the Three Months Ended March 31, 2000
(unaudited)................................................ 6-7
Notes to Condensed Consolidated Financial
Statements (unaudited)..................................... 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 10-25
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 26
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds.............. 27
Item 6. Exhibits and Reports on Form 8-K....................... 28
Signatures...................................................... 29
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................................ $ 52,678 $ 58,486
Restricted deposits .................................................................. 14 27
Investments .......................................................................... 61,456 94,583
Interest receivable .................................................................. 1,505 1,307
Receivable from collaborative partner ................................................ 484 1,156
Prepaid expenses ..................................................................... 782 555
--------- ---------
Total current assets ............................................................ 116,919 156,114
--------- ---------
Property, plant and equipment, net ......................................................... 6,066 5,701
Investments ................................................................................ 23,354 4,682
--------- ---------
Total assets .................................................................... $ 146,339 $ 166,497
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ..................................................................... $ 10,790 $ 11,495
Capital lease obligation-current ..................................................... 101 133
Accrued expenses ..................................................................... 15,625 14,587
Deferred revenue ..................................................................... 7,929 6,250
--------- ---------
Total current liabilities ....................................................... 34,445 32,465
--------- ---------
Capital lease obligation-noncurrent ........................................................ 4 9
Deferred revenue ........................................................................... 21,804 18,750
--------- ---------
Total liabilities ............................................................... 56,253 51,224
--------- ---------
Commitments and contingencies (See notes 4 and 5) .......................................... -- --
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value; 5,000 shares
authorized; 0 shares issued and outstanding ..................................... -- --
Common Stock, $0.001 par value; 75,000 shares authorized;
38,097 and 37,578 shares, issued and outstanding, respectively .................. 38 38
Additional paid-in capital ........................................................... 342,983 336,814
Accumulated deficit during development stage ......................................... (252,830) (221,444)
Accumulated other comprehensive loss ................................................. (105) (135)
--------- ---------
Total stockholders' equity ...................................................... 90,086 115,273
--------- ---------
Total liabilities and stockholders' equity ...................................... $ 146,339 $ 166,497
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Period from
Inception
Three Months Three Months (July 12, 1995)
Ended Ended Through
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue:
Collaborative revenue ......................................... $ 1,982 $ -- $ 1,982
Operating expenses:
License fees .................................................. 378 200 20,720
Development ................................................... 27,190 17,342 194,850
Purchased research and development ............................ 5,350 -- 17,858
Selling, general and administrative ........................... 2,726 2,359 38,772
--------- --------- ---------
Total operating expenses .................................... 35,644 19,901 272,200
--------- --------- ---------
Loss from operations ............................................. (33,662) (19,901) (270,218)
Interest income, net ............................................. 2,276 1,470 17,388
--------- --------- ---------
Net loss ......................................................... $ (31,386) $ (18,431) $(252,830)
========= ========= =========
Basic and diluted net loss per common
share ......................................................... $ (0.83) $ (0.64)
========= =========
Shares used in computing basic and
diluted net loss per common share ............................. 37,625 28,908
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Period from
Inception
Three Months Three Months (July 12, 1995)
Ended Ended Through
March 31, 2000 March 31, 1999 March 31, 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (31,386) $ (18,431) $(252,830)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization .......................................... 417 281 2,927
Purchased research and development ..................................... 5,350 -- 17,858
Stock-based compensation ............................................... 322 18 1,860
Change in assets and liabilities:
Receivables .......................................................... 474 (502) (1,989)
Prepaid expenses ..................................................... (227) 1 (782)
Accounts payable ..................................................... (705) (901) 10,790
Accrued expenses ..................................................... 1,038 1,267 15,625
Deferred revenue ..................................................... 4,733 -- 29,733
--------- --------- ---------
Net cash used by operating activities ..................................... (19,984) (18,267) (176,808)
--------- --------- ---------
Cash flows from investing activities:
Sale (purchase) of restricted deposits ................................. 13 12 (14)
Purchase of investments ................................................ (57,731) (24,549) (278,017)
Proceeds from sale and maturity of investments ......................... 72,216 8,883 193,102
Purchase of property, plant and equipment .............................. (782) (114) (8,817)
Acquisition of Avid Corporation, net of cash acquired .................. -- -- (3,053)
--------- --------- ---------
Net cash provided (used) by investing activities .......................... 13,716 (15,768) (96,799)
--------- --------- ---------
Cash flows from financing activities:
Sale of stock, net of related issuance costs ........................... 249 163 325,694
Sale of options under salary investment option
grant program ........................................................ 15 27 277
Proceeds from stock options/warrants exercised ......................... 233 23 475
Proceeds from notes payable ............................................ -- -- 374
Equipment financing .................................................... -- -- 354
Principal payments on capital lease obligations
and notes payable .................................................... (37) (79) (889)
--------- --------- ---------
Net cash provided by financing activities ................................. 460 134 326,285
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents ...................... (5,808) (33,901) 52,678
Cash and cash equivalents at beginning of period .......................... 58,486 77,653 --
--------- --------- ---------
Cash and cash equivalents at end of period ................................ $ 52,678 $ 43,752 $ 52,678
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional
------------------- ----------------- Paid-In Accumulated
Shares Amount Warrants Shares Amount Capital Deficit
------ ------ -------- ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial sale of stock ........... 933 $ 1 $ -- 1,175 $ 1 $ 710 $ --
Additional sale of stock ........ 4,249 4 -- 1,495 2 3,137 --
Stock-based compensation ........ -- -- -- -- -- 12 --
Comprehensive loss:
Net loss ...................... -- -- -- -- -- -- (967)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1995 ...... 5,182 5 -- 2,670 3 3,859 (967)
Sale of stock ................... 3,756 4 -- 4,943 5 59,506 --
Stock-based compensation ........ -- -- 152 700 1 1,127 --
Stock options exercised ......... -- -- -- 317 -- 57 --
Conversion of Preferred to
Common Stock .................. (8,938) (9) -- 8,938 9 -- --
Comprehensive loss:
Net loss ...................... -- -- -- -- -- -- (10,917)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1996 ...... -- -- 152 17,568 18 64,549 (11,884)
Sale of stock ................... -- -- -- 2,014 2 29,521 --
Acquisition of Avid Corp. ....... -- -- -- 400 -- 8,117 --
Sale of stock options ........... -- -- -- -- -- 70 --
Stock-based compensation ........ -- -- (38) -- -- -- --
Stock options exercised ......... -- -- -- 13 -- 3 --
Comprehensive loss:
Net loss ...................... -- -- -- -- -- -- (37,668)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1997 ...... -- -- 114 19,995 20 102,260 (49,552)
Sale of stock ................... 170 -- -- 8,868 9 116,325 --
Sale of stock options ........... -- -- -- -- -- 97 --
Stock-based compensation ........ -- -- -- -- -- -- --
Stock options exercised ......... -- -- -- 8 -- 1 --
Comprehensive loss:
Change in unrealized
gains/(losses) on investments -- -- -- -- -- -- --
Net loss ...................... -- -- -- -- -- -- (67,271)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1998 ...... 170 -- 114 28,871 29 218,683 (116,823)
Sale of stock ................... -- -- -- 6,605 7 116,211 --
Sale of stock options ........... -- -- -- -- -- 95 --
Stock-based compensation ........ -- -- -- 6 -- 101 --
Stock options/warrants exercised -- -- (114) 296 -- 479 --
Conversion of Preferred to
Common Stock .................. (170) -- -- 1,700 2 (2) --
Purchased in-process research and
development costs ............. -- -- -- 100 -- 1,247 --
Comprehensive loss:
Reclassification adjustment for
gains/(losses) in net loss .. -- -- -- -- -- -- --
Change in unrealized
gains/(losses) on investments -- -- -- -- -- -- --
Net loss ...................... -- -- -- -- -- -- (104,621)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 ...... -- $ -- $ -- 37,578 $ 38 $ 336,814 $(221,444)
(Continued)
<CAPTION>
Accumulated
Comprehensive Other
Income Comprehensive Deferred
(Loss) Income/(Loss) Compensation Total
------------ ------------- ------------ -----
<S> <C> <C> <C> <C>
Initial sale of stock ........... $ -- $ -- $ -- $ 712
Additional sale of stock ........ -- -- -- 3,143
Stock-based compensation ........ -- -- (12) --
Comprehensive loss:
Net loss ...................... (967) -- -- (967)
--------- --------- --------- ---------
Balance, December 31, 1995 ...... (967) -- (12) 2,888
Sale of stock ................... -- -- -- 59,515
Stock-based compensation ........ -- -- (141) 1,139
Stock options exercised ......... -- -- (26) 31
Conversion of Preferred to
Common Stock .................. -- -- -- --
Comprehensive loss:
Net loss ...................... (10,917) -- -- (10,917)
--------- --------- --------- ---------
Balance, December 31, 1996 ...... (10,917) -- (179) 52,656
Sale of stock ................... -- -- -- 29,523
Acquisition of Avid Corp. ....... -- -- -- 8,117
Sale of stock options ........... -- -- -- 70
Stock-based compensation ........ -- -- 48 10
Stock options exercised ......... -- -- 6 9
Comprehensive loss:
Net loss ...................... (37,668) -- -- (37,668)
--------- --------- --------- ---------
Balance, December 31, 1997 ...... (37,668) -- (125) 52,717
Sale of stock ................... -- -- -- 116,334
Sale of stock options ........... -- -- -- 97
Stock-based compensation ........ -- -- 48 48
Stock options exercised ......... -- -- 7 8
Comprehensive loss:
Change in unrealized
gains/(losses) on investments 18 18 -- 18
Net loss ...................... (67,271) -- -- (67,271)
--------- --------- --------- ---------
Balance, December 31, 1998 ...... (67,253) 18 (70) 101,951
Sale of stock ................... -- -- -- 116,218
Sale of stock options ........... -- -- -- 95
Stock-based compensation ........ -- -- 58 159
Stock options/warrants exercised -- -- 12 377
Conversion of Preferred to
Common Stock .................. -- -- -- --
Purchased in-process research and
development costs ............. -- -- -- 1,247
Comprehensive loss:
Reclassification adjustment for
gains/(losses) in net loss .. (21) (21) -- (21)
Change in unrealized
gains/(losses) on investments (132) (132) -- (132)
Net loss ...................... (104,621) -- -- (104,621)
--------- --------- --------- ---------
Balance, December 31, 1999 ...... $(104,774) $ (135) $ -- $ 115,273
(Continued)
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional
------------------- ----------------- Paid-In Accumulated
Shares Amount Warrants Shares Amount Capital Deficit
------ ------ -------- ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
Sale of stock ................... -- -- -- 26 -- 249 --
Sale of stock options ........... -- -- -- -- -- 15 --
Stock-based compensation ........ -- -- -- -- -- 322 --
Stock options/warrants exercised -- -- -- 93 -- 233 --
Purchased in-process research and
development costs ............. -- -- -- 400 -- 5,350 --
Comprehensive loss:
Reclassification adjustment for
gains/(losses) in net loss .. -- -- -- -- -- -- --
Change in unrealized
gains/(losses) on investments -- -- -- -- -- -- --
Net loss ...................... -- -- -- -- -- -- (31,386)
--------- --------- --------- --------- --------- --------- ---------
Balance, March 31, 2000 ......... -- $ -- $ -- 38,097 $ 38 $ 342,983 $(252,830)
========= ========= ========= ========= ========= ========= =========
<CAPTION>
Accumulated
Comprehensive Other
Income Comprehensive Deferred
(Loss) Income/(Loss) Compensation Total
------------- ------------- ------------ -----
<S> <C> <C> <C> <C>
(Unaudited)
Sale of stock ................... -- -- -- 249
Sale of stock options ........... -- -- -- 15
Stock-based compensation ........ -- -- -- 322
Stock options/warrants exercised -- -- -- 233
Purchased in-process research and
development costs ............. -- -- -- 5,350
Comprehensive loss:
Reclassification adjustment for
gains/(losses) in net loss .. (43) (43) -- (43)
Change in unrealized
gains/(losses) on investments 73 73 -- 73
Net loss ...................... (31,386) -- -- (31,386)
--------- --------- --------- ---------
Balance, March 31, 2000 ......... $ (31,356) $ (105) $ -- $ 90,086
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
7
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Triangle Pharmaceuticals, Inc. and its wholly-owned subsidiary (the "Company" or
"Triangle") have been prepared in accordance with generally accepted accounting
principles and applicable Securities and Exchange Commission regulations for
interim financial information. These financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. It is presumed that users of this
interim financial information have read or have access to the audited financial
statements for the preceding fiscal year contained in the Company's Annual
Report on Form 10-K. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Principles of Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
3. Net Loss Per Common Share
Basic net loss per common share is computed using the weighted average
number of shares of Common Stock outstanding during the period. Diluted net loss
per common share is computed using the weighted average number of shares of
common and dilutive potential common shares outstanding during the period.
Potential common shares consist of stock options, warrants and convertible
preferred stock using the treasury stock method and are excluded if their effect
is antidilutive. For the three month periods ended March 31, 2000 and 1999, the
weighted average shares outstanding used in the calculation of net loss per
common share do not include potential shares outstanding because they have the
effect of reducing net loss per common share.
4. Licensing Agreements
The Company's existing license agreements require future payments of up to
$67,250 contingent upon the achievement of certain development milestones and up
to $30,000 upon the achievement of certain sales milestones. One of the
Company's licensors has the option to receive $2,000 of such future milestone
payments in shares of Common Stock (based on the then current market price) in
lieu of a cash payment. The Company is also obligated to issue up to 1,650
shares of Common Stock upon the achievement of certain development milestones
relating to DMP-450 acquired in the acquisition of Avid Corporation ("Avid").
Additionally, the Company will pay royalties based on a percentage of net sales
of each licensed product incorporating these drug candidates. Most of the
Company's license agreements require minimum royalty payments commencing three
years after regulatory approval. Depending on the Company's success and timing
in obtaining regulatory approval, aggregate annual minimum royalties and license
preservation fees could range from $50 (if only a single drug candidate is
approved for one indication) to $46,500 (if all drug candidates are approved for
all indications) under the Company's existing license agreements.
8
<PAGE>
Triangle Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except per share amounts)
5. Contingencies
On March 27, 2000, the Company issued 400 shares of Common Stock to the
former Avid stockholders for extending the payment date for certain contingent
consideration under the merger agreement with Avid. Pursuant to the merger
agreement executed in connection with the 1997 Avid acquisition, the Company
agreed to issue up to 2,100 additional shares of Common Stock to the former Avid
stockholders upon the achievement of certain milestones related to DMP-450. The
issuance of 1,600 of these shares was contingent upon the Company's initiating
pivotal Phase II clinical trials with DMP-450 before February 28, 1999 (the "DMP
Milestone Date"), or electing on or before the DMP Milestone Date to continue
the development of DMP-450 even if such clinical trials had not been initiated.
In February 1999, the Company and representatives of the former Avid
stockholders agreed to extend the DMP Milestone Date to February 28, 2000 in
exchange for issuance of 100 of the 1,600 contingent shares of Common Stock. In
March 2000, these representatives further agreed to extend the DMP Milestone
Date until August 28, 2001. As consideration for the second extension, the
Company agreed to issue 400 of the 1,500 contingent shares in 2000, and to
increase the remaining number of contingent shares by 50. Accordingly, if
Triangle initiates pivotal Phase II clinical trials with DMP-450 on or before
August 28, 2001 or elects on or before August 28, 2001 to continue development
of DMP-450 even if such clinical trials have not been initiated, the Company
would issue 1,150 shares of Common Stock. Issuance of the 400 shares was
recorded as additional purchase price and has been expensed as purchased
in-process research and development, based on the fair market value of the
Common Stock at the date on which such extension was granted, as this drug
candidate is still at an early stage of clinical development and has no
alternative future use. The remaining 500 of the 1,650 additional shares are
contingent upon the obtainment of additional development milestones and have not
been affected by these extensions.
6. Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting For Derivative Instruments
And Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS 133, as
amended and deferred by SFAS 137, is effective for financial statements for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
intends to adopt SFAS 133 when required; however, SFAS 133 is not expected to
have a material impact on the Company's consolidated financial position, results
of operations, or cash flows.
In December 1999, the Securities and Exchange Commission (the
"Commission") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101, as amended by SAB 101A, provided
broad conceptual discussions and industry-specific guidance concerning revenue
recognition. The Company adopted SAB 101 in the three month period ending
December 31, 1999 and, accordingly, has reported the impact of the strategic
alliance with Abbott Laboratories in accordance with SAB 101's conceptual
guidance. Specifically, adoption of SAB 101 resulted in all non-contingent
research and development reimbursement under the Company's strategic alliance to
be amortized as collaborative revenue over the anticipated research and
development arrangement period.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
This Quarterly Report on Form 10-Q may contain certain projections,
estimates and other forward-looking statements that involve a number of risks
and uncertainties, including those discussed below at "--Risk and
Uncertainties." While this outlook represents management's current judgment on
the future direction of the business, such risks and uncertainties could cause
actual results to differ materially from any future performance suggested below.
We undertake no obligation to release publicly the results of any revisions to
these forward-looking statements to reflect events or circumstances arising
after the date hereof.
The following discussion and analysis should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's 1999 Annual Report on Form 10-K as well as
with the Company's condensed consolidated financial statements and notes thereto
appearing elsewhere in this Quarterly Report on Form 10-Q.
Overview
Triangle is engaged in the development of new drug candidates primarily
for serious viral diseases. Since our inception on July 12, 1995, our operating
activities have related primarily to recruiting personnel, negotiating license
and option arrangements for our drug candidates, raising capital and developing
our drug candidates. We have not received any revenues from the sale of products
and do not expect any of our drug candidates to be commercially available until
at least the year 2002. As of March 31, 2000, our accumulated deficit was
approximately $252.8 million.
We require substantial capital expenditures relating to the development
and potential commercialization of our drug candidates, including expenditures
for preclinical testing, chemical synthetic scale-up, manufacture of drug
substance for clinical trials and toxicology studies, clinical trials of drug
candidates, sales and marketing expenses and payments to our licensors. We have
been unprofitable since our inception and expect to incur substantial losses for
at least the next several years, due substantially to the expansion of our drug
development programs and the addition of infrastructure necessary to
commercialize our drug candidates. We will require substantial capital
expenditures relating to activities many of which may need to occur prior to,
and in anticipation of, the potential regulatory approval of our drug
candidates, including expenditures associated with the continued establishment
of a sales and marketing organization, the manufacture of drug substance, the
development of a distribution system with outside vendors and other
administrative expenditures. Many of these capital expenditures may be incurred
irrespective of whether our drug candidates are approved when anticipated or at
all. We expect that losses will fluctuate from period to period and that such
fluctuations may be substantial. See "--Risk and Uncertainties-- We have
incurred losses since inception and may never achieve profitability."
We have only a limited operating history upon which an evaluation of
Triangle and our prospects can be based. The risks, expenses and difficulties
encountered by companies at an early stage of development must be considered
when evaluating our prospects. To address these risks, we must, among other
things, successfully develop and commercialize our drug candidates, secure all
necessary proprietary rights, respond to competitive developments, obtain
additional financing and continue to attract, retain and motivate qualified
personnel. We cannot assure you that we will be successful in addressing these
risks. See "--Risk and Uncertainties-- All of our product candidates are in
development and may never be successfully commercialized which would have an
adverse impact on your investment and our business" and "--Risk and
Uncertainties-- If we need additional funds and are unable to raise them, we
would have to curtail or cease operations."
Our operating expenses will depend on several factors, including the level
of development expenses and the potential commercialization of our drug
candidates. Development expenses will depend on the progress and results of our
drug development efforts, which we cannot predict. Management may in some cases
be able to control the timing of development expenses in part by accelerating or
decelerating preclinical testing and clinical trial activities. The level of
expenses relating to the establishment of a sales and marketing organization,
the manufacture of drug substance and other administrative expenditures will
depend on the success of the development of our drug candidates; however, many
of these capital expenditures may be incurred irrespective of whether our drug
candidates are approved when anticipated or at all. As a result of these
factors, we believe that period to period comparisons are not necessarily
meaningful and should not be relied upon as an indication of future performance.
10
<PAGE>
Due to all of the foregoing factors, it is possible that our consolidated
operating results will be below the expectations of market analysts and
investors. In such event, the prevailing market price of the common stock could
be materially adversely affected. See "--Risk and Uncertainties-- The market
price of our stock may be adversely affected by market volatility."
Results of Operations
Collaborative Revenue
Revenue totaled $2.0 million for the three months ended March 31, 2000 as
compared to no revenue for the same period in 1999. Revenue is solely related to
collaborative revenue associated with our strategic alliance with Abbott
Laboratories, Abbott, and arises from $31.7 million of non-contingent research
and development expense reimbursement which is being amortized over the
anticipated research and development arrangement period. See "--Liquidity and
Capital Resources."
License Fees
License fees totaled $378,000 for the three months ended March 31, 2000 as
compared to $200,000 for the same period in 1999. License fees in the first
quarter of 2000, and for the same period in 1999, relate to the expense of
license or option preservation fees for certain of our drug candidates.
Development Expenses
Development expenses totaled $27.2 million for the three months ended
March 31, 2000 as compared to $17.3 million for the same period in 1999.
Development expenses in 2000 consisted primarily of expenses for drug synthesis,
clinical trials, employee compensation, and preclinical testing. Development
expenses in 1999 consisted primarily of expenses for clinical trials, drug
synthesis, and employee compensation. The substantial increase in 2000
development expenses as compared to the three month period ended March 31, 1999
is due primarily to the continued and more expansive drug development activities
on our drug candidates, including the addition of development personnel
necessary to perform these activities. Development expenses for the first
quarter of 2000 were heavily focused on our drug candidate, Coviracil(R).
Currently, we have five drug candidates in active development, two candidates
that have dual indications for HIV and hepatitis B, and all candidates are in
clinical studies.
We expect our development expenses to increase in the future due to
continued expansion of drug development activities for our existing portfolio of
drug candidates, including preclinical testing and toxicology studies, clinical
trials and the manufacture of drug substance for preclinical tests, clinical
trials and production of commercial material in anticipation of product launch.
In addition, if we in-license or otherwise acquire rights to additional drug
candidates, development expenses would increase.
Purchased Research and Development Expense
Purchased research and development expenses totaled $5.4 million for the
three months ended March 31, 2000, as compared to none for the three months
ended March 31, 1999. On March 27, 2000, we issued 400,000 shares of common
stock, a component of the 2,000,000 contingent shares associated with the Avid
Corporation, Avid, acquisition, and agreed to increase the remaining number of
contingent shares by 50,000 as consideration to the former Avid stockholders for
extending the payment date of certain contingent consideration from February 28,
2000 to August 28, 2001. The in-process research and development charge is based
upon the fair market value of our common stock at the date on which the
extension was granted and relates to DMP-450 which is at an early stage of
clinical development and has no alternative future use. Accordingly, if we
initiate pivotal Phase II clinical trials with DMP-450 on or before August 28,
2001 or elect on or before August 28, 2001 to continue development of DMP-450
even if such clinical trials have not been initiated, we would issue 1,150,000
shares of common stock. Issuance of the remaining 500,000 of the 1,650,000
contingent shares is dependent upon the attainment of other development
milestones with DMP-450. Issuance of any additional contingent shares will be
recorded as additional purchase price and will be allocated upon resolution of
the underlying contingency.
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Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses totaled $2.7 million
for the three months ended March 31, 2000 as compared to $2.4 million for the
same period in 1999. SG&A expenses in 2000 consisted primarily of employee
compensation; amounts paid for outside professional services, primarily
marketing, legal and investor relations services; and rent expense. SG&A
expenses in 1999 consisted primarily of employee compensation, amounts paid for
outside professional services and rent expense. We expect that our SG&A expenses
will increase in future periods as we continue to expand development activities
and develop our sales and marketing organization.
Interest Income, Net
Net interest income totaled $2.3 million for the three months ended March
31, 2000 as compared to $1.5 million for the same period in 1999. The increase
in interest income is due primarily to larger average investment balances and
slightly higher low-risk, short-term interest rates in the first quarter of
2000. See "--Liquidity and Capital Resources."
Liquidity and Capital Resources
We have financed our operations since inception (July 12, 1995) through
March 31, 2000 primarily with the net proceeds received from private placements
of equity securities, which provided aggregate net proceeds of approximately
$111.9 million (net of offering costs), and from initial and secondary public
offerings, which provided aggregate net proceeds of approximately $96.8 million
(net of offering costs), as well as net proceeds from the completion of the
strategic alliance with Abbott, the Abbott Alliance, (including net proceeds
from the sale of common stock and non-contingent research and development
reimbursement) of approximately $147.3 million. In addition, we have received
approximately $2.3 million as reimbursement of certain development expenses
under our license agreements.
At March 31, 2000, we had net working capital of $82.5 million, a decrease
of approximately $41.2 million over December 31, 1999. The decrease in working
capital is principally the result of funding our normal operating expenses
partially offset by reimbursement of costs stipulated under the Abbott Alliance.
Our principal source of liquidity at March 31, 2000, was $52.7 million in cash
and cash equivalents and $84.8 million in investments which are considered
"available-for-sale," reflecting a $20.3 million decrease of cash, cash
equivalent and investment balances over those at December 31, 1999.
We expect that our capital requirements will continue to increase in
future periods as we fund our drug development programs, pay obligations under
our license and/or option agreements, continue development of our sales and
marketing organization, acquire drug substance from third party manufacturers,
and incur other SG&A expenditures necessary to support our expanding operations.
Our future capital requirements will depend on many factors, including the
progress of our drug development programs, the magnitude of these programs, the
scope and results of preclinical testing and clinical trials, the cost, timing
and outcome of regulatory reviews, the costs under the license and/or option
agreements relating to our drug candidates (including the costs of obtaining
patent protection for our drug candidates), the timing and the terms of the
acquisition of any additional drug candidates, the rate of technological
advances, determinations as to the commercial potential of our drug candidates,
administrative and legal expenses, the establishment of internal capacity and
third party arrangements for sales and marketing functions, the establishment of
third party arrangements for manufacturing, including Abbott, and other factors.
Amounts payable by us in the future under our existing license agreements
are uncertain due to a number of factors, including the progress of our drug
development programs, our ability to obtain approval to commercialize any drug
candidate and the commercial success of any approved drug. Our existing license
agreements may require future cash payments of up to $67.3 million contingent
upon the achievement of certain development milestones and up to $30.0 million
upon the achievement of certain sales milestones. One of our licensors has the
option to receive $2.0 million of such future milestone payments in shares of
common stock (based on the then current market price) in lieu of a cash payment.
We are also obligated to issue up to an additional 1,650,000 shares of common
stock upon the achievement of certain development milestones relating to
DMP-450, which was acquired in the acquisition of Avid. Additionally, we will
pay royalties based on a percentage of net sales of each licensed product
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incorporating these drug candidates. Most of our license agreements require
minimum royalty payments commencing three years after regulatory approval.
Depending on our success and timing in obtaining regulatory approval, aggregate
annual minimum royalties and license preservation fees could range from
$50,000 (if only a single drug candidate is approved for one indication) to
$46.5 million (if all drug candidates are approved for all indications) under
our existing license agreements.
We believe that our cash, cash equivalents and investments will be
adequate to satisfy our anticipated capital requirements through June 2001, but
expect that we will be required to raise additional funds through equity or debt
financings, or from other sources. We cannot assure you that additional funding
will be available on favorable terms from any of these sources or at all. See
"--Risk and Uncertainties-- If we need additional funds and are unable to raise
them, we would have to curtail or cease operations."
Intelligent Therapeutic Solutions
In the first quarter of 2000, we contributed intellectual property with an
appraised value of approximately $5.0 million and approximately $150,000 of
other assets to Intelligent Therapeutic Solutions, Inc., ITS, in exchange for
3,300,000 shares of ITS Series A Preferred Stock. On March 15, 2000, two outside
investors purchased a non-controlling ownership interest in ITS through a Series
B Preferred Stock investment for $10 million with a binding commitment to invest
an additional $5.0 million by June 30, 2000. ITS is a health information
technology company formed to provide solutions in the management of patients
with chronic and complex diseases, focusing primarily at the point-of-care on
the provider-patient relationship. The ITS/Triangle relationship is structured
such that the future development costs of ITS's health information technology is
not anticipated to impact our future consolidated financial position, results of
operations, and cash flow. At March 31, 2000, we own approximately 40% of ITS.
Coviracil (FTC-302)
In February 2000, we halted recruitment of patients in our pivotal FTC-302
study. There had been a higher than normal incidence of liver toxicity that
occurred in some of the 470 patients enrolled in the study. Preliminary analysis
has indicated that Coviracil has not been responsible for any significant liver
toxicity in this trial or in other trials. In April 2000, the Food and Drug
Administration, FDA, issued a clinical hold on the study and the South African
Medicines Control Council, MCC, terminated the study. The majority of patients
participating in the study have not encountered significant difficulties and the
patients receiving clinical benefit from the study are continuing to receive
treatment on compassionate grounds. However, the FDA has indicated that study
FTC-302 may not be adequate to provide pivotal data in support of a New Drug
Application, NDA. Discussions with the FDA and MCC on this issue are continuing.
Due to these circumstances, the planned submission of an U.S. NDA for Coviracil
may be significantly delayed. Two additional studies with Coviracil are
scheduled to begin in the second quarter of 2000; one is sponsored by us and the
other is sponsored by the Agence Nationale de Recherche sur le SIDA, located in
France.
Dynavax Technologies Corporation
In March 2000, we entered into a licensing and collaborative agreement
with Dynavax Technologies Corporation, Dynavax, to develop immunostimulatory
pharmaceutical candidates for the prevention and/or treatment of serious viral
diseases, the closing of which was subject to contingencies. This license grants
Triangle exclusive worldwide rights to Dynavax' proprietary immunostimulatory
sequences for the treatment of HIV and the prevention and treatment of hepatitis
B and hepatitis C. This alliance is another element of Triangle's strategy to
leverage strategic alliances with carefully selected partners. We will
collaborate with Dynavax in the clinical development of immunostimulatory
pharmaceutical candidates and we will be responsible for funding certain
development, as well as paying development milestones and royalty payments under
the agreement. In April 2000, the terms of the licensing agreement became
effective, coincident with satisfying the contingency, or closing on our
purchase of 400,000 shares of Dynavax Series T Preferred Stock for $2.0 million.
The investment in Dynavax, which represents a less than 5% ownership interest
and all other implications of the Dynavax collaboration, will be reflected in
our second quarter financial position, results of operations and cash flow.
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Litigation and Other Contingencies
As discussed below in "Risk and Uncertainties," we are indirectly involved
in several patent opposition and adversarial proceedings and one lawsuit filed
in Australia regarding the patent rights related to two of our licensed drug
candidates, including Coviracil. Although we are not a named party in any of
these proceedings, we are obligated to reimburse our licensors for certain legal
expenses associated with these proceedings. We cannot predict the outcome of
these proceedings. We believe that an adverse judgment rendered against us would
not result in a material financial obligation, nor would we have to recognize an
impairment under Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of" as no amounts have been capitalized related to our drug candidates.
However, any development in these proceedings adverse to our interests,
including but not limited to any adverse development related to the patent
rights licensed to us for these two drug candidates or our rights or obligations
related thereto, could have a material adverse effect on our business and future
consolidated financial position, results of operations and cash flow.
Risk and Uncertainties
In addition to the other information contained herein, the following risks
and uncertainties should be carefully considered in evaluating Triangle and its
business.
All of our product candidates are in development and may never be successfully
commercialized which would have an adverse impact on your investment and our
business.
Some of our drug candidates are at an early stage of development and all
of our drug candidates will require expensive and lengthy testing and regulatory
clearances. None of our drug candidates has been approved by regulatory
authorities. We do not expect any of our drug candidates to be commercially
available until at least the year 2002. There are many reasons that we may fail
in our efforts to develop our drug candidates, including that:
o our drug candidates will be ineffective, toxic or will not
receive regulatory clearances,
o our drug candidates will be too expensive to manufacture or
market or will not achieve broad market acceptance,
o third parties will hold proprietary rights that may preclude us from
developing or marketing our drug candidates, or
o third parties will market equivalent or superior products.
The success of our business depends upon our ability to successfully
develop and market our drug candidates.
We have incurred losses since inception and may never achieve profitability.
We formed Triangle in July 1995 and we have only a limited operating
history for you to review in evaluating our business. We have incurred losses
since our inception. At March 31, 2000, our accumulated deficit was $252.8
million. Our historical costs relate primarily to the acquisition and
development of our drug candidates and selling, general and administrative
costs. We have not generated any revenue from the sale of our drug candidates to
date, and do not expect to do so until at least the year 2002. In addition, we
expect annual losses to increase over the next several years as we expand our
drug development and commercialization efforts. To become profitable, we must
successfully develop and obtain regulatory approval for our drug candidates and
effectively manufacture, market and sell any products we develop. We may never
generate significant revenue or achieve profitable operations.
If we need additional funds and are unable to raise them, we would have to
curtail or cease operations.
Our drug development programs and potential commercialization of our drug
candidates require substantial capital expenditures, including expenses for
preclinical testing, chemical synthetic scale-up, manufacture of drug substance
for clinical trials, toxicology studies, clinical trials of drug candidates,
sales and marketing expenses,
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payments to our licensors and potential commercial launch of our drug
candidates. We expect our capital requirements to continue to increase. Our
future capital needs will depend on many factors, including:
o the progress and magnitude of our drug development programs,
o the scope and results of preclinical testing and clinical
trials,
o the cost, timing and outcome of regulatory reviews,
o the costs under current and future license and option
agreements for our drug candidates, including the costs of
obtaining patent protection for our drug candidates,
o the costs of acquiring any additional drug candidates,
o the rate of technological advances,
o the commercial potential of our drug candidates,
o the magnitude of our administrative and legal expenses,
o the costs of establishing sales and marketing functions, and
o the costs of establishing third party arrangements for
manufacturing.
We have incurred negative cash flow from operations since we incorporated
Triangle and do not expect to generate positive cash flow from our operations
for at least the next several years. Although the Abbott Alliance provided us
with significant additional funding, we cannot assure you that such funding will
be sufficient to meet our future needs. In addition, we cannot assure you that
we will receive the contingent future research funding payments under the Abbott
Alliance. Therefore, we may need additional future financings to fund our
operations. We may not be able to obtain adequate financing to fund our
operations, and any additional financing we obtain may be on terms that are not
favorable to us. In addition, any future financings could substantially dilute
our stockholders. If adequate funds are not available, we will be required to
delay, reduce or eliminate one or more of our drug development programs, to
enter into new collaborative arrangements or to modify the Abbott Alliance on
terms that are not favorable to us. These collaborative arrangements or
modifications could result in the transfer to third parties of rights that we
consider valuable. In addition, we often consider the acquisition of
technologies and drug candidates that would increase our capital requirements.
Because our product candidates may not successfully complete clinical trials
required for commercialization, our business may never achieve profitability.
To obtain regulatory approvals needed for the sale of our drug candidates,
we must demonstrate through preclinical testing and clinical trials that each
drug candidate is safe and effective. The clinical trial process is complex and
uncertain and varies widely from country to country. Positive results from
preclinical testing and early clinical trials do not ensure positive results in
pivotal clinical trials. Many companies in our industry have suffered
significant setbacks in pivotal clinical trials, even after promising results in
earlier trials. Any of our drug candidates may produce undesirable side effects
in humans. These side effects could cause us or regulatory authorities to
interrupt, delay or halt clinical trials of a drug candidate, as occurred with
DMP-450 or could result in regulatory authorities refusing to approve the drug
candidate for any and all targeted indications. In April 2000, the FDA issued a
clinical hold on, and the MCC terminated, clinical study FTC-302 for our drug
candidate Coviracil, formerly known as FTC. Study FTC-302 was being conducted
under a U.S. Investigational New Drug Application, IND, at sites in South
Africa. The FDA indicated that study FTC-302 may not be adequate to provide
pivotal data in support of a NDA. Discussions with the FDA and MCC on this issue
are continuing. Due to these circumstances, the planned submission of a U.S. NDA
for Coviracil may be significantly delayed. We, the FDA or foreign regulatory
authorities may suspend or terminate clinical trials at any time if we or they
believe the trial participants face unacceptable health risks. Clinical trials
may not demonstrate that our drug candidates are safe or effective.
Clinical trials are lengthy and expensive. They require adequate supplies
of drug substance and sufficient patient enrollment. Patient enrollment is a
function of many factors, including:
o the size of the patient population,
o the nature of the protocol,
o the proximity of patients to clinical sites, and
o the eligibility criteria for the clinical trial.
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Delays in patient enrollment can result in increased costs and longer
development times. Even if we successfully complete clinical trials, we may not
be able to file any required regulatory submissions in a timely manner and we
may not receive regulatory approval for the drug candidate.
In addition, if the FDA or foreign regulatory authorities require
additional clinical trials, we could face increased costs and significant
development delays, as occurred with Coactinon(R). Changes in regulatory policy
or additional regulations adopted during product development and regulatory
review of information we submit could also result in delays or rejections. The
FDA has notified us that two of our drug candidates, Coviracil and or the
treatment of HIV, qualify for designation as "fast track" products under
provisions of the Food and Drug Administration Modernization Act of 1997. The
fast track provisions are designed to expedite the review of new drugs intended
to treat serious or life-threatening conditions and essentially codified the
criteria previously established by the FDA for accelerated approval. These drug
candidates may not, however, continue to qualify for expedited review and our
other drug candidates may fail to qualify for fast track development or
expedited review. Even though some of our drug candidates have qualified for
expedited review, the FDA may not approve them at all or any sooner than other
drug candidates that do not qualify for expedited review.
If we or our licensors are not able to obtain and maintain adequate patent
protection for our product candidates, we may be unable to commercialize our
product candidates or to prevent other companies from using our technology in
competitive products.
Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our drug candidates and
to avoid infringing the proprietary rights of others, both in the United States
and in foreign countries. We have no patents in our own name and we have a small
number of patent applications of our own pending. One of our patent applications
is a joint application with co-inventors from another institution. We have,
however, licensed or we have an option to license patents, patent applications
and other proprietary rights from third parties for each of our drug candidates.
If we breach our licenses, we may lose rights to important technology and drug
candidates.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have in-licensed. In addition,
others may challenge, seek to invalidate, infringe or circumvent any patents we
own or in-license, and rights we receive under those patents may not provide
competitive advantages to us. Further, the manufacture, use or sale of our
products or processes may infringe the patent rights of others.
Several pharmaceutical and biotechnology companies, universities and
research institutions have filed patent applications or received patents that
cover our technologies or technologies similar to ours. Others have filed patent
applications and received patents that conflict with patents or patent
applications we own or have in-licensed, either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those owned by
or licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our drug
candidates. For example, United States patent applications are confidential
while pending in the Patent and Trademark Office, PTO, and patent applications
filed in foreign countries are often first published six months or more after
filing. Any conflicts resulting from third party patent applications and patents
could significantly reduce the coverage of our patents and limit our ability to
obtain meaningful patent protection. If other companies obtain patents with
conflicting claims, we may be required to obtain licenses to these patents or to
develop or obtain alternative technology. We may not be able to obtain any such
license on acceptable terms or at all. Any failure to obtain such licenses could
delay or prevent us from pursuing the development or commercialization of our
drug candidates, which would adversely affect our business.
There are significant risks regarding the patent rights of two of our
in-licensed drug candidates. We may not be able to commercialize Coviracil or
DAPD due to patent rights held by third parties other than our licensors. Third
parties have filed numerous patent applications and have received numerous
issued patents in the United States and many foreign countries that relate to
these drug candidates and their use alone or coactively to treat HIV and
hepatitis B. As a result, our patent position regarding the use of Coviracil and
DAPD to treat HIV and/or hepatitis B is highly uncertain and involves numerous
complex legal and factual questions that are unknown or
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unresolved. If any of these questions is resolved in a manner that is not
favorable to us, we would not have the right to commercialize Coviracil and/or
DAPD in the absence of a license from one or more third parties, which may not
be available on acceptable terms or at all. In addition, even if any of these
questions is favorably resolved, we may still attempt to obtain licenses from
one or more third parties to reduce or eliminate the risks relating to some or
all of these matters. Such licenses may not be available on acceptable terms or
at all. Our inability to commercialize either of these drug candidates could
adversely affect our business.
Coviracil (emtricitabine)
Coviracil, a purified form of FTC, belongs to the same general class of
nucleosides as lamivudine, also known as 3TC. In the United States, the FDA has
approved 3TC for the treatment of hepatitis B and for use in combination with
zidovudine, also known as AZT, for the treatment of HIV. Regulatory authorities
have approved 3TC for the treatment of hepatitis B in several other countries
and for use in combination with other nucleoside analogues for the treatment of
HIV in a number of other countries. Glaxo Wellcome plc, Glaxo, currently sells
3TC for the treatment of HIV and hepatitis B under a license agreement with
BioChem Pharma Inc., BioChem Pharma. We obtained rights to Coviracil under a
license from Emory University, Emory. In 1990 and 1991, Emory filed in the
United States and thereafter in numerous foreign countries patent applications
with claims to compositions of matter and methods to treat HIV and hepatitis B
with Coviracil. In 1991, Yale University, Yale, filed in the United States
patent applications on FTC, including Coviracil and its use to treat hepatitis
B, and subsequently licensed its rights under those patent applications to
Emory. Our license arrangement with Emory includes all rights to Coviracil and
its uses claimed in the Yale patent applications.
HIV. Emory received a United States patent in 1993 covering a method to
treat HIV with Coviracil. Emory has also received United States and European
patents containing composition of matter claims that cover Coviracil. BioChem
Pharma filed a patent application in the United States in 1989 and received a
patent in 1991 covering a group of nucleosides in the same general class as
Coviracil, but which did not include Coviracil. BioChem Pharma filed foreign
patent applications in 1990, which expanded upon its 1989 United States patent
application to include FTC among a large class of nucleosides. The foreign
patent applications are pending in many countries and have issued in a number of
countries with claims directed to FTC that may cover Coviracil and its use to
treat HIV. In addition, BioChem Pharma filed a United States patent application
in 1991 specifically directed to Coviracil. BioChem Pharma has received two
patents in the United States based on this patent application, one directed to
Coviracil and the other directed to a method for treating viral diseases with
Coviracil. The PTO has determined that there is a conflict between the latter
BioChem Pharma patent and a patent application filed by Emory because they have
overlapping claims to the same technology. The PTO is conducting an adversarial
proceeding to determine whether BioChem Pharma or Emory is entitled to the
patent claims in dispute. Emory may not prevail in the adversarial proceeding,
and the proceeding may also delay the decision of the PTO regarding Emory's
patent application. BioChem Pharma also filed patent applications in many
foreign countries based upon its 1991 United States patent application and has
received patents in certain countries. BioChem Pharma may have additional patent
applications pending in the United States.
In the United States, the first to invent a technology is entitled to
patent protection on that technology. For patent applications filed prior to
January 1, 1996, United States patent law provides that a party who invented a
technology outside the United States is deemed to have invented the technology
on the earlier of the date it introduced the invention in the United States or
the date it filed its patent application. In a filing with the SEC, BioChem
Pharma stated that prior to January 1, 1996, it conducted substantially all of
its research activities outside the United States. BioChem Pharma also stated
that it considered this to be a disadvantage in obtaining United States patents
based on patent applications filed before January 1, 1996 as compared to
companies that mainly conducted research in the United States. We do not know
whether Emory or BioChem Pharma was the first to invent the technology claimed
in their respective United States patent applications or patents. We also do not
know whether BioChem Pharma invented the technology disclosed in its patent
applications in the United States or introduced that technology in the United
States before the date of its patent applications.
In foreign countries, the first party to file a patent application on a
technology, not the first to invent the technology, is entitled to patent
protection on that technology. We believe that Emory filed patent applications
disclosing Coviracil as a useful anti-HIV agent in many foreign countries before
BioChem Pharma filed its foreign patent applications on that technology.
However, BioChem Pharma has received patents in several foreign
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countries. In addition, BioChem Pharma has filed patent applications on
Coviracil and its uses in certain countries in which Emory did not file patent
applications. Emory has opposed or otherwise challenged patent claims on
Coviracil granted to BioChem Pharma in Australia and Europe. Emory may not
initiate patent opposition proceedings in any other countries or be successful
in any foreign proceeding attempting to prevent the issuance of, revoke or limit
the scope of patents issued to BioChem Pharma. BioChem Pharma has opposed patent
claims on Coviracil granted to Emory in Europe, Japan, Australia and South
Korea. BioChem Pharma may make additional challenges to Emory patents or patent
applications, which Emory may not succeed in defending. Our sales, if any, of
Coviracil for the treatment of HIV may be held to infringe United States and
foreign patent rights of BioChem Pharma. Under the patent laws of most
countries, a product can be found to infringe a third party patent either if the
third party patent expressly covers the product or method of treatment using the
product, or if the third party patent covers subject matter that is
substantially equivalent in nature to the product or method, even if the patent
does not expressly cover the product or method. If it is determined that the
sale of Coviracil for the treatment of HIV infringes a BioChem Pharma patent, we
would not have the right to make, use or sell Coviracil for the treatment of HIV
in one or more countries in the absence of a license from BioChem Pharma. We may
be unable to obtain such a license from BioChem Pharma on acceptable terms or at
all.
Hepatitis B. Burroughs Wellcome Co, Burroughs Wellcome, filed patent
applications in March 1991 and May 1991 in Great Britain on a method to treat
hepatitis B with FTC and purified forms of FTC, that include Coviracil.
Burroughs Wellcome filed similar patent applications in other countries,
including the United States. Glaxo subsequently acquired Burroughs Wellcome's
rights under those patent applications. Those patent applications were filed in
foreign countries prior to the date Emory filed its patent application on the
use of Coviracil to treat hepatitis B. Burroughs Wellcome's foreign patent
applications, therefore, have priority over those filed by Emory. In July 1996,
Emory instituted litigation against Glaxo in the United States District Court to
obtain ownership of the patent applications filed by Burroughs Wellcome,
alleging that Burroughs Wellcome converted and misappropriated Emory's invention
and property and that an Emory employee is the inventor or a co-inventor of the
subject matter covered by the Burroughs Wellcome patent applications. In May
1999, Emory and Glaxo settled the litigation, and we became the exclusive
licensee of the United States and all foreign patent applications and patents
filed by Burroughs Wellcome on the use of Coviracil to treat hepatitis B. Under
the license and settlement agreements, Emory and we were also given access to
development and clinical data and drug substance held by Glaxo relating to
Coviracil.
BioChem Pharma filed a patent application in May 1991 in Great Britain
also directed to a method to treat hepatitis B with FTC. BioChem Pharma filed
similar patent applications in other countries. In January 1996, BioChem Pharma
received a patent in the United States, which included a claim to treat
hepatitis B with Coviracil. The PTO has determined that there is a conflict
between the BioChem Pharma patent and patent applications filed by Yale and
Emory. The PTO is conducting an adversarial proceeding to determine which party
is entitled to the patent claims in dispute. Yale licensed all of its rights
relating to FTC, including Coviracil, and its uses claimed in this patent
application to Emory, which subsequently licensed these rights to us. Neither
Emory nor Yale may prevail in the adversarial proceeding, and the proceeding may
delay the decision of the PTO regarding Yale's and Emory's patent applications.
In addition, the PTO has recently added the U.S. patent application filed by
Burroughs Wellcome to this interference. Emory may not pursue or succeed in any
such proceedings. We will not be able to sell Coviracil for the treatment of
hepatitis B in the United States unless a United States court or administrative
body determines that the BioChem Pharma patent is invalid or unless we obtain a
license from BioChem Pharma. We may be unable to obtain such a license on
acceptable terms or at all. In July 1991, BioChem Pharma received a United
States patent on the use of 3TC to treat hepatitis B and has corresponding
patent applications pending or issued in foreign countries. If it is determined
that the use of Coviracil to treat hepatitis B is not substantially different
from the use of 3TC to treat hepatitis B, a court could hold that the use of
Coviracil to treat hepatitis B infringes these BioChem Pharma 3TC patents.
In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes Coviracil, from which BioChem Pharma has
received several patents in the United States and many foreign countries. If we
use a manufacturing method that is covered by patents issued on any of these
applications, we will not be able to manufacture Coviracil without a license
from BioChem Pharma. We may not be able to obtain such a license on acceptable
terms or at all.
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DAPD
We obtained our rights to DAPD under a license from Emory and the
University of Georgia Research Foundation, Inc., University of Georgia. Our
rights to DAPD include a number of issued United States patents that cover
composition of matter, a method for the synthesis of DAPD, methods for the use
of DAPD alone or in combination with certain other agents for the treatment of
hepatitis B, and a method to treat HIV with DAPD. We also have rights to several
foreign patents and patent applications that cover methods for the use of DAPD
alone or in combination with certain other anti-hepatitis B agents for the
treatment of hepatitis B. Additional foreign patent applications are pending
which contain claims for the use of DAPD to treat HIV. Emory and the University
of Georgia filed patent applications claiming these inventions in the United
States in 1990 and 1992. BioChem Pharma filed a patent application in the United
States in 1988 on a group of nucleosides in the same general class as DAPD and
their use to treat HIV, and has filed corresponding patent applications in
foreign countries. The PTO issued a patent to BioChem Pharma in 1993 covering a
class of nucleosides that includes DAPD and its use to treat HIV. Corresponding
patents have been issued to BioChem Pharma in many foreign countries. Emory has
filed an opposition to patent claims granted to BioChem Pharma by the European
Patent Office based, in part, upon Emory's assertion that BioChem Pharma's
patent does not disclose how to make DAPD. In a patent opposition hearing held
at the European Patent Office on March 4, 1999, the Opposition Division ruled
that the BioChem Pharma European patent covering DAPD is valid. Emory has
informed Triangle that it has appealed this decision to the European Patent
Office Technical Board of Appeal. If the Technical Board of Appeal affirms the
decision of the Opposition Division, or if Emory or Triangle do not pursue the
appeal, we would not be able to sell DAPD in Europe without a license from
BioChem Pharma, which may not be available on acceptable terms or at all. Patent
claims granted to Emory on a portion of the DAPD technology by the Australian
Patent Office have also been opposed by BioChem Pharma. We cannot assure you
that a court or administrative body would invalidate BioChem Pharma's patent
claims. Further, a sale of DAPD by us may infringe BioChem Pharma's patents. If
Emory, the University of Georgia and we do not challenge, or are not successful
in any challenge to, BioChem Pharma's issued patents, pending patent
applications, or patents that may issue from such applications, we will not be
able to manufacture, use or sell DAPD in the United States and any foreign
countries in which BioChem Pharma receives a patent without a license from
BioChem Pharma. We may not be able to obtain such a license from BioChem Pharma
on acceptable terms or at all.
Immunostimulatory Sequence Product Candidates
In March 2000, we entered into a licensing and collaborative agreement
with Dynavax to develop immunostimulatory polynucleotide sequence product
candidates for the prevention and/or treatment of serious viral diseases, which
became effective in April 2000. Immunostimulatory sequences are polynucleotides
which stimulate the immune system, and could potentially be used in combination
with our small molecule product candidates to increase the body's ability to
defend against viral infection. Immunostimulatory sequences can be stabilized
for use through internal linkages that do not occur in nature, including
phosphorothioate linkages.
There are a number of companies which have patent applications and issued
patents, both in the United States and in other countries, that cover
immunostimulatory sequences and their uses. Coley Pharmaceuticals, Inc., Coley,
has filed several patent applications in this area and has in addition
exclusively licensed a number of patent applications on this subject from the
University of Iowa and Isis Pharmaceuticals, Inc. A number of these patent
applications have been issued. A number of companies have also filed patent
applications and have or are expected to receive patents on certain
polynucleotides and methods for their use and manufacture. We could be prevented
from making, using or selling any immunostimulatory sequence that is covered by
an issued patent to a third party company, unless we obtain a license from that
company, which may not be available on reasonable terms or at all.
With respect to any of our drug candidates, litigation, patent opposition
and adversarial proceedings, including the currently pending proceedings, could
result in substantial costs to us. We expect the costs of the currently pending
proceedings to increase significantly during the next several years. We
anticipate that additional litigation and/or proceedings will be necessary or
may be initiated to enforce any patents we own or in-license, or to determine
the scope, validity and enforceability of other parties' proprietary rights and
the priority of an invention. Any of these activities could result in
substantial costs and/or delays to us. The outcome of any of these proceedings
may significantly affect our drug candidates and technology. United States
patents carry a presumption of validity and generally can be invalidated only
through clear and convincing evidence. As indicated above, the PTO is
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conducting two adversarial proceedings in connection with the emtricitabine
technology. We cannot assure you that a court or administrative body would hold
our in-licensed patents valid or would find an alleged infringer to be
infringing. Further, the license and option agreements with Emory, the
University of Georgia, The Regents of the University of California, The DuPont
Pharmaceuticals Company, Mitsubishi Chemical Corporation, and Dynavax provide
that each of these licensors is primarily responsible for any patent prosecution
activities, such as litigation, patent conflict proceeding, patent opposition or
other actions, for the technology licensed to us. These agreements also provide
that in general we are required to reimburse these licensors for the costs they
incur in performing these activities. Similarly, Yale and the University of
Georgia, the licensors of L-FMAU to Bukwang Pharm. Ind. Co., Ltd., are primarily
responsible for patent prosecution activities with respect to L-FMAU at our
expense. As a result, we generally do not have the ability to institute or
determine the conduct of any such patent proceedings unless our licensors elect
not to institute or to abandon such proceedings. If our licensors elect to
institute and prosecute patent proceedings, our rights will depend in part upon
the manner in which these licensors conduct the proceedings. In any proceedings
they elect to initiate and maintain, these licensors may not vigorously pursue
or defend or may decide to settle such proceedings on terms that are unfavorable
to us. An adverse outcome of these proceedings could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require us to cease using such technology, any of which could
adversely affect our business. Moreover, the mere uncertainty resulting from the
initiation and continuation of any technology related litigation or adversarial
proceeding could adversely affect our business pending resolution of the
disputed matters.
We also rely on unpatented trade secrets and know-how to maintain our
competitive position, which we seek to protect, in part, by confidentiality
agreements with employees, consultants and others. These parties may breach or
terminate these agreements, and we may not have adequate remedies for any
breach. Our trade secrets may also be independently discovered by competitors.
We rely on certain technologies to which we do not have exclusive rights or
which may not be patentable or proprietary and thus may be available to
competitors. We have filed applications for, but have not obtained, trademark
registrations for various marks in the United States and other jurisdictions. We
have received U.S. trademark registrations for our corporate name and logo,
Coactinon(R) and Coviracil(R). We have also received a registration in the
European Union for the mark Coactinon(R). Our pending application in the
European Union for the mark Coviracil(TM) has been opposed by Orsem, based upon
registrations for the mark Coversyl in various countries, and Les
Laboratories Serveir, based on a French registration for the mark Coversyl. We
do not believe that the marks Coviracil and Coversyl are confusingly similar,
but, in the event they are found to be confusingly similar, we may need to adopt
a different product name for emtricitabine in the applicable jurisdictions.
Several other companies use trade names that are similar to our name for their
businesses. If we are unable to obtain any licenses that may be necessary for
the use of our corporate name, we may be required to change our name. Our
management personnel were previously employed by other pharmaceutical companies.
The prior employers of these individuals may allege violations of trade secrets
and other similar claims relating to their drug development activities for us.
We are subject to extensive government regulation and may fail to receive
regulatory approval which could prevent or delay the commercialization of our
products.
In addition to preclinical testing, clinical trials and other approval
procedures for human pharmaceutical products, we are subject to numerous other
regulations covering the development of pharmaceutical products. These
regulations include, for example, domestic and international regulations
relating to the manufacturing, safety, labeling, storage, record keeping and
reporting of pharmaceutical products. We are also regulated with respect to
laboratory practices, safe working conditions and the use and disposal of
hazardous substances, including radioactive compounds and infectious disease
agents used in connection with our development work. The requirements vary
widely from country to country. We expect the process of obtaining these
approvals and complying with appropriate government regulations to be time
consuming and expensive. Even if our drug candidates receive regulatory
approval, we may still face difficulties in marketing and manufacturing those
drug candidates. Further, any approval may require postmarketing studies or
other conditions. The approval of any of our drug candidates may limit the
indicated uses of the drug candidate. A marketed product, its manufacturer and
the manufacturer's facilities are subject to continual review and periodic
inspections. The discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on the product or
manufacturer, including withdrawal of the product from the market. The failure
to comply with applicable regulatory requirements can, among other things,
result in:
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o fines,
o suspended regulatory approvals,
o refusal to approve pending applications,
o refusal to permit exports from the United States,
o product recalls,
o seizure of products,
o injunctions,
o operating restrictions, and
o criminal prosecutions.
In addition, adverse clinical results by others could negatively impact
the development and approval of our drug candidates. Some of our drug candidates
are intended for use as coactive therapy with one or more other drugs, and
adverse safety, effectiveness or regulatory developments in connection with such
other drugs will also have an adverse effect on our business.
Intense competition may render our drug candidates noncompetitive or obsolete.
We are engaged in segments of the drug industry that are highly
competitive and rapidly changing. Any of our current drug candidates that we
successfully develop will compete with numerous existing therapies. In addition,
many companies are pursuing novel drugs that target the same diseases we are
targeting. We believe that a significant number of drugs are currently under
development and will become available in the future for the treatment of HIV and
hepatitis B. We anticipate that we will face intense and increasing competition
as new products enter the market and advanced technologies become available. Our
competitors' products may be more effective, or more effectively marketed and
sold, than any of our products. Competitive products may render our products
obsolete or noncompetitive before we can recover the expenses of developing and
commercializing our drug candidates. Furthermore, the development of a cure or
new treatment methods for the diseases we are targeting could render our drug
candidates noncompetitive, obsolete or uneconomical. Many of our competitors:
o have significantly greater financial, technical and human resources
than we have and may be better equipped to develop, manufacture and
market products,
o have extensive experience in preclinical testing and clinical trials,
obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products, and
o have products that have been approved or are in late stage development
and operate large, well-funded research and development programs.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Academic institutions, governmental agencies and other
public and private research organizations are also becoming increasingly aware
of the commercial value of their inventions and are more actively seeking to
commercialize the technology they have developed.
If we successfully develop and obtain approval for our drug candidates, we
will face competition based on the safety and effectiveness of our products, the
timing and scope of regulatory approvals, the availability of supply, marketing
and sales capability, reimbursement coverage, price, patent position and other
factors. Our competitors may develop or commercialize more effective or more
affordable products, or obtain more effective patent protection, than we do.
Accordingly, our competitors may commercialize products more rapidly or
effectively than we do, which could hurt our competitive position.
Because we face risks related to our license and option agreements, we could
lose our rights to our drug candidates.
We have in-licensed or obtained an option to in-license our drug
candidates under agreements with our licensors. These agreements permit our
licensors to terminate the agreements under certain circumstances, such as our
failure to achieve certain development milestones or the occurrence of an
uncured material breach by us. The termination of any of these agreements could
result in the loss of our rights to a drug candidate. Upon termination of most
of our license agreements, we are required to return the licensed technology to
our licensors. In addition,
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most of these agreements provide that our licensors are primarily responsible
for any patent prosecution activities, such as litigation, patent conflict,
patent opposition or other actions, for the technology licensed to us. These
agreements also provide that in general we are required to reimburse our
licensors for the costs they incur in performing these activities. We believe
that these costs as well as other costs under our license and option agreements
will be substantial and may increase significantly during the next several
years. Our inability or failure to pay any of these costs with respect to any
drug candidate could result in the termination of the license or option
agreement for the drug candidate.
Because we may be unable to successfully manufacture our drug candidates, our
business may never achieve profitability.
We do not have any internal manufacturing capacity and we rely on third
party manufacturers for the manufacture of all of our clinical trial material.
We plan to expand our existing relationships or to establish relationships with
additional third party manufacturers for products that we successfully develop.
The terms of the Abbott Alliance provide that Abbott will manufacture all or a
portion of our product requirements for those products that are or become
covered by the Abbott Alliance. We may be unable to maintain our relationship
with Abbott or to establish or maintain relationships with other third party
manufacturers on acceptable terms, and third party manufacturers may be unable
to manufacture products in commercial quantities on a cost effective basis. Our
dependence upon third parties for the manufacture of our products may adversely
affect our profit margins and our ability to develop and commercialize products
on a timely and competitive basis. Further, third party manufacturers may
encounter manufacturing or quality control problems in connection with the
manufacture of our products and may be unable to maintain the necessary
governmental licenses and approvals to continue manufacturing our products.
We may be unable to successfully market, sell or distribute our drug candidates.
In the United States, we currently intend to market the drug candidates
covered by the Abbott Alliance in collaboration with Abbott and to market other
drug candidates that we successfully develop, that do not become part of the
Abbott Alliance, through a direct sales force. Outside of the United States, we
expect Abbott to market drug candidates covered by the Abbott Alliance and, for
any other drug candidates that we successfully develop that do not become part
of the Abbott Alliance, we intend to market and sell through arrangements or
collaborations with third parties. In addition, we expect Abbott to handle the
distribution and sale of drug candidates covered by the Abbott Alliance both
inside and outside the United States. With respect to the United States, our
ability to market the drug candidates that we successfully develop will be
contingent upon recruitment, training and deployment of a sales and marketing
force as well as the performance of Abbott under the Abbott Alliance. We may be
unable to establish marketing or sales capabilities or to maintain arrangements
or enter into new arrangements with third parties to perform those activities on
favorable terms. In addition, any such third parties may have significant
control or influence over important aspects of the commercialization of our drug
candidates, including market identification, marketing methods, pricing,
composition of sales force and promotional activities. We also may have limited
control over the amount and timing of resources that a third party may devote to
our drug candidates. Our business may never achieve profitability if we fail to
establish or maintain a sales force and marketing, sales and distribution
capabilities.
Because we depend on third parties for the development and acquisition of drug
candidates, we may not be able to successfully acquire additional drug
candidates or commercialize or develop our current drug candidates.
We have engaged and intend to continue to engage third party contract
research organizations and other third parties to help us develop our drug
candidates. Although we have designed the clinical trials for our drug
candidates, the contract research organizations have conducted many of the
clinical trials. As a result, many important aspects of our drug development
programs have been and will continue to be outside of our direct control. In
addition, the contract research organizations may not perform all of their
obligations under arrangements with us. If the contract research organizations
do not perform clinical trials in a satisfactory manner or breach their
obligations to us, the development and commercialization of any drug candidate
may be delayed or precluded. We do not intend to engage in drug discovery. Our
strategy for obtaining additional drug candidates is to utilize the
relationships of our management team and scientific consultants to identify drug
candidates for in-licensing from
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companies, universities, research institutions and other organizations. We may
not succeed in acquiring additional drug candidates on acceptable terms or at
all.
Because we may not be able to attract and retain key personnel and advisors, we
may not successfully develop our products or achieve our other business
objectives.
We are highly dependent on our senior management and scientific staff,
including Dr. David Barry, our Chairman and Chief Executive Officer. We have
entered into employment agreements with each vice president of Triangle. Dr.
Barry's employment agreement contains certain non-competition provisions. In
addition, the employment agreements for each of the vice presidents provide for
certain severance payments which are contingent upon each vice president's
refraining from competition with Triangle. The loss of the services of any
member of our senior management or scientific staff may significantly delay or
prevent the achievement of product development and other business objectives.
Our ability to attract and retain qualified personnel, consultants and advisors
is critical to our success. In order to pursue our drug development programs and
marketing plans, we will need to hire additional qualified scientific and
management personnel. Competition for qualified individuals is intense and we
face competition from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. We may be unable to attract and
retain these individuals, and our failure to do so would have an adverse effect
on our business.
Health care reform measures and third party reimbursement practices are
uncertain and may adversely impact the commercialization of our products.
The efforts of governments and third party payors to contain or reduce the
cost of health care will continue to affect the business and financial condition
of drug companies. A number of legislative and regulatory proposals to change
the health care system have been proposed in recent years. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase pressure on drug pricing. While we cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business, the announcement
and/or adoption of such proposals or efforts could have an adverse effect on our
profit margins and financial condition. Sales of prescription drugs depend
significantly on the availability of reimbursement to the consumer from third
party payors, such as government and private insurance plans. These third party
payors frequently require that drug companies give them predetermined discounts
from list prices, and they are increasingly challenging the prices charged for
medical products and services. Present coactive treatment regimens for the
treatment of HIV are expensive; published reports indicate the cost per patient
per year can exceed $13,000, and may increase as new combinations are developed.
These costs have resulted in limitations in the reimbursement available from
third party payors for the treatment of HIV infection, and we expect that
reimbursement pressures will continue in the future. If we succeed in bringing
one or more products to the market, these products may not be considered cost
effective and reimbursement to the consumer may not be available or sufficient
to allow us to sell our products on a competitive basis.
If our drug candidates do not achieve market acceptance, our business may never
achieve profitability.
Our success will depend on the market acceptance of any products we
develop. The degree of market acceptance will depend upon a number of factors,
including the receipt and scope of regulatory approvals, the establishment and
demonstration in the medical community of the safety and effectiveness of our
products and their potential advantages over existing treatment methods, and
reimbursement policies of government and third party payors. Physicians,
patients, payors or the medical community in general may not accept or utilize
any product that we may develop.
We may not have adequate insurance protection against product liability.
Our business exposes us to potential product liability risks that are
inherent in the testing of drug candidates and the manufacturing and marketing
of drug products and we may face product liability claims in the future. We
currently have only limited product liability insurance. We may be unable to
maintain our existing insurance and/or obtain additional insurance in the future
at a reasonable cost or in sufficient amounts to protect against potential
losses. A successful product liability claim or series of claims brought against
us could require us to pay substantial amounts that would decrease our
profitability, if any.
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We may incur substantial costs related to our use of hazardous materials.
We use hazardous materials, chemicals, viruses and various radioactive
compounds in our drug development programs. Although we believe that our
handling and disposing of these materials comply with state and federal
regulations, the risk of accidental contamination or injury still exists. In the
event of such an accident, we could be held liable for any damages or fines that
result and any such liability could exceed our resources.
Our controlling stockholders may make decisions which you do not consider to be
in your best interest.
As of March 31, 2000, our directors, executive officers and their
affiliates, excluding Abbott, owned approximately 12.3% of our outstanding
common stock and Abbott owned approximately 17.3% of our outstanding common
stock. Pursuant to the terms of the Abbott Alliance, Abbott has the right to
purchase additional amounts of our common stock up to a maximum aggregate
percentage of 21% of our outstanding common stock and has certain rights to
purchase shares directly from us in order to maintain its existing level of
ownership, also known as antidilution protection. One Abbott designee serves as
a member of our Board of Directors. As a result, our controlling stockholders
are able to significantly influence all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership could also delay or prevent a
change in control of Triangle that may be favored by other stockholders.
The market price of our stock may be adversely affected by market volatility.
The market price of our common stock is likely to be volatile and could
fluctuate widely in response to many factors, including:
o announcements of the results of clinical trials by us or our
competitors,
o developments with respect to patents or proprietary rights,
o announcements of technological innovations by us or our
competitors,
o announcements of new products or new contracts by us or our
competitors,
o actual or anticipated variations in our operating results due
to the level of development expenses and other factors,
o changes in financial estimates by securities analysts and
whether our earnings meet or exceed such estimates,
o conditions and trends in the pharmaceutical and other
industries,
o new accounting standards,
o general economic, political and market conditions and other
factors, and
o the occurrence of any of the risks described in these "Risk
Factors."
In the past, following periods of volatility in the market price of the
securities of companies in our industry, securities class action litigation has
often been instituted against those companies. If we face such litigation in the
future, it would result in substantial costs and a diversion of management
attention and resources, which would negatively impact our business.
In addition, if our stockholders sell a substantial number of shares of
our common stock in the public market, the market price of our common stock
could be reduced. As of March 31, 2000, there were 38,096,599 shares of common
stock outstanding, of which approximately 23,500,000 were immediately eligible
for resale in the public market without restriction. Holders of approximately
7,900,000 shares have rights to cause us to register them for sale to the
public. We have filed registration statements to register the sale of
approximately 3,900,000 of these shares. We are obligated to register for sale
in the public market by June 1, 2000 a substantial portion of the 400,000 shares
issued to former Avid stockholders in March 2000. In addition, Abbott will have
the right on or after June 30, 2002 to cause us to register for resale in the
public market the 6,571,428 shares of common stock purchased at the closing of
the Abbott Alliance. Any such sales may make it more difficult for us to raise
needed capital through an offering of our equity or convertible debt securities
and may reduce the market price of our common stock.
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Antitakeover provisions in our charter documents and Delaware law could delay,
defer or prevent a tender offer or takeover attempt that you consider to be in
your best interest.
We have adopted a number of provisions that could have antitakeover
effects. On January 29, 1999, our Board of Directors, the Board, adopted a
preferred stock purchase rights plan, commonly referred to as a "poison pill."
The rights plan is intended to deter an attempt to acquire Triangle in a manner
or on terms not approved by the Board. Thus, the rights plan will not prevent an
acquisition of Triangle which is approved by the Board. Our charter authorizes
the Board to issue shares of undesignated preferred stock without stockholder
approval on terms as the Board may determine. Moreover, the issuance of
preferred stock may make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, voting control of Triangle. Our bylaws
divide the Board into three classes of directors with each class serving a three
year term. These and other provisions of our charter and our bylaws, as well as
certain provisions of Delaware law, could delay or impede the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving Triangle, even if the events could be beneficial to our
stockholders. These provisions could also limit the price that investors might
be willing to pay for our common stock.
We have not declared or paid any dividends on our common stock.
We have never declared or paid any cash dividends on our common stock, and
we currently do not intend to pay any cash dividends on our common stock in the
foreseeable future. We intend to retain our earnings, if any, for the operation
of our business.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Triangle is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. At March 31, 2000, Triangle had no
outstanding forward foreign currency contracts to hedge anticipated foreign
currency obligations but was subject to interest rate risk associated with its
investment portfolio. All derivative financial instruments, when purchased, are
done so in accordance with established policies and procedures and require the
approval, reporting and monitoring of derivative financial instrument
activities. The following discusses our exposure to market risk related to
changes in interest rates and foreign currency exchange rates.
Interest Rate Sensitivity
Triangle is subject to interest rate risk on its investment portfolio. We
maintain an investment portfolio consisting primarily of high quality government
and corporate bonds with an average maturity of less than 18 months. We attempt
to mitigate default risk by investing in high credit quality securities and by
monitoring the credit rating of investment issuers. Our investment portfolio
includes only marketable securities with active secondary or resale markets to
help ensure portfolio liquidity and we have implemented guidelines limiting the
duration of investments. These available-for-sale securities are subject to
interest rate risk and will decrease in value if market interest rates increase.
If market rates were to increase by 10% from levels at March 31, 2000, the fair
value of the portfolio is expected to decline by an immaterial aggregate amount
primarily due to the relatively short maturity of the portfolio. At March 31,
2000, our portfolio consisted of approximately $61.5 million of investments
maturing within one year and approximately $23.4 million of investments maturing
after one year but within 30 months. Additionally, we generally have the ability
to hold our fixed income investments to maturity and therefore do not expect our
consolidated operating results, financial position or cash flows to be affected
by a significant amount due to a sudden change in interest rates.
Foreign Currency Exchange Risk
The majority of our transactions occur in U.S. dollars and we do not have
subsidiaries or investments in foreign countries. Therefore, we are not subject
to significant foreign currency exchange risk. We have, however, established
policies and procedures for market risk assessment, including a foreign currency
hedging program. The goal of our hedging program is to economically guarantee,
or lock into, exchange rates on firm foreign currency cash outflows and to
minimize the impact to the Company of foreign currency fluctuations. These
policies specifically provide for the hedging of firm commitments and prohibit
the holding of derivative instruments for speculative or trading purposes. At
March 31, 2000, Triangle had no outstanding foreign currency contracts.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
c. Issuance of Unregistered Securities
On March 27, 2000, we issued 400,000 shares of common stock to the former
Avid stockholders for extending the date for payment of certain contingent
consideration under the Avid merger agreement. No additional consideration was
received by us upon the issuance of this common stock and no underwriters were
involved in the issuance of this common stock. Under the terms of the amendment,
we are obligated to file a registration statement on a Form S-3 for a
substantial portion of these shares on or before June 1, 2000.
The above securities were offered and sold by us in reliance upon
exemptions from registration under Regulation D promulgated by the SEC or,
alternatively, under Section 4(2) of the Securities Act of 1933. We did not use
any general advertisement or solicitation in connection with the offer or sale
of the securities and appropriate legends were affixed to the certificates of
these securities.
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Amendment Number Two to the Agreement and Plan of Reorganization by
and among the Company, Avid Corporation and Forrest H. Anthony, Alan
G. Walton and Marcia T. Bates as Securityholder Agent, dated as of
March 24, 2000
10.2 Amendment Number Two to the Agreement and Plan of Merger by and
among the Company, Avid Corporation and Forrest H. Anthony, Alan G.
Walton and Marcia T. Bates as Securityholder Agent, dated as of
March 24, 2000
10.3 Amendment Number One to Declaration of Registration Rights by and
among the Company, Avid Corporation and Forrest H. Anthony, Alan G.
Walton and Marcia T. Bates as Securityholder Agent, dated as of
March 24, 2000
10.4 Declaration of Registration Rights, dated as of June 30, 1997
+10.5 License Agreement between Dynavax Technologies Corporation and the
Company, dated as of March 31, 2000
27.1 Financial Data Schedule
(+) Certain confidential portions of this Exhibit were omitted by means
of marking such portions with an asterisk (the "Mark"). This Exhibit
has been filed separately with the Secretary of the Commission
without the Mark pursuant to the Company's Application Requesting
Confidential Treatment under Rule 24b-2 under the Securities
Exchange Act of 1934.
b. Reports on Form 8-K
None
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TRIANGLE PHARMACEUTICALS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIANGLE PHARMACEUTICALS, INC.
Date: May 12, 2000 By: /s/ David W. Barry
----------------------------------------
David W. Barry
Chairman and Chief Executive Officer
TRIANGLE PHARMACEUTICALS, INC.
Date: May 12, 2000 By: /s/ Thomas R. Staab, II
----------------------------------------
Thomas R. Staab, II
Acting Chief Financial Officer and Treasurer
29
EXHIBIT 10.1
AMENDMENT NUMBER TWO TO THE
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment Number Two (this "Amendment") to the Agreement and Plan of
Reorganization dated as of June 30, 1997 (the "Original Agreement") as amended
February 28, 1999 (the "Agreement") among Triangle Pharmaceuticals, Inc.
("Triangle"), Project Z Corporation ("Project Z") and Avid Corporation ("Avid"),
is made as of this 24th day of March, 2000, by and among Triangle, Avid and the
Securityholder Agent (as such term is defined in the Original Agreement) (the
"Securityholder Agent"), on behalf of and as attorney-in-fact for all of the
stockholders, optionholders and warrantholders of Avid immediately prior to the
merger of Project Z with and into Avid (the "Former Avid Stockholders").
Capitalized terms used herein which are not defined herein shall have the
definitions ascribed to them in the Agreement.
RECITALS
A. Triangle, Project Z and Avid entered into the Original Agreement,
pursuant to which Project Z merged with and into Avid on August 28, 1997, and
Avid became a wholly-owned subsidiary of Triangle.
B. Triangle, Avid (including its capacity as successor to Project Z) and
the Securityholder Agent, entered into Amendment Number One to the Agreement and
Plan of Reorganization, dated February 28, 1999, extending to thirty (30) months
the eighteen (18) month period set forth in Section 1.6(b)(ii)(B) of the
Original Agreement.
C. Triangle, Avid and the Securityholder Agent, on behalf of and as
attorney-in-fact for the Former Avid Stockholders, desire (i) to extend the
thirty (30) month period set forth in Section 1.6(b)(ii)(B) of the Agreement
after which, if Triangle has not Initiated a Definitive Clinical Trial with the
Lead Compound or elected in writing to continue the development of the Lead
Compound, the Securityholder Agent will have the right to exercise the Lead
Compound Option, and (ii) to amend certain other provisions of the Agreement as
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENTS TO AGREEMENT.
1.1 Section 1.6(b). The first paragraph of Section 1.6(b) is hereby
amended and restated in its entirety as follows:
"(b) Stock Consideration. The "Stock Consideration" shall be
the number of shares of Parent Common Stock equal to the sum of (v) the
First Payment (as defined in Section 1.6(b)(i) below) plus (x) the Second
Payment (as defined in Amendment Number One to this Agreement) plus (y)
the Third Payment (as defined in Amendment Number Two to this Agreement)
plus (z) the Milestone Payments (as defined in Section 1.6(b)(ii) below)."
<PAGE>
1.2 Section 1.6(b)(ii)(A). Section 1.6(b)(ii)(A) of the Agreement is
hereby amended and restated in its entirety as follows:
"(A) In the event that Parent, in its sole discretion, (x)
Initiates (as defined in Section 1.6(b)(iii) below) a Definitive Clinical
Trial (as defined in Section 1.6(b)(iii) below) with the Lead Compound (as
defined in Section 1.6(b)(iii) below), or (y) notifies the Securityholder
Agent (as defined in Section 7.2(g) below) in a writing that specifically
references this Section 1.6(b)(ii)(A) of its election to continue the
development of the Lead Compound even if Parent has not Initiated a
Definitive Clinical Trial with the Lead Compound, Parent shall within
seventy-five (75) days thereafter make available to the Exchange Agent (as
defined in Section 1.10(a) below) for distribution pursuant to Section
1.10, 1,150,000 shares of Parent Common Stock."
1.3 Section 1.6(b)(ii)(B). Section 1.6(b)(ii)(B) of the Agreement is
hereby amended and restated in its entirety as follows:
"(B) If neither of the conditions described in Section
1.6(b)(ii)(A) above is satisfied on or prior to forty-eight (48) months
after the Closing Date and the Securityholder Agent elects not to exercise
the Lead Compound Option (as defined in Section 5.17 below) within the
thirty (30) day period set forth in Section 5.17 below, Parent shall
within seventy-five (75) days thereafter make available to the Exchange
Agent for distribution pursuant to Section 1.10, 100,000 shares of Parent
Common Stock."
1.4 Section 1.8(c)(i)(A). Section 1.8(c)(i)(A) of the Agreement is
hereby amended and restated in its entirety as follows:
"(A) At the Effective Time, each Assumed Option shall be, in
connection with the Merger, assumed by Parent. Each Assumed Option so
assumed by Parent under this Agreement shall be amended prior to the
Effective Time to provide that from and after the Effective Time such
Assumed Option (1) may be exercised through a cashless exercise procedure
(to the extent that the Assumed Option does not already permit the holder
thereof to do so) and may be exercised notwithstanding the failure of the
holder thereof to enter or remain in the employ of Parent or the Company
following the Merger, (2) may not be exercised at any time prior to the
earlier of (a) forty-eight (48) months after the Closing Date and (b) the
date, if any, of the written notice from the Securityholder Agent
addressed to the last known domicile address of the holder of such Assumed
Option informing such holder that one of the conditions described in
Section 1.6(b)(ii)(A) above has been satisfied (the earlier of such dates
being the "Option Exercise Date"), (3) may not be exercised at any time
after 5:00 p.m. eastern standard time on the date that is forty-five (45)
days after the Option Exercise Date, and (4) represents only the right to
receive upon exercise the portion of the Merger Consideration issuable to
such holder pursuant to Section 1.7 above. Except as so amended, each
Assumed Option shall continue to have,
-2-
<PAGE>
and be subject to, the same terms and conditions set forth in the Option
Plan under which it was issued and/or as provided in the respective option
agreements governing such Assumed Option immediately prior to the
Effective Time. Parent shall reserve from the Cash Distribution the
amount, if any, that the holders of the Assumed Options would have
received had all of the Assumed Options and all of the Assumed Warrants
been exercised in full immediately prior to the Effective Time (assuming
that the exercise price was paid in cash). The portion of the Cash
Distribution reserved by Parent for issuance upon exercise of the Assumed
Options is referred to as the "Assumed Option Amount." "
1.5 Section 1.8(d)(i)(A). Section 1.8(d)(i)(A) of the Agreement is
hereby amended and restated in its entirety as follows:
"(A) At the Effective Time, each Assumed Warrant shall be, in
connection with the Merger, assumed by Parent. Each Assumed Warrant so
assumed by Parent under this Agreement shall be amended prior to the
Effective Time to provide that from and after the Effective Time such
Warrant (1) may be exercised through a cashless exercise procedure (to the
extent that the Assumed Warrant does not already permit the holder thereof
to do so), (2) may not be exercised at any time prior to the earlier of
(a) forty-eight (48) months after the Closing Date and (b) the date, if
any, of the written notice from the Securityholder Agent addressed to the
last known domicile address of the holder of such Assumed Warrant
informing such holder that one of the conditions described in Section
1.6(b)(ii)(A) above has been satisfied (the earlier of such dates being
the "Warrant Exercise Date"), (3) may not be exercised at any time after
5:00 p.m. eastern standard time on the date that is forty-five (45) days
after the Warrant Exercise Date, and (4) represents only the right to
receive upon exercise the portion of the Merger Consideration issuable to
such holder pursuant to Section 1.7 above. Except as so amended, each
Assumed Warrant shall continue to have, and be subject to, the same terms
and conditions as provided in the respective Assumed Warrant agreement
immediately prior to the Effective Time. Parent shall reserve from the
Cash Distribution the amount, if any, that the holders of the Assumed
Warrants would have received had all of the Assumed Warrants and all of
the Assumed Options been exercised in full immediately prior to the
Effective Time (assuming that the exercise price was paid in cash). The
portion of the Cash Distribution reserved by Parent for issuance upon
exercise of the Assumed Warrants is referred to as the "Assumed Warrant
Amount." "
1.6 Section 5.17. The first paragraph of Section 5.17 of the
Agreement is hereby amended and restated in its entirety as follows:
"5.17 Option to Obtain Rights to Lead Compound. In the event
that neither of the conditions described in Section 1.6(b)(ii)(A) is
satisfied on or prior to the date that is forty-eight (48) months after
the Closing Date, the Securityholder Agent shall have the option ("Lead
Compound Option"), subject to the conditions and on the terms described
below, to acquire on behalf of each holder of any Company Capital Stock
outstanding immediately prior to the
-3-
<PAGE>
Effective Time and each holder of an Assumed Option or an Assumed Warrant
that is timely and properly exercised after the Closing (together, the
"Former Company Stockholders") pursuant to the Technology Transfer
Agreement in the form attached hereto as Exhibit 5.17 (the "Technology
Transfer Agreement"): (i) all of Parent's and the Company's rights in the
Lead Compound, in all improvements solely and exclusively of, and
enhancements solely and exclusively to, the Lead Compound (the "Lead
Compound Improvements") and in all documents and data created solely and
exclusively in connection with the development of the Lead Compound (the
"Lead Compound Information") (and in both the case of Lead Compound
Improvements and Lead Compound Information, not in any way related to any
of the other compounds, technologies or assets of Parent or the Company),
and (ii) one copy of all documents that contain any data regarding
clinical trials of the Lead Compound in combination with other drugs or
drug candidates, redacted to exclude therefrom any other information
contained therein (together with the Lead Compound Information, the "Lead
Compound Documents"). In the event the Securityholder Agent delivers
written notice to Parent of his or her election to exercise the Lead
Compound Option within thirty (30) calendar days after the date of the
Parent Notice (as defined in Section 5.17(a) below), Parent shall
thereafter, subject to and in compliance with good medical and clinical
trial practices, promptly and permanently cease, and shall cause the
Company to cease, all development and use of the Lead Compound, the Lead
Compound Improvements and the Lead Compound Documents (collectively, the
"Lead Compound Rights")."
1.7 Section 5.1(d). Section 5.1(d) is hereby amended and restated in
its entirety as follows:
(i) If one of the conditions described in Section
1.6(b)(ii)(A) above is satisfied, Parent shall use its reasonable efforts
to file a Registration Statement on Form S-3 with the SEC covering the
resale of the shares of Parent Common Stock issued in the Merger. Such
registration, including Parent's obligation to file such Registration
Statement on Form S-3, shall be subject to the terms and conditions set
forth in the Declaration of Registration Rights attached hereto as Exhibit
5.1(d).
(ii) Parent shall file a Registration Statement on Form S-3
with the SEC covering the resale of the shares issued in connection with
the Third Payment (as defined in Amendment Number Two to this Agreement)
on or before June 1, 2000. Such registration, including Parent's
obligation to file such Registration Statement on Form S-3, shall be
subject to the terms and conditions set forth in the Declaration of
Registration rights attached hereto as Exhibit 5.1(d).
2. THIRD PAYMENT.
Triangle shall, on or before April 15, 2000, deliver 400,000 shares
of Triangle Common Stock (the "Third Payment") to the Escrow Agent of which that
number of shares to be reserved for the benefit of the holders of Assumed
Options and the holders of Assumed Warrants
-4-
<PAGE>
(the "Reserved Payment") shall be held by the Escrow Agent, and the remainder
shall be transferred promptly to the Exchange Agent for distribution to each of
the Former Avid Stockholders in proportion to the aggregate number of shares of
Parent Common Stock which such holder would otherwise be entitled to receive
from the aggregate of the First Payment, the Second Payment and the Third
Payment pursuant to Section 1.7 of the Agreement by virtue of such holder's
ownership of outstanding shares of Company Capital Stock immediately prior to
the Effective Time, and assuming for the purposes of such allocation that the
holders of all Assumed Options and the holders of all Assumed Warrants were the
holders of the number of shares of the Company Common Stock that would have been
issued had all of the Assumed Options and all of the Assumed Warrants been
exercised in full immediately prior to the Effective Time (assuming that the
exercise price was paid in cash). No later than seventy-five (75) days after
delivery to the Escrow Agent of an Agent Certificate, in form acceptable to
Triangle, pursuant to Section 1.7(d)(i) of the Agreement with respect to the
distribution of the Third Payment, the Third Payment less the Reserved Payment
shall be distributed from the Exchange Agent to the Former Avid Stockholders as
provided in such Agent Certificate. Triangle, the Escrow Agent, and the Exchange
Agent shall be entitled to rely without investigation on the accuracy of the
information set forth in such Agent Certificate.
3. SECURITYHOLDER AGENT'S EXPENSES.
Triangle shall pay the reasonable fees and expenses of legal counsel to
the Securityholder Agent incurred in connection with the drafting and review of
this Amendment and the transactions contemplated hereby and in communicating
with Former Avid Stockholders in connection therewith, subject to verification
of fees by Triangle.
4. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall continue
in full force and effect. In the event of any conflict between the terms of the
Agreement and the terms of this Amendment, the terms of this Amendment shall
govern and control. This Amendment shall become effective when executed and
delivered by Triangle, Avid and a majority of the individuals constituting the
Securityholder Agent.
5. FURTHER ASSURANCES.
The parties agree to execute such further instruments, agreement and
documents and to take such further action as may reasonably be necessary to
carry out the intent of this Amendment.
6. COUNTERPARTS.
This Amendment may be executed in any number of counterparts, each
which will be deemed an original, and all of which together shall constitute one
instrument.
7. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from this
Amendment and the balance of the
-5-
<PAGE>
Amendment shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
8. GOVERNING LAW.
This Amendment shall be governed by and construed under the laws of
the State of Delaware regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
This Amendment is hereby executed as of the date first above written.
TRIANGLE: TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President and Chief Operating Officer
AVID: AVID CORPORATION, a Pennsylvania
corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President
SECURITYHOLDER AGENT:
--------------------------------------------
Forrest H. Anthony
/s/ Alan G. Walton
--------------------------------------------
Alan G. Walton
/s/ Marcia T. Bates
--------------------------------------------
Marcia T. Bates
[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO
THE AGREEMENT AND PLAN OF REORGANIZATION]
EXHIBIT 10.2
AMENDMENT NUMBER TWO TO THE
AGREEMENT AND PLAN OF MERGER
This Amendment Number Two (this "Amendment") to the Agreement and Plan of
Merger dated as of August 28, 1997 (the "Original Agreement") as amended
February 28, 1999 (the "Agreement") between Project Z Corporation ("Project Z")
and Avid Corporation ("Avid") is made as of this 24th day of March, 2000, by and
among Avid (including its capacity as successor to Project Z), Triangle
Pharmaceuticals, Inc. ("Triangle"), and the Securityholder Agent (as such term
is defined in the Reorganization Agreement referred to below) (the
"Securityholder Agent"), on behalf of and as attorney-in-fact for all of the
stockholders, optionholders and warrantholders of Avid immediately prior to the
merger of Project Z with and into Avid (the "Former Avid Stockholders").
Capitalized terms used herein which are not defined herein shall have the
definitions ascribed to them in the Reorganization Agreement (defined below).
RECITALS
A. Triangle, Project Z and Avid entered into an Agreement and Plan of
Reorganization dated as of June 30, 1997 (the "Original Reorganization
Agreement"), and as amended February 28, 1999 (the "Reorganization Agreement"),
which contained the terms for the merger of Project Z with and into Avid and
after which Avid would become a wholly-owned subsidiary of Triangle.
B. Avid and Project Z entered into the Original Agreement, pursuant to
which Project Z merged with and into Avid on August 28, 1997, and Avid became a
wholly-owned subsidiary of Triangle.
C. Avid (including its capacity as successor to Project Z), entered into
Amendment Number One to the Original Agreement, in connection with the extension
to thirty (30) months of the eighteen (18) month period set forth in Section
1.6(b)(ii)(B) of the Original Reorganization Agreement.
D. Triangle, Avid and the Securityholder Agent, on behalf of and as
attorney-in-fact for the Former Avid Stockholders, are concurrently herewith
entering into an amendment to the Reorganization Agreement (the "Reorganization
Amendment") (i) to extend further the thirty (30) month period set forth in
Section 1.6(b)(ii)(B) of the Reorganization Agreement after which, if Triangle
has not Initiated a Definitive Clinical Trial with the Lead Compound or elected
in writing to continue the development of the Lead Compound, the Securityholder
Agent will have the right to either exercise the Lead Compound Option, and (ii)
to amend certain other provisions of the Agreement as set forth in the
Reorganization Amendment.
E. Triangle, Avid (including its capacity as successor to Project Z) and
the Securityholder Agent desire to amend the Agreement to make it consistent
with the terms of the Reorganization Agreement as amended by the Reorganization
Amendment.
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
9. AMENDMENTS TO AGREEMENT.
9.1 Article IV.A.2.b.(i). Article IV.A.2.b.(i) of the Agreement is
hereby amended and restated in its entirety as follows:
"(i) In the event that Parent, in its sole discretion, (x) Initiates
(as defined in Section 1.6(b)(iii) of the Reorganization Agreement) a
Definitive Clinical Trial (as defined in Section 1.6(b)(iii) of the
Reorganization Agreement) with the Lead Compound (as defined in Section
1.6(b)(iii) of the Reorganization Agreement), or (y) notifies the
Securityholder Agent (as defined in Section 7.2(g) of the Reorganization
Agreement) in a writing that specifically references Section 1.6(b)(ii)(A)
of the Reorganization Agreement of its election to continue the
development of the Lead Compound even if Parent has not Initiated a
Definitive Clinical Trial with the Lead Compound, Parent shall within
seventy-five (75) days thereafter make available to the Exchange Agent (as
defined in Section IV.E.1 below) for distribution pursuant to Section IV.E
below, 1,150,000 shares of Parent Common Stock."
9.2 Article IV.A.2.b.(ii). Article IV.A.2.b.(ii) of the Agreement is
hereby amended and restated in its entirety as follows:
"(ii) If neither of the conditions described in Section IV.A.2.b.(i)
above is satisfied on or prior to forty-eight (48) months after the
Closing Date and the Securityholder Agent elects not to exercise the Lead
Compound Option (as defined in Section 5.17 of the Reorganization
Agreement) within the thirty (30) day period set forth in Section 5.17 of
the Reorganization Agreement, Parent shall within seventy-five (75) days
thereafter make available to the Exchange Agent for distribution pursuant
to Section IV.E below, 100,000 shares of Parent Common Stock."
10. Third PAYMENT.
Triangle shall, on or before April 15, 2000, deliver 400,000 shares of
Triangle Common Stock (the "Third Payment") to the Escrow Agent of which that
number of shares to be reserved for the benefit of the holders of Assumed
Options and the holders of Assumed Warrants (the "Reserved Payment") shall be
held by the Escrow Agent, and the remainder shall be transferred promptly to the
Exchange Agent for distribution to each of the Former Avid Stockholders in
proportion to the aggregate number of shares of Parent Common Stock which such
holder would otherwise be entitled to receive from the aggregate of the First
Payment, the Second Payment and the Third Payment pursuant to Section 1.7 of the
Agreement by virtue of such holder's ownership of outstanding shares of Company
Capital Stock immediately prior to the Effective Time, assuming for the purposes
of such allocation that the holders of all Assumed Options and the holders of
all Assumed Warrants were the holders of the number of shares of the Company
Common Stock that would have been issued had all of the Assumed Options and all
of the Assumed Warrants been exercised in full immediately prior to the
Effective Time (assuming that the exercise price was paid in cash). No later
than seventy-five (75) days after delivery to the Escrow Agent of an Agent
Certificate, in form acceptable to Triangle, pursuant to Section
-2-
<PAGE>
1.7(d)(i) of the Agreement with respect to the distribution of the Third
Payment, the Third Payment less the Reserved Payment shall be distributed from
the Exchange Agent to the Former Avid Stockholders as provided in such Agent
Certificate. Triangle, the Escrow Agent, and the Exchange Agent shall be
entitled to rely without investigation on the accuracy of the information set
forth in such Agent Certificate.
11. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall continue in
full force and effect. In the event of any conflict between the terms of the
Agreement and the terms of this Amendment, the terms of this Amendment shall
govern and control.
12. FURTHER ASSURANCES.
The parties agree to execute such further instruments, agreement and
documents and to take such further action as may reasonably be necessary to
carry out the intent of this Amendment.
13. COUNTERPARTS.
This Amendment may be executed in any number of counterparts, each which
will be deemed an original, and all of which together shall constitute one
instrument. This Amendment shall become effective when executed and delivered by
Triangle, Avid and a majority of the individuals constituting the Securityholder
Agent.
14. SEVERABILITY.
If one or more provisions of this Amendment are held to be unenforceable
under applicable law, such provision shall be excluded from this Amendment and
the balance of the Amendment shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
15. GOVERNING LAW.
This Amendment shall be governed by and construed under the laws of the
State of Delaware regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
This Amendment is hereby executed as of the date first above written.
TRIANGLE: TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President and Chief Operating Officer
AVID: AVID CORPORATION, a Pennsylvania
corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President
SECURITYHOLDER AGENT:
--------------------------------------------
Forrest H. Anthony
/s/ Alan G. Walton
--------------------------------------------
Alan G. Walton
/s/ Marcia T. Bates
--------------------------------------------
Marcia T. Bates
[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO
THE AGREEMENT AND PLAN OF MERGER]
EXHIBIT 10.3
AMENDMENT NUMBER ONE TO
DECLARATION OF REGISTRATION RIGHTS
This Amendment Number One (the "Amendment") to the Declaration of
Registration Rights, dated August 28, 1997 (the "Original Declaration"),
delivered in connection with the Reorganization Agreement (defined below) by and
among Triangle Pharmaceuticals, Inc. ("Triangle"), Project Z Corporation
("Project Z"), Avid Corporation ("Avid") and the Securityholder Agent (as such
term is defined in the Reorganization Agreement) (the "Securityholder Agent"),
is made as of this 24th day of March, 2000, on behalf and as attorney-in-fact
for all of the stockholders, optionholders and warrantholders of Avid
immediately prior to the merger of Project Z with and into Avid (the "Former
Avid Stockholders"). Capitalized terms used herein which are not defined herein
shall have the definitions ascribed to them in the Reorganization Agreement.
RECITALS
A. Triangle and, Project Z and Avid entered into an Agreement and Plan of
Reorganization dated as of June 30, 1997 (the "Original Reorganization
Agreement"), as amended (the "Reorganization Agreement") which contained the
terms of the merger of Project Z with and into Avid and after which Avid became
a wholly-owned subsidiary of Triangle, which terms included certain registration
rights covering the resale of the shares of Parent Common Stock issued in the
Merger.
B. In connection with the Original Reorganization Agreement, Triangle
delivered the Original Declaration, which described the terms and conditions of
the registration rights granted in the Original Reorganization Agreement.
C. Triangle, Avid and the Securityholder Agent, on behalf of and as
attorney-in-fact for the Former Avid Stockholders, are concurrently herewith
entering into an amendment to the Reorganization Agreement, and in connection
therewith, Triangle will issue 400,000 shares of Parent Common Stock to the
Former Avid Stockholders as a Third Payment (the "Third Payment Shares").
D. Triangle, Avid (including in its capacity as successor to Project Z)
and the Securityholder Agent desire to amend the Original Declaration to grant
registration rights in connection with the Third Payment Shares.
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
16. AMENDMENTS TO Declaration.
16.1 Section 1. The following definition is added to Section 1:
"h. "Third Payment Registrable Securities" means for each Holder:
(a) the number of shares of Parent Common Stock issued to such Holder in
connection with the Third Payment, excluding a number of shares reserved
(i) in
<PAGE>
connection with Assumed Options equal to the number of shares that the
holders of the Assumed Options would have received had all of the Assumed
Options and Assumed Warrants been exercised in full immediately prior to
the Effective Time (assuming that the exercise price was paid in cash),
and (ii) in connection with the Assumed Warrants equal to the number of
shares that the holders of the Assumed Warrants would have received had
all of the Assumed Options and Assumed Warrants been exercised in full
immediately prior to the Effective Time (assuming that the exercise price
was paid in cash), and (b) for all Holders the aggregate of all Third
Payment Registrable Securities held by all such Holder in connection
therewith, excluding those shares reserved in Section 1(h)(a)(i) and
Section 1(h)(a)(ii) above, together with all other shares of Parent Common
Stock which may hereafter be issued with respect thereto as the result of
a stock split, stock dividend or otherwise.
16.2 Section 2. Section 2 of the Original Declaration is hereby
amended and restated in its entirety as follows:
"(i) If one of the conditions described in Section 1.6(b)(ii)(A) of
the Reorganization Agreement is satisfied, Parent shall use its
commercially reasonable efforts to cause the Registrable Securities held
by each Holder following the Merger to be registered under the Act so as
to permit the resale thereof, and in connection therewith shall prepare
and file a registration statement on Form S-3 with the SEC within sixty
(60) days following Parent's receipt of the written request of the
Majority Holders; provided, however, that each Holder shall at the request
of Parent provide to Parent all such information and materials with
respect to such Holder and take all such action as may be reasonably
required in order to permit Parent to comply with all applicable
requirements of the SEC with respect to such registration statement and to
obtain any desired acceleration of the effective date of such registration
statement, such provision of information and materials by each Holder to
be a condition precedent to the obligations of Parent pursuant to this
Declaration with respect to such Holder. The Majority Holders may not
request registration earlier than the second anniversary of the Closing
Date nor later than the fourth anniversary of the Closing Date. Parent
shall not be required to effect more than one (1) registration under this
Section 2(i) of this Declaration. The offering made pursuant to such
registration shall not be underwritten.
(ii) Notwithstanding the foregoing, Parent shall use its
commercially reasonable efforts to cause the Third Payment Registrable
Securities held by each Holder following the Third Payment to be
registered under the Act so as to permit the resale thereof , and in
connection therewith shall prepare and file a registration statement on
Form S-3 with the SEC on or before June 1, 2000; provided, however, that
each Holder shall at the request of Parent provide to Parent all such
information and materials with respect to such Holder and take all such
action as may be reasonably required in order to permit Parent to comply
with all applicable requirements of the SEC with respect to such
registration statement and to obtain any desired acceleration of the
effective date of such registration statement, such provision of
information and materials by each Holder to be a condition precedent to
the obligations of Parent pursuant to this Declaration with respect to
such Holder. Parent shall not be required to effect more than one (1)
2
<PAGE>
registration under this Section 2(ii) of this Declaration. The offering
made pursuant to such registration shall not be underwritten."
16.3 Section 3. Section 3 of the Original Declaration is hereby
amended and restated in its entirety as follows:
"Postponement of Registration. Notwithstanding Section 2 above,
Parent shall be entitled to postpone the declaration of effectiveness of
the registration statement prepared and filed pursuant to Section 2(i) for
up to one hundred eighty (180) calendar days and the declaration of
effectiveness of the registration statement prepared and filed pursuant to
Section 2(ii) for up to ninety (90) days, if the Board of Directors of
Parent, acting in good faith, determines that there exist business reasons
for such postponement; provided, however, that the Company may not
postpone the declaration of effectiveness of any registration statement
pursuant to this Section 3 more than once in any twelve-month period."
16.4 Section 4. Section 4 of the Original Declaration is hereby
amended and restated in its entirety as follows:
"Obligations of Parent. Subject to the limitations of Sections 3, 5
and 12, Parent shall (i) prepare and file with the SEC the registration
statements on Form S-3 in accordance with Section (2) hereof with respect
to the applicable shares of Registrable Securities and shall use
reasonable efforts to cause such registration statements to become
effective as promptly as practicable after filing and to keep such
registration statement effective for ninety (90) calendar days (which
period shall be extended by any period of time during which the Holders
are not permitted to resell their Registrable Securities under the
registration statement as a result of the provisions of Section 5 below or
a lock-up of the Registrable Securities pursuant to Section 5.1(e) of the
Reorganization Agreement); (ii) prepare and file with the SEC such
amendments and supplements to such registration statements and the
prospectuses used in connection therewith as may be necessary to comply
with the provisions of the Act with respect to the resale or other
disposition of all securities proposed to be registered in such
registration statement; (iii) furnish to each Holder such number of copies
of any prospectus (including any preliminary prospectus and any amended or
supplemented prospectus) in conformity with the requirements of the Act,
and such other documents, as each Holder may reasonably request in order
to effect the offering and resale of the shares of the Registrable
Securities to be offered and resold, but only while Parent shall be
required under the provisions hereof to cause the registration statements
to remain current; and (iv) use its commercially reasonable efforts to
register or qualify the shares of the Registrable Securities covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request (provided that
Parent shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service
of process in any such jurisdiction where it has not been qualified).
16.5 Section 5. The first sentence of Section 5 of the Original
Declaration is hereby amended and restated in its entirety as follows:
3
<PAGE>
"Selling Procedures. Any sale of Registrable Securities pursuant to
any registration statement filed in accordance with Section 2 hereof shall
be subject to the following conditions and procedures:"
17. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Original Declaration shall
continue in full force and effect. In the event of any conflict between the
terms of the Original Declaration and the terms of this Amendment, the terms of
this Amendment shall govern and control. This Amendment shall become effective
when executed and delivered by Triangle, Avid and a majority of the individuals
constituting the Securityholder Agent.
4
<PAGE>
This Amendment is hereby executed as of the date first above written.
TRIANGLE: TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President and Chief Operating Officer
AVID: AVID CORPORATION, a Pennsylvania
corporation
By: /s/ Chris A. Rallis
-------------------------------------
Name: Chris A. Rallis
Title: President
SECURITYHOLDER AGENT:
--------------------------------------------
Forrest H. Anthony
/s/ Alan G. Walton
--------------------------------------------
Alan G. Walton
/s/ Marcia T. Bates
--------------------------------------------
Marcia T. Bates
[SIGNATURE PAGE TO AMENDMENT NUMBER ONE TO
DECLARATION OF REGISTRATION RIGHTS]
EXHIBIT 10.4
DECLARATION OF REGISTRATION RIGHTS
This DECLARATION OF REGISTRATION RIGHTS ("Declaration") is made as
of June 30, 1997, by Triangle Pharmaceuticals, Inc., a Delaware corporation
("Parent"), for the benefit of stockholders of Avid Corporation, a Pennsylvania
corporation ("Company"), acquiring shares of the Common Stock of Parent pursuant
to that certain Agreement and Plan of Reorganization dated as of June 30, 1997
(the "Reorganization Agreement"), among Parent, Company and Project Z
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Sub").
1. Definitions. As used in this Declaration:
a. "1934 Act" means the Securities Exchange Act of 1934, as
amended.
b. "Act" means the Securities Act of 1933, as amended.
c. "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which similarly permits inclusion or incorporation of substantial
information by reference to other documents filed by Parent with the SEC.
d. "Holder" means a stockholder of Company to whom shares of
Registrable Securities are issued pursuant to the Reorganization Agreement.
e. "Majority Holders" means the Holders of a majority of the
Registrable Securities with rights existing under this Declaration.
f. "Registrable Securities" means for each Holder the number
of shares of Parent Common Stock issued to such Holder pursuant to the
Reorganization Agreement, and for all Holders the aggregate of all Registrable
Securities held by all such Holders, together with all other shares of Parent
Common Stock which may hereafter be issued with respect thereto as the result of
a stock split, stock dividend or otherwise; provided, however, that shares of
Parent Common Stock held by the Escrow Agent pursuant to Article VII of the
Reorganization Agreement shall not be deemed to be Registrable Securities unless
and until such shares are released to the Holders in accordance with the
provisions of Article VII of the Reorganization Agreement. Registrable
Securities shall not include any shares of Parent Common Stock transferred by a
Holder.
<PAGE>
g. "SEC" means the Securities and Exchange Commission.
Capitalized terms not otherwise defined herein have the meanings
given to them in the Reorganization Agreement.
2. Registration. If one of the conditions described in Section
1.6(b)(ii)(A) of the Reorganization Agreement is satisfied, Parent shall use its
commercially reasonable efforts to cause the Registrable Securities held by each
Holder following the Merger to be registered under the Act so as to permit the
resale thereof, and in connection therewith shall prepare and file a
registration statement on Form S-3 with the SEC within sixty (60) days following
Parent's receipt of the written request of the Majority Holders; provided,
however, that each Holder shall at the request of Parent provide to Parent all
such information and materials with respect to such Holder and take all such
action as may be reasonably required in order to permit Parent to comply with
all applicable requirements of the SEC with respect to such registration
statement and to obtain any desired acceleration of the effective date of such
registration statement, such provision of information and materials by each
Holder to be a condition precedent to the obligations of Parent pursuant to this
Declaration with respect to such Holder. The Majority Holders may not request
registration earlier than the second anniversary of the Closing Date nor later
than the fourth anniversary of the Closing Date. Parent shall not be required to
effect more than one (1) registration under this Declaration. The offering made
pursuant to such registration shall not be underwritten.
3. Postponement of Registration. Notwithstanding Section 2 above,
Parent shall be entitled to postpone the declaration of effectiveness of the
registration statement prepared and filed pursuant to Section 2 for up to one
hundred eighty (180) calendar days, if the Board of Directors of Parent, acting
in good faith, determines that there exist business reasons for such
postponement; provided, however, that the Company may not postpone the
declaration of effectiveness of the registration statement pursuant to this
Section 3 more than once in any twelve-month period.
4. Obligations of Parent. Subject to the limitations of Sections 3,
5 and 12, Parent shall (i) prepare and file with the SEC the registration
statement on Form S-3 in accordance with Section (2) hereof with respect to the
shares of Registrable Securities and shall use reasonable efforts to cause such
registration statement to become effective as promptly as practicable after
filing and to keep such registration statement effective for ninety (90)
calendar days (which period shall be extended by any period of time during which
the Holders are not permitted to resell their Registrable Securities under the
registration statement as a result of the provisions of Section 5 below or a
lock-up of the Registrable Securities pursuant to Section 5.1(e) of the
Reorganization Agreement); (ii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Act with respect to the resale or other disposition of all securities proposed
to be registered in such registration statement; (iii) furnish to each Holder
such number of copies of any prospectus (including any preliminary prospectus
2
<PAGE>
and any amended or supplemented prospectus) in conformity with the requirements
of the Act, and such other documents, as each Holder may reasonably request in
order to effect the offering and resale of the shares of the Registrable
Securities to be offered and resold, but only while Parent shall be required
under the provisions hereof to cause the registration statement to remain
current; and (iv) use its commercially reasonable efforts to register or qualify
the shares of the Registrable Securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request (provided that Parent shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such jurisdiction where it has not
been qualified).
5. Selling Procedures. Any sale of Registrable Securities pursuant
to the registration statement filed in accordance with Section 2 hereof shall be
subject to the following conditions and procedures:
a. Stockholder Notice. Each selling Holder shall provide
written notice ("Stockholder Notice") to Parent no less than five (5) business
days prior to such Holder's intended sale. Within two (2) business days of
receipt of the Stockholder Notice, Parent will inform such Holder in writing if
the registration statement and final prospectus then on file with the SEC is
current and otherwise complies with the Act such that sales may be made
thereunder. After receipt of notice from Parent that the registration statement
is current and complies with the Act, such Holder shall then have ten (10)
business days after the date of the intended sale, as specified in the
Stockholder Notice, to sell the Registrable Securities proposed to be sold.
After such ten (10) day period, the selling Holder shall once again comply with
the procedures set forth in this Section 5(a) prior to any further sales.
b. Updating the Prospectus. If Parent informs the selling
Holders that the registration statement or final prospectus then on file with
the SEC is not current or otherwise does not comply with the Act, Parent shall
use commercially reasonable efforts to provide to the selling Holders a current
prospectus that complies with the Act on or before the date of the intended sale
of the Registrable Securities as disclosed in the Stockholder Notice; provided,
however, that no more than four (4) times during any twelve-month period, Parent
shall have the right to delay the preparation of a current prospectus that
complies with the Act for up to forty-five (45) days on each occasion without
explanation to such Holders.
c. Blackout Periods. No sale shall be made by any Holder
during the period commencing on the first calendar day of the third month of
each of Parent's fiscal quarters and ending forty-eight (48) hours after the
public release by Parent of financial results for such quarter.
d. General. Notwithstanding the foregoing, Parent shall notify
each Holder (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the registration
statement for amendments or supplements to the registration statement or related
prospectus or for additional information relating to the
3
<PAGE>
registration statements, (ii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for that
purpose, (iii) of the receipt by Parent of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (iv) of the happening of any
event which makes any statement made in the prospectus included in the
registration statement or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires the making
of any changes in the prospectus so that it will not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. In such event, Parent may suspend use of the prospectus on
written notice to each Holder, in which case each Holder shall not dispose of
Registrable Securities covered by the registration statement or prospectus until
copies of a supplemented or amended prospectus are distributed to the Holders or
until the Holders are advised in writing by Parent that the use of the
applicable prospectus may be resumed. Parent shall use its commercially
reasonable efforts to ensure that the use of the prospectus may be resumed as
soon as practicable. Parent shall use its commercially reasonable efforts to
obtain the withdrawal of any order suspending the effectiveness of the
registration statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the securities for sale in any
jurisdiction, at the earliest practicable moment. Parent shall, upon the
occurrence of any event contemplated by clause (iv), prepare a supplement or
post-effective amendment to the registration statement or a supplement to the
related prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
6. Expenses. Parent shall pay all of the out-of-pocket expenses
incurred, other than selling discounts and commissions and the fees and
disbursements of counsel for any of the selling Holders, in connection with any
registration of Registrable Securities pursuant to this Declaration, including,
without limitation, all SEC, Nasdaq and blue sky registration and filing fees,
printing expenses, transfer agents' and registrars' fees, and the reasonable
fees and disbursements of Parent's outside counsel and independent accountants.
7. Indemnification. In the event of any offering registered pursuant
to this Declaration:
4
<PAGE>
a. Indemnification by Parent. Parent will indemnify each
Holder, each of its directors, officers, partners and its legal counsel and
independent accountants, and each person controlling such Holder within the
meaning of Section 15 of the Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, final prospectus, or any amendment
or supplement thereto, incident to any offering registered pursuant to this
Declaration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading,
or any violation by Parent of any rule or regulation promulgated under the Act,
or state securities laws applicable to Parent in connection with any such
registration, and subject to Section 7(c), will reimburse each such Holder and
each person controlling such Holder, for any legal and any other out-of-pocket
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that
Parent will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to Parent by such
Holder or controlling person and stated to be specifically for use therein.
b. Indemnification by Holders. Each Holder will indemnify
Parent, each of its directors and officers and its legal counsel and independent
accountants, each person who controls Parent within the meaning of Section 15 of
the Act, and each other Holder and each person controlling such Holder within
the meaning of Section 15 of the Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, final prospectus, or any amendment or
supplement thereto, incident to any offering registered pursuant to this
Declaration, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Parent, such other Holders, such directors,
officers, legal counsel, independent accountants or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, final prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to Parent by such
Holder and stated to be specifically for use therein; provided, however, that
the obligations of such Holder hereunder shall be several and not joint and
shall be limited to an amount equal to the respective gross proceeds (before
expenses and commissions) from the sale of Registrable Securities by such Holder
as contemplated herein.
c. Indemnification Procedures. Each party entitled to
indemnification under this Section 7 (the "Indemnified Party") shall give notice
to the party required to provide
5
<PAGE>
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Declaration, except to the
extent, but only to the extent, that the Indemnifying Party's ability to defend
against such claim or litigation is impaired as a result of such failure to give
notice. Notwithstanding the foregoing sentence, the Indemnified Party may retain
its own counsel to conduct the defense of any such claim or litigation, and
shall be entitled to be reimbursed by the Indemnifying Party for expenses
incurred by the Indemnified Party in defense of such claim or litigation, in the
event that the Indemnifying Party does not assume the defense of such claim or
litigation within sixty days after the Indemnifying Party receives notice
thereof from the Indemnified Party. Further, an Indemnifying Party shall be
liable for amounts paid in settlement of any such claim or litigation only if
the Indemnifying Party consents in writing to such settlement (which consent
shall not be unreasonable withheld). No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
d. Contribution. If the indemnification provided for in this
Section 7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party due to operation of law with respect to any loss, liability,
claim or damage referred to therein, then the Indemnifying Party, to the extent
such indemnification is unavailable, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, liability, claim or damage in such proportion as is
appropriate to reflect the relative benefit to or fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim or
damage as well as any other relevant equitable considerations. The relative
benefit to the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, the gross proceeds received by
each such party from the sale of the Registrable Securities in the manner
contemplated hereby. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact of the
omission to sate a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
loss, liability, claim or damage referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable
6
<PAGE>
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to above in this Section 7(d). No party
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any party.
e. Survival of Obligations. The obligations of Parent and each
Holder under this Section 7 shall survive the completion of any offering of
stock in a registration statement under this Declaration.
8. Reports Under Securities Exchange Act of 1934. Parent agrees to:
a. use its commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of Parent under
the Act and the 1934 Act; and
b. furnish to each Holder forthwith upon request (i) a written
statement by Parent that it has complied with the reporting requirements of the
Act and the 1934 Act, or that it qualifies as a registrant whose securities may
be resold pursuant to Form S-3 (at any time that it so qualifies), (ii) a copy
of the most recent annual or quarterly report of Parent and (iii) such other
information as may be reasonably requested in availing each Holder of any rule
or regulation of the SEC which permits the selling of any such securities
pursuant to Form S-3.
9. No Assignment of Registration Rights. The rights of a Holder
pursuant to this Declaration to cause Parent to register Registrable Securities
may not be assigned or transferred, voluntarily or involuntarily, by a Holder.
10. Amendment of Registration Rights. The Majority Holders may, with
the consent of Parent, amend the registration rights granted hereunder.
11. Termination. The registration rights set forth in this
Declaration shall terminate with respect to a Holder (and the shares held by
such Holder shall cease to constitute Registrable Securities) upon the earlier
of (i) such time as all of the Registrable Securities then held by such Holder
can be sold by such Holder in a three-month period in accordance with Rule 144
under the Act and (ii) the fourth anniversary of the Closing Date.
12. Obligations of Holders. By exercising any rights hereunder, each
Holder shall be deemed to assume all obligations of a Holder hereunder as though
such Holder were a signatory hereto. Parent may require Holders to execute an
instrument whereby such Holders expressly assume all obligations of Holders
hereunder as a condition precedent to any obligations of Parent hereunder.
7
EXHIBIT 10.5
LICENSE AGREEMENT
BETWEEN
DYNAVAX TECHNOLOGIES CORPORATION
AND
TRIANGLE PHARMACEUTICALS, INC.
<PAGE>
TABLE OF CONTENTS
***Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the "Mark"). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.
Page
----
ARTICLE 1. DEFINITIONS............................................. 2
ARTICLE 2. LICENSES................................................ 13
ARTICLE 3. STOCK PURCHASE, ROYALTIES, AND
MILESTONE PAYMENTS...................................... 19
ARTICLE 4. REPORTS AND ACCOUNTING.................................. 26
ARTICLE 5. PAYMENTS................................................ 29
ARTICLE 6. RESEARCH PROGRAM........................................ 31
ARTICLE 7. DEVELOPMENT PROGRAM..................................... 34
ARTICLE 8. JOINT PROJECT COMMITTEE................................. 36
ARTICLE 9. SUPPLY AND MANUFACTURE.................................. 39
ARTICLE 10. PATENT PROSECUTION...................................... 44
ARTICLE 11. INFRINGEMENT............................................ 48
ARTICLE 12. TRANSFER OF KNOW-HOW; TECHNICAL ASSISTANCE.............. 52
ARTICLE 13. WARRANTIES AND REPRESENTATIONS; LIMITATION OF
LIABILITY; DISCLAIMERS; AND COVENANTS................... 55
ARTICLE 14. INDEMNIFICATION......................................... 60
ARTICLE 15. CONFIDENTIALITY......................................... 62
ARTICLE 16. CONDITIONS PRECEDENT.................................... 64
ARTICLE 17. TERM AND TERMINATION.................................... 65
ARTICLE 18. ASSIGNMENT.............................................. 69
<PAGE>
TABLE OF CONTENTS (continued)
Page
----
ARTICLE 19. REGISTRATION OF LICENSE................................. 69
ARTICLE 20. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE
COMPETITION AND PATENT TERM RESTORATION ACT............. 70
ARTICLE 21. DISPUTE RESOLUTION AND ARBITRATION...................... 71
ARTICLE 22. GENERAL PROVISIONS...................................... 75
<PAGE>
THIS LICENSE AGREEMENT is made and entered into as of this 31st day of
March, 2000, by and between DYNAVAX TECHNOLOGIES CORPORATION, with its principal
offices located at 717 Potter Street, Suite 100, Berkeley, California 94710
(hereinafter referred to as "Dynavax") and TRIANGLE PHARMACEUTICALS, INC., with
its principal offices located at 4 University Place, 4611 University Drive,
Durham, North Carolina 27707 (hereinafter referred to as "Triangle").
WITNESSETH:
WHEREAS, Dynavax has developed know-how and is obtaining or has obtained
patent rights relating to immunostimulatory oligonucleotides containing
immunostimulatory nucleic acid sequences ("ISS") which activate or stimulate an
immune response;
WHEREAS, ISS is covered by patents and patent applications filed in
various countries throughout the world;
WHEREAS, Dynavax has entered into an Exclusive License Agreement for
Administration of Naked Nucleotides which Express Biologically Active Peptides
and Immunostimulatory Oligonucleotide Conjugates, effective ***, as amended on
*** (the "Primary License Agreement") with The Regents of the University of
California (the "Primary Licensor"), pursuant to which Dynavax has obtained an
exclusive worldwide license under the Primary Licensor's patents and patent
applications relating to ISS and has acquired the right to grant licenses under
such patents and patent applications;
WHEREAS, Dynavax possesses certain technology, know-how and patent rights
relating to ISS and has the right to grant licenses in respect of such
technology, know-how and patent rights; and
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
1
<PAGE>
WHEREAS, Triangle desires to obtain an exclusive license under such
technology, know-how and patent rights;
NOW, THEREFORE, in consideration of the premises and the covenants herein
contained, the parties agree as follows:
ARTICLE 1. DEFINITIONS
The following terms as used herein, when written with an initial capital
letter, shall have the meanings ascribed to them below:
1.1 "Acquisition Cost" shall mean the actual invoiced price paid by a
party to any non-Affiliate third party for acquiring any item (e.g., ISS,
Conjugated ISS or another active ingredient), including but not limited to,
shipping and handling costs and customs duties incurred and paid by such party
in connection with the acquisition of such item.
1.2 "Affiliate" shall mean any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with a party
to this Agreement. A corporation or non-corporate business entity shall be
regarded as in control of another corporation if it owns, or directly or
indirectly controls, at least fifty (50%) percent of the voting stock of the
other corporation, or (a) in the absence of the ownership of at least fifty
(50%) percent of the voting stock of a corporation or (b) in the case of a
non-corporate business entity, or non-profit corporation, if (x) it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate business entity, as
applicable or (y) for financial accounting and reporting purposes, a party
consolidates the financial results of such corporation or non-corporate business
entity with the financial results of such party.
2
<PAGE>
1.3 "Agreement" or "License Agreement" shall mean this Agreement,
including all Exhibits attached to this Agreement.
1.4 "Antigen" shall mean any substance which, when injected or otherwise
introduced into a mammal (including humans), stimulates the production of an
antibody.
1.5 "BLA" shall mean a Biological License Application or its U.S. or
foreign equivalent.
1.6 "Conjugated ISS" shall mean any ISS which is *** corresponding to
either hepatitis B virus or hepatitis C virus which modulates the activity of
the ISS.
1.7 "Development Program" shall mean the development program described in
Article 7 of this Agreement.
1.8 "Disease Indication" shall mean: (a) the treatment of HBV; (b) the
prophylaxis of HBV; (c) the treatment of HCV; (d) the prophylaxis of HCV; or (e)
the treatment of HIV.
1.9 "Disease Target" shall mean: (a) HBV; (b) HCV; or (c) HIV.
1.10 "Dollars" shall mean United States dollars.
1.11 "Drug Master File" shall mean information comprised in a submission
to the Food and Drug Administration or comparable foreign regulatory agency
providing information on the manufacturing facilities and manufacturing
processes including but not limited to all activities relating to manufacturing
processing, formulating, packaging and storage, which information may be used to
support Registration of a Licensed Product.
1.12 "Dynavax Know-How" shall mean all inventions, discoveries, trade
secrets, information, experience, data, formulas, procedures and results which
are rightfully held by
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
3
<PAGE>
Dynavax as of the Effective Date (including, but not limited to, any of the
foregoing items licensed to Dynavax under the Primary License Agreement), or
which are not Joint Know-How or Joint Inventions and are developed or acquired
by Dynavax during the period beginning on the Effective Date and ending upon
termination or expiration of this Agreement pursuant to Article 17 including,
but not limited to, all manufacturing and synthesis know-how; provided that, for
purposes of this Section 1.12, Dynavax Know-How shall include only such
inventions, discoveries, trade secrets, information, experience, data, formulas,
procedures and results reasonably necessary to practice the rights and licenses
granted by Dynavax to Triangle under the Dynavax Patents pursuant to Section 2.1
of this Agreement. In addition, notwithstanding the foregoing, Dynavax Know-How
shall not be deemed to include any of the foregoing to the extent, and only for
as long as, Dynavax is prohibited from disclosing the same to third parties
pursuant to binding, noncancellable contractual nondisclosure obligations
applicable to Dynavax.
1.13 "Dynavax Patents" shall mean all patents and patent applications in
the Territory owned or controlled by Dynavax or under which Dynavax has a right
to practice with the right to extend such right to practice to Triangle
(including, but not limited to, all patents and patent applications licensed to
Dynavax under the Primary License Agreement) which contain claims the rights to
which are reasonably necessary for the development, registration, manufacturing,
using or selling of ISS, Conjugated ISS or the Licensed Products which are filed
as of the Effective Date or during the term of this Agreement provided, that
such claims cover inventions or discoveries reduced to practice, actually or
constructively, prior to the first anniversary of the expiration of the Research
Program, including any addition, continuation, continuation-in-part or division
thereof or any substitute application
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thereof; any patent issued with respect to such patent application, any reissue,
extension or patent term extension of any such patent, and any confirmation
patent or registration patent or patent of addition based on any such patent;
and any other United States and foreign patent or inventor's certificate with
regard thereto. Dynavax Patents shall include but not be limited to those listed
in Exhibit A attached hereto.
1.14 "Effective Date" shall mean the later of (a) the date first written
above and (b) the date, if any, that the condition set forth in Article 16 shall
have been satisfied or, if applicable, waived.
1.15 "Effective Date of IND" shall mean the date on which Triangle, its
Affiliates or sublicensees are authorized to commence clinical trials in a given
Major Market Country pursuant to an IND filed in such Major Market Country.
1.16 "FDA" shall mean the United States Food and Drug Administration or
any successor entity.
1.17 "Field" shall mean: (a) the prophylaxis and/or treatment of HBV; (b)
the prophylaxis and/or treatment of HCV; or (c) the treatment of HIV. "Fields"
shall mean (a), (b) and (c).
1.18 "Finished Drug Substance" shall mean ISS or Conjugated ISS in
formulated and finished form suitable for preclinical or clinical use.
1.19 "Forms of Administration" shall mean: (a) in respect of ISS,
injectable and oral forms; and (b) in respect of Conjugated ISS, injectable,
oral, topical and pulmonary inhalation forms of administration.
1.20 "Future Dynavax Patents" shall mean all patents and patent
applications in the Territory owned or controlled by Dynavax or under which
Dynavax has a right to practice
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with the right to extend such right to practice to Triangle which contain claims
covering inventions or discoveries reduced to practice, actually or
constructively, on or after the first anniversary of the expiration of the
Research Program the rights to which are reasonably necessary for the
development, registration, manufacturing, using or selling of ISS, Conjugated
ISS or the Licensed Products, including any addition, continuation,
continuation-in-part or division thereof or any substitute application thereof;
any patent issued with respect to such patent application, any reissue,
extension or patent term extension of any such patent, and any confirmation
patent or registration patent or patent of addition based on any such patent;
and any other United States and foreign patent or inventor's certificate with
regard thereto.
1.21 "HBV" shall mean hepatitis B virus.
1.22 "HCV" shall mean hepatitis C virus.
1.23 "HIV" shall mean human immunodeficiency virus, including Acquired
Immune Deficiency Syndrome.
1.24 "IND" shall mean an Investigational New Drug Application or its U.S.
or foreign equivalent.
1.25 "Indemnitees" shall mean (a) in the case of the indemnity set forth
in Section 14.1, Dynavax, its Affiliates, the Primary Licensor and the trustees,
directors, officers and employees of any of the foregoing; (b) in the case of
the indemnity set forth in Section 14.2, Triangle, its Affiliates and
sublicensees, and their directors, officers and employees; and (c) in the case
of the Indemnitees referenced in Section 14.3, the parties identified in
Subsections 1.25(a) and 1.25(b) above, as applicable.
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1.26 "ISS" shall mean any immunostimulatory oligonucleotide containing a
nucleic acid sequence which can activate or stimulate a Th1 immune response
alone or in combination with other immune responses in vitro or in vivo and
wherein the nucleosides in the nucleic acid sequence can be naturally occurring
or not naturally occurring and such nucleosides can be connected through any
form of naturally occurring or not naturally occurring linkage.
1.27 "Joint Inventions" shall mean any inventions related to ISS,
Conjugated ISS or the Licensed Products, whether patented or not, which are
jointly made during the period beginning on the Effective Date and ending ***
after termination or expiration of this Agreement pursuant to Article 17 by at
least one (1) Dynavax employee or person contractually required to assign or
license patent rights covering such inventions to Dynavax and at least one (1)
Triangle employee or person contractually required to assign or license patent
rights covering such inventions to Triangle.
1.28 "Joint Know-How" shall mean all inventions, discoveries, trade
secrets, information, data, formulas, procedures and results which are
reasonably necessary for the development, registration, manufacturing, using or
selling of the ISS, Conjugated ISS or the Licensed Products which are developed
jointly by at least one (1) Dynavax employee or person contractually required to
assign or license such data and know-how to Dynavax and at least one (1)
Triangle employee or person contractually required to assign or license such
data or know-how to Triangle, during the period beginning on the Effective Date
and ending *** after termination or expiration of this Agreement pursuant to
Article 17. All Joint Know-How shall be owned jointly by the parties hereto.
Triangle shall have the exclusive right to use such Joint Know-How in the
Territory in the Fields, unless the license granted pursuant to Section 2.1 is
terminated in a given country or countries of the Territory by Dynavax pursuant
to Section 7.3 or 17.2 or by Triangle pursuant to Section 17.3, in which case,
Dynavax shall have a non-exclusive right to
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use the Joint Know-How in such country or countries in the Fields. Dynavax and
Triangle shall each have a non-exclusive right to use the Joint Know-How outside
the Fields.
1.29 "Joint Project Committee" shall mean the committee described in
Article 8 hereof.
1.30 "Licensed Product(s)" shall mean any ISS or Conjugated ISS or any
pharmaceutical product containing one or more ISS or Conjugated ISS as an active
ingredient, alone or in combination with other active ingredients, for
administration in accordance with the Forms of Administration; provided,
however, that, subject to Section 2.7, in respect of HIV, Conjugated ISS shall
not be Licensed Products for purposes of this Agreement.
1.31 "Major Market Country" shall mean ***except that, in the case of
Subsection 3.2(a)(i), *** shall also be deemed to be a Major Market Country.
1.32 "Manufacturing Cost," in respect of a particular item (e.g., ISS,
Conjugated ISS or another active ingredient), shall mean the costs of direct
labor (including allocable employee benefits and employment taxes), direct
material, direct energy, direct utilities and other charges incurred directly by
a party in the manufacture by it of such item and, without duplication, normal
production overhead (i.e., indirect labor, utilities, maintenance, depreciation
of the manufacturing equipment and facilities and other allocable overhead of
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the manufacturing facility), all determined in accordance with U.S. GAAP.
1.33 "NDA" shall mean a New Drug Application or its U.S. or foreign
equivalent.
1.34 "Net Sales" of Licensed Products which contain as their active
ingredients only one or more ISS or Conjugated ISS shall mean the gross sales
price of such Licensed Products billed by Triangle, its Affiliates or
sublicensees to independent customers, less (a) normal and customary trade,
quantity and cash discounts, all rebates (including those paid to third party
payors), sales, use, or other similar taxes, and all transportation, insurance
and handling charges; and (b) all credits and allowances granted to such
independent customers on account of returns or retroactive price reductions in
lieu of returns, whether during the specific royalty period or prior to the
specific royalty period, all determined in accordance with U.S. GAAP. In the
event that Triangle or its Affiliates or sublicensees distribute any Licensed
Products to a third party for non-monetary consideration (e.g., barter or
exchange), such distribution shall be considered a sale for accounting and
royalty purposes. Net Sales for any such distributions shall be determined on a
country-by-country basis and shall be the average price of "arm's length" sales
by Triangle or its Affiliates or sublicensees in such country in the Territory
during the royalty period in which such sale occurs or, if no such "arm's
length" sales occurred in such country in the Territory during such royalty
period, during the last royalty period in which such "arm's length" sales
occurred. If no "arm's length" sales have occurred in a particular country in
the Territory, Net Sales for any such distributions in such country in the
Territory, shall be the average price of "arm's length" sales in all countries
in the Territory during such royalty period.
1.35 "Net Sales" of Licensed Products which contain as their active
ingredients both or one or more ISS or Conjugated ISS and other active
ingredients (a "Combination
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Product") shall mean the gross sales price of such Combination Product billed by
Triangle, its Affiliates or sublicensees to independent customers, less all the
allowances, adjustments, reductions, discounts, taxes, duties, rebates and other
items referred to in Section 1.34 multiplied by a fraction, the numerator of
which shall be the billing party's Acquisition Cost or Manufacturing Cost, as
applicable, for all ISS or Conjugated ISS included in such Licensed Product and
the denominator of which shall be the billing party's Acquisition Cost or
Manufacturing Cost, as applicable, for all active ingredients contained in such
Licensed Product (including all ISS or Conjugated ISS), all determined in
accordance with U.S. GAAP. In the event that Triangle or its Affiliates or
sublicensees distribute any Licensed Products to a third party for non-monetary
consideration (e.g., barter or exchange), such distribution shall be considered
a sale for accounting and royalty purposes. Net Sales for any such distributions
shall be determined on a country-by-country basis and shall be the average price
of "arm's length" sales by Triangle or its Affiliates or sublicensees in such
country in the Territory during the royalty period in which such sale occurs or,
if no such "arm's length" sales occurred in such country in the Territory during
such royalty period, during the last royalty period in which such "arm's length"
sales occurred. If no "arm's length" sales have occurred in a particular country
in the Territory, Net Sales for any such distributions in such country in the
Territory, shall be the average price of "arm's length" sales in all countries
in the Territory during such royalty period.
1.36 "Patent Filing Countries" shall mean the ***.
1.37 "Phase II Completion Date" shall mean sixty (60) days after the
completion of statistical analyses of the final results of those Phase II
clinical studies which Triangle
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considers reasonably necessary for purposes of inclusion in an NDA or BLA, as
applicable, for a Licensed Product. As used in the preceding sentence, "Phase II
clinical trials" shall mean those well-controlled clinical trials sponsored by
Triangle, the primary objective of which (as reasonably determined by Triangle)
is to ascertain additional data regarding the safety and tolerance of a Licensed
Product and preliminary data regarding such Licensed Product's antiviral
effects.
1.38 "Registration" shall mean, in relation to any Licensed Product, such
approvals by the regulatory authorities in a given country (including pricing
approvals, if any) as may be legally required before such Licensed Product may
be commercialized or sold in such country.
1.39 "Research Program" shall mean the research program described in
Article 6 of this Agreement.
1.40 "Stock Purchase Agreement" shall mean the Series T Preferred Stock
Purchase Agreement between Dynavax and Triangle, dated as of even date herewith.
1.41 "Territory" shall mean the entire world.
1.42 "Triangle Know-How" shall mean all inventions, discoveries, trade
secrets, information, experience, data, formulas, procedures and results arising
solely out of the Development Program or the manufacture, use or sale of the
Licensed Products which are rightfully held by Triangle as of the Effective
Date, or which are not Joint Know-How or Joint Inventions and are developed or
acquired by Triangle during the period beginning on the Effective Date and
ending upon termination or expiration of this Agreement pursuant to Article 17;
provided that, for purposes of this Section 1.42, Triangle Know-How shall
include only such inventions, discoveries, trade secrets, information,
experience, data,
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formulas, procedures and results reasonably necessary to practice the rights and
licenses granted by Triangle to Dynavax under the Triangle Patents pursuant to
Section 2.4 of this Agreement. In addition, notwithstanding the foregoing,
Triangle Know-How shall not be deemed to include any of the foregoing to the
extent, and only for as long as, Triangle is prohibited from disclosing the same
to third parties pursuant to binding, non-cancellable contractual nondisclosure
obligations applicable to Triangle.
1.43 "Triangle Patents" shall mean all patents and patent applications
owned or controlled by Triangle or under which Triangle has a right to practice
with the right to extend such right to practice to Dynavax which contain claims
the rights to which are reasonably necessary for the development, registration,
manufacturing, using or selling of ISS, Conjugated ISS or the Licensed Products,
including any addition, continuation, continuation-in-part or division thereof
or any substitute application thereof; any patent issued with respect to such
patent application, any reissue, extension or patent term extension of any such
patent, and any confirmation patent or registration patent or patent of addition
based on any such patent; and any other United States and foreign patent or
inventor's certificate with regard thereto.
1.44 "U.S. GAAP" shall mean generally accepted accounting principles in
the United States, consistently applied.
1.45 "Valid Claim" shall mean an issued claim of any issued and unexpired
patent included among the Dynavax Patents, which has not been held
unenforceable, unpatentable or invalid by a decision of a court or governmental
body of competent jurisdiction, which is unappealable or unappealed within the
time allowed for appeal, which has not been rendered unenforceable through
disclaimer or otherwise or which has not been lost through an
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interference or opposition proceeding.
ARTICLE 2. LICENSES
2.1 License Under Dynavax Patents and Dynavax Know-How. Except to the
extent expressly reserved or otherwise specified in Sections 2.5, 2.8 and 2.9
below, Dynavax hereby grants Triangle the exclusive right and license to
practice the Dynavax Patents and the Dynavax Know-How in the Territory: (a) to
use, offer for sale, sell and have sold Licensed Products within the Fields
during the pre-clinical and clinical development of such Licensed Products; and
(b) in preparation of, and upon commercialization of any Licensed Product, to
make, have made, import, offer for sale, sell and have sold such Licensed
Product within the Fields during the remaining term of this Agreement.
2.2 Extension to Affiliates. Triangle shall have the right to extend its
rights under the license granted in Section 2.1 to one or more of its
Affiliates, provided, that Triangle (a) gives Dynavax at least thirty (30) days'
prior written notice of such extension and (b) shall remain responsible for such
Affiliate's compliance with all obligations under this Agreement which apply to
such Affiliate.
2.3 Sublicenses. Prior to the Phase II Completion Date for the initial
Licensed Product, Triangle may grant sublicenses to non-Affiliate third parties
only with Dynavax' prior written consent, which consent shall not be
unreasonably withheld or delayed. Subsequent to the Phase II Completion Date for
the initial Licensed Product, Triangle may grant sublicenses to non-Affiliate
third parties without Dynavax' consent. The provisions of Section 3.9 shall
apply to certain sublicenses granted pursuant to this Section 2.3. No sublicense
granted by Triangle shall relieve it of any of its obligations hereunder. With
respect to any sublicense for which Dynavax' consent is not required pursuant to
this Section
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2.3, Triangle shall provide Dynavax with notice of its grant of a sublicense
within thirty (30) days after entering into the applicable sublicense agreement.
Upon written request, Triangle shall promptly provide Dynavax with a copy of any
executed sublicense agreement.
2.4 License Under Triangle Patents and Triangle Know-How. In the event
Triangle's license granted under Section 2.1 is terminated in a given country of
the Territory (other than by expiration or by Triangle pursuant to Section 17.2
of this Agreement), Triangle hereby grants Dynavax a non-exclusive right and
license to practice the Triangle Patents and Triangle Know-How to make, have
made, use, import, offer for sale, sell and have sold Licensed Products in the
Fields, with a right to sublicense in such country from and after the date of
termination only to the extent such license has been terminated. The license
granted pursuant to this Section 2.4 shall be subject to the payment of
royalties and other amounts by Dynavax to Triangle. Such royalties and other
amounts shall: (a) correspond to the royalties and other amounts set forth in
Sections 3.2 and 3.3 of this Agreement; (b) be paid in the same manner as
prescribed in Articles 4 and 5 hereof; and (c) be subject to the same
adjustments, extensions and other conditions prescribed in Articles 3, 7 and 11
of this Agreement, mutatis mutandis.
2.5 Rights Reserved by Dynavax. Dynavax hereby reserves the right and
license to make, have made, use and import Licensed Products in the Fields in
the Territory to the extent and only to the extent necessary to fulfill its
obligations under Articles 6 and 9 of this Agreement.
2.6 Covenant Not to Sue. Each party granting a license agrees that during
the term of this Agreement, neither it nor any of its Affiliates, sublicensees,
as applicable, will assert against the other party (a "licensed party") or its
Affiliates or sublicensees any Future
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Dynavax Patents or Triangle Patents, as applicable, that is or might be
infringed by reason of such licensed party's or its Affiliates' or sublicensees'
exercise of the license granted to it hereunder.
2.7 Rights of First Discussion.
(a) If, at any time during the term hereof, Dynavax re-acquires
rights in respect of Conjugated ISS for the prophylaxis or treatment of HIV (a
"Non-Field Use") it shall give prompt notice thereof to Triangle. Such notice
shall include a description of the rights which Dynavax has reacquired, together
with all data and information in Dynavax' possession relating to the Non-Field
Use. Thereafter, Triangle shall have sixty (60) days to notify Dynavax whether
Triangle is interested in commencing negotiations to obtain a license to such
rights (the "Non-Field License"). If Triangle does not give such notice within
such sixty (60) day period, Dynavax shall be entitled to commence negotiations
with a third party in respect of the Non-Field License and Triangle shall have
no further right in respect of the Non-Field Use. If Triangle gives such notice
within such sixty (60) days, the parties shall commence good faith negotiations
in an effort to reach agreement on the terms of the Non-Field License. If such
negotiations do not result in the execution of the Non-Field License, Dynavax
agrees that, for a period of twenty-four (24) months after cessation of such
negotiations, it will not offer the Non-Field License to a third party
containing financial terms more favorable than those last offered to Triangle
during such negotiations without first offering the Non-Field License to
Triangle on the same terms. In such event, Triangle shall have sixty (60) days
to accept the Non-Field License containing such more favorable financial terms
and if it fails to do so, it shall have no further rights to such Non-Field Use.
(b) If, at any time during the term hereof, Dynavax elects to grant
a
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license with respect to any ISS or any pharmaceutical product containing one or
more ISS as an active ingredient, alone or in combination with other active
ingredients, administered by any means other than the Forms of Administration
for use in the Fields, it shall give prompt notice thereof to Triangle.
Thereafter, Triangle shall have sixty (60) days to notify Dynavax whether
Triangle is interested in commencing negotiations to obtain such a license. If
Triangle does not give such notice within such sixty (60) day period, Dynavax
shall be entitled to commence negotiations with a third party in respect of such
a license and Triangle shall have no other rights in respect of a license to
administration by such means. If Triangle gives such notice within such sixty
(60) days, the parties shall commence good faith negotiations in an effort to
reach agreement on the terms of such a license. If such negotiations do not
result in the execution of a license with respect to the administration of ISS
or pharmaceutical products containing ISS by means other than the Forms of
Administration for use in the Fields, Dynavax agrees that, for a period of
twenty-four (24) months after cessation of such negotiations, it will not offer
a license substantial similar to the license offered to Triangle at the end of
such negotiations to a third party containing financial terms more favorable
than those last offered to Triangle during such negotiations without first
offering such license to Triangle on the same terms. In such event, Triangle
shall have sixty (60) days to accept the license containing such more favorable
financial terms and, if it fails to do so, it shall have no further rights to
the subject matter of such license.
(c) If, at any time during the term hereof, Dynavax elects to grant
a license with respect to any Future Dynavax Patents in the Fields, it shall
give prompt notice thereof to Triangle. Thereafter, Triangle shall have sixty
(60) days to notify Dynavax
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whether Triangle is interested in commencing negotiations to obtain such a
license. If Triangle does not give such notice within such sixty (60) day
period, Dynavax shall be entitled to commence negotiations with a third party in
respect of such a license and Triangle shall have no other rights in respect of
a license to Future Dynavax Patents in the Fields. If Triangle gives such notice
within such sixty (60) days, the parties shall commence good faith negotiations
in an effort to reach agreement on the terms of such a license. If such
negotiations do not result in the execution of a license with respect to the
Future Dynavax Patents in the Fields, Dynavax agrees that, for a period of
twenty-four (24) months after cessation of such negotiations, it will not offer
a license substantial similar to the license offered to Triangle at the end of
such negotiations to a third party containing financial terms more favorable
than those last offered to Triangle during such negotiations without first
offering such license to Triangle on the same terms. In such event, Triangle
shall have sixty (60) days to accept the license containing such more favorable
financial terms and, if it fails to do so, it shall have no further rights to
the subject matter of such license.
2.8 Retained License by Primary Licensor. Triangle acknowledges that,
pursuant to Paragraph 2.4 of the Primary License Agreement, the Primary Licensor
has retained on its behalf a royalty-free right and license to use the Invention
(as defined in the Primary License Agreement) and associated technology for its
own non-commercial, educational and research purposes.
2.9 United States Government Rights. Triangle acknowledges that the
portion of the Dynavax Patents and Dynavax Know-How licensed to Dynavax under
the Primary License Agreement were developed with financial or other assistance
through grants or contracts funded by the United States government. Triangle
acknowledges that its license
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rights to such portion of the Dynavax Patents and Dynavax Know-How are subject
to the rights of the U.S. Government pursuant to 35 U.S.C. ss.ss. 200-212 and
applicable regulations promulgated thereunder.
2.10 No Implied License. The license and rights granted in this Agreement:
(a) to Triangle shall not be construed to confer any rights upon Triangle by
implication, estoppel or otherwise as to any technology, know-how or any other
intellectual property not specifically identified as Dynavax Patents or Dynavax
Know-How; and (b) to Dynavax shall not be construed to confer any rights upon
Dynavax by implication, estoppel or otherwise as to any technology, know-how or
any other intellectual property not specifically identified as Triangle Patents
or Triangle Know-How.
2.11 Uses Outside of Fields. Triangle shall use its reasonable efforts to
avoid the promotion and sale of Licensed Products by it, its sublicensors,
Affiliates and distributors for indications outside the Fields. In addition,
Triangle acknowledges and agrees that Licensed Products are for administration
only by the Forms of Administration and that Triangle will use reasonable
efforts to avoid development, promotion and sale of any ISS, Conjugated ISS or
any pharmaceutical product containing one or more ISS or Conjugated ISS as an
active ingredient, alone or in combination with other active ingredients, by it,
its sublicensees, Affiliates and distributors for administration by any means
other than the Forms of Administration for use in the Fields. Dynavax shall use
its reasonable efforts to avoid, and to cause any of its other licensees of ISS,
Conjugated ISS or any pharmaceutical product containing one or more ISS or
Conjugated ISS as an active ingredient, alone or in combination with other
active ingredients outside the Fields to avoid the development, promotion and
sales of any ISS or Conjugated ISS (or any products containing either of the
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foregoing) for indications in the Fields.
2.12 Disease Target Specific Forms of Administration. Triangle shall use
reasonable efforts to develop Forms of Administration of the Licensed Products
which can reasonably be administered only for the Disease Targets. Dynavax shall
use reasonable efforts, and shall cause its other licensees of ISS, Conjugated
ISS or any pharmaceutical product containing one or more ISS or Conjugated ISS
as an active ingredient, alone or in combination with other active ingredients,
to develop Forms of Administration which can reasonably be administered only for
diseases other than the Disease Targets.
ARTICLE 3. STOCK PURCHASE, ROYALTIES,
AND MILESTONE PAYMENTS
3.1 Stock Purchase. Triangle is contemporaneously entering into the Stock
Purchase Agreements with Dynavax, pursuant to which it will purchase 400,000
shares of Dynavax Series T Preferred Shares for the total price of $2,000,000.
3.2 Milestone Payments.
(a) Triangle shall pay Dynavax a milestone payment ("Milestone
Payment") in the amount specified below no later than *** days after the
occurrence of the corresponding event designated below, unless Triangle has
given Dynavax notice of termination of this Agreement in the entire Territory
for the given Licensed Product prior to such due date.
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Aggregate
Milestone Payment/ Milestone
Event Disease Indication Payments
---------------------------------------------------------------------
(i) ***
(ii) ***
(iii) ***
Total Milestone Payments *** ***
(b) With respect to any Milestone Payment payable pursuant to
Subsection 3.2(a)(iii) above based on Registration in a Major Market Country
which requires pricing approval, *** percent (***%) of such Milestone Payment
will be payable upon receipt of ***, as applicable, and *** percent (***%) of
such Milestone Payment will be payable upon receipt of ***.
3.3 Earned Royalties; Duration and Reduction.
(a) Triangle shall pay Dynavax a royalty equal to *** percent (***%)
of the Net Sales of Licensed Products sold in the Territory by Triangle and its
Affiliates and sublicensees for the periods and subject to the reductions set
forth in this Agreement.
(b) Royalties shall be paid in respect of a given Licensed Product
in a given country for a period of *** years after the initial commercial
introduction of such Licensed Product in such country and, thereafter, only so
long as the manufacture, use, offer for sale, sale or importation of such
Licensed Product in such country would, in the absence of this license, infringe
a Valid Claim.
(c) If at any time during the period set forth in Subsection 3.3(b)
above, (i)
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a third party or third parties commence selling a product in a country of the
Territory in which no Valid Claims exist and (ii) such product contains any ISS
or Conjugated ISS ("unlicensed unit sales") and (iii) such unlicensed unit sales
for any royalty period exceed the percentage threshold of Triangle's unit sales
of such Licensed Product in such country during such royalty period as set forth
below, determined in accordance with Subsection 3.3(d) below, then Triangle's
royalty obligation in such country with respect to such Licensed Product shall
be reduced by the applicable percentage of the royalty otherwise payable, as set
forth below, commencing with the royalty period next succeeding the royalty
period in which such percentage threshold was initially exceeded and shall be
restored with the royalty period next succeeding the first royalty period in
which neither percentage threshold is exceeded.
Percent Royalty Reduction (Aggregate)
Unlicensed Unit Sales as a If Unlicensed Unit Sale
Percent of Triangle Unit Sales Percentage Threshold is Exceeded
-------------------------------------------------------------------------
***% ***%
***% ***%
By way of example only, if, during a given royalty period ("Royalty Period 1"),
unlicensed unit sales in a given country were *** percent (***%) of Triangle's
unit sales of a given Licensed Product in such country and Triangle were paying
royalties on such Licensed Product at a rate of ***percent (***%), then in the
next succeeding royalty period ("Royalty Period 2"), Triangle's royalty rate
with respect to Net Sales of such Licensed Product in such country would be
reduced by *** percent (***%) to *** percent (***%). If in Royalty Period 2,
such unlicensed unit sales were *** percent (***%) of Triangle's unit sales of
such Licensed Product in such country during Royalty Period 2, then in the next
succeeding royalty period
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("Royalty Period 3"), Triangle's royalty rate on Net Sales of Licensed Products
in such country would be only subject to a *** percent (***%) reduction and
Triangle would pay royalties at a rate of *** percent (***%) during Royalty
Period 3.
(d) For purposes of this Section 3.3, (i) "unlicensed unit sales"
and "Triangle unit sales" shall be deemed to mean the *** selected by Triangle
or its Affiliates or sublicensees and reasonably acceptable to Dynavax. The ***
of the third party product and the Licensed Product shall be appropriately
adjusted to account for any differences in potency based on the approved
labeling of such third party product and the Licensed Product. If Triangle is
entitled to a royalty reduction based on unlicensed unit sales pursuant to
Subsection 3.3(c) for any royalty period, it or its Affiliates or sublicensees
shall submit the ***, as applicable, for the relevant royalty period to Dynavax,
together with Triangle's or its Affiliates' or sublicensees' sales report for
the relevant royalty period. Such sales reports for each royalty period in which
Triangle is entitled to such royalty reduction shall be submitted with the
royalty report for such royalty period submitted pursuant to Section 4.1.
3.4 Annual Minimum Royalties. In the event that, during the third full
calendar year following the year during which the U.S. Registration for the HIV
Disease Indication or for any HCV Disease Indication is granted for a Licensed
Product or any calendar year thereafter for as long as royalty obligations exist
in the U.S. for such Licensed Product, Triangle's total annual royalty payments
to Dynavax pursuant to Section 3.3 above are less than the annual minimum amount
set forth opposite such year below (the "Annual Minimum"), Triangle shall make a
payment to Dynavax together with the royalty report for the fourth quarter of
such year required in Section 4.1 of this Agreement equal to the
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difference between such Annual Minimum and the royalties paid to Dynavax for
such year pursuant to Section 3.3 above:
Calendar Year Annual Minimum
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3.5 Accrual of Royalties. No royalty shall be payable on a Licensed
Product made, sold, or used for tests or development purposes, or distributed as
samples. No royalties shall be payable on sales among Triangle, its Affiliates
and sublicensees, but royalties shall be payable on subsequent sales by
Triangle, its Affiliates or sublicensees to a third party. Notwithstanding the
immediately preceding sentence, royalties shall be payable on sales among
Triangle, its Affiliates and sublicensees where the purchasing party does not
resell the Licensed Product and uses the Licensed Product for tests or
developmental purposes or distributes them as samples. No multiple royalty shall
be payable because the manufacture, use, offer for sale, sale or import of a
Licensed Product is covered by more than one Valid Claim or by at least one
Valid Claim and the Dynavax Know-How.
3.6 Third Party Royalties. If Triangle, its Affiliates or sublicensees
determine, after consultation with Dynavax, but at Triangle's sole discretion,
that it or they may be required to pay royalties and other amounts
(collectively, the "Third Party Royalties") to any third party because the
manufacture, use, offer for sale, sale or importation of a Licensed Product
infringes or may infringe any patent or patent which may issue from a patent
application of such third party in one or more countries (a "Third Party
License"), Triangle, its Affiliates or sublicensees may deduct the Third Party
Royalties it or they pay to such third party from royalties thereafter payable
to Dynavax. If such license relates to ISS per se,
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Conjugated ISS per se or the use of ISS or Conjugated ISS, Triangle may credit
*** percent (***%) of any Third Party Royalties up to *** percent (***%) of Net
Sales of Licensed Products and *** percent (***%) of the amount of any Third
Party Royalties in excess of *** percent (***%) of Net Sales of Licensed
Products. For all other Third Party Licenses, Triangle may credit *** percent
(***%) of all Third Party Royalties against royalties thereafter payable to
Dynavax. In no event shall the royalties due on Net Sales of Licensed Products
in any royalty period be thereby reduced on account of any reduction pursuant to
this Section 3.6 by more than *** percent (***%) of the amount which would have
been otherwise payable. In the event Triangle enters into a Third Party License
pursuant to this Section 3.6, Dynavax will use its best efforts to settle or
otherwise resolve any inter partes patent proceeding which may be pending
between Dynavax and the relevant third party relating to such Third Party
License without any claim to any Third Party Royalties and will not, thereafter
commence or take any action which might provoke the commencement of any inter
partes proceeding in respect of any patent rights licensed under such Third
Party License.
3.7 Compulsory Licenses. Should a compulsory license be granted to any
third party in any country of the Territory to make, have made, use, import,
offer for sale or sell Licensed Products, the royalty rate payable hereunder for
sales of the Licensed Products by Triangle in such country shall be adjusted to
match any lower royalty rate granted to the third party for such country.
3.8 Reduction in Royalty Due to Invalid Claims. In the event that
applicable claims of all patents or patent applications included within the
Dynavax Patents under which Triangle is selling or actively developing a
Licensed Product shall be held invalid or not
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infringed by the Licensed Products Triangle is selling or actively developing by
a court of competent jurisdiction in a given country of the Territory, whether
or not there is a conflicting decision by another court of competent
jurisdiction in such country, Triangle may reduce all royalty payments on its,
its Affiliates' or its sublicensees' sales of such Licensed Product covered by
such claims by *** percent (***%) until such judgment is finally reversed by an
unappealed or unappealable decision of a court of competent jurisdiction of
higher dignity in such country or is otherwise unappealable or is unappealed
within the time allowed therefor. If such judgment is finally reversed by an
unappealable decree of a court of competent jurisdiction of higher dignity in
such country, or is deemed reversed as provided herein, the former royalty rates
shall be restored and the royalty payments not theretofore made and interest
earned thereon shall become due and payable to Dynavax. If such judgment is not
reversed, deemed reversed, is unappealed or becomes unappealable, as aforesaid,
Triangle shall be entitled to all of the royalty reductions pursuant to this
Section 3.8.
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3.9 Sublicense Sharing Provision. With respect to any sublicense which may
be granted by Triangle to a non-Affiliate third party within ***, Triangle shall
pay Dynavax *** and (ii) all expenses incurred by Triangle in connection with
the development of the Licensed Products. No amounts received by Triangle as
reimbursement or prepayment for development expenses actually incurred shall be
subject to this Section 3.9. This Section 3.9 shall apply only to sublicenses
granted by Triangle on or before the first anniversary of the Effective Date.
3.10 Royalty Rate Floor. Any provision of this Agreement to the contrary
notwithstanding, the royalty rate on Net Sales of Licensed Products as set forth
in Subsection 3.3(a) shall not be reduced to less than *** percent (***%) as a
result of the applicability of the royalty rate reduction provisions set forth
herein.
ARTICLE 4. REPORTS AND ACCOUNTING
4.1 Royalty Reports and Records.
(a) During the term of this Agreement commencing with the commercial
introduction of the first Licensed Product, Triangle shall furnish, or cause to
be furnished to Dynavax, written reports governing each of Triangle's fiscal
quarters showing:
(i) the gross sales of all Licensed Products on a Licensed Product
by Licensed Product basis sold by Triangle, its Affiliates and sublicensees
during the reporting period, together with the calculations of Net Sales in
accordance with Sections 1.34 and 1.35; and
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(ii) the royalties payable in Dollars, which shall have accrued
hereunder in respect of such Net Sales; and
(iii) the exchange rates used, if any, in determining the amount of
Dollars; and
(iv) any withholding taxes (other than income taxes) required to be
made from such royalties.
(b) With respect to sales of the Licensed Product invoiced in
Dollars, the gross sales, Net Sales, and royalties payable shall be expressed in
Dollars. With respect to sales of the Licensed Product invoiced in a currency
other than Dollars, the gross sales, Net Sales, and royalties payable shall be
expressed in the domestic currency of the party making the sale together with
the Dollar equivalent of the royalty payable, calculated using the simple
average of the exchange rates published in the Wall Street Journal on the last
day of each month during the reporting period. If any Triangle Affiliate or
sublicensee makes any sales invoiced in a currency other than its domestic
currency, the gross sales and Net Sales shall be converted to its domestic
currency in accordance with the Affiliate's or sublicensee's normal accounting
practices. If the event a Triangle Affiliate or sublicensee uses its normal
accounting practices, a complete description of such normal accounting practices
shall be provided to Dynavax together with the royalty report furnished pursuant
to Article 4. Triangle or its Affiliate or sublicensee making any royalty
payment shall furnish to Dynavax appropriate evidence of payment of any tax or
other amount deducted from any royalty payment.
(c) Reports shall be made on a quarterly basis. Quarterly reports
shall be due within sixty (60) days of the close of every Triangle fiscal
quarter and shall be prepared
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in accordance with U.S. GAAP. Triangle shall keep accurate records in sufficient
detail to enable royalties and other payments payable hereunder to be
determined. Triangle shall be responsible for all royalties and late payments
that are due to Dynavax that have not been paid by Triangle's Affiliates and
sublicensees. Triangle's Affiliates and sublicensees shall have, and shall be
notified by Triangle that they have, the option of making any royalty payment
directly to Dynavax.
4.2 Right to Audit. Dynavax shall have the right, upon prior notice to
Triangle, not more than once in each Triangle fiscal year nor more than once in
respect of any fiscal year, through an independent certified public accountant
selected by Dynavax and acceptable to Triangle, which acceptance shall not be
unreasonably refused, to have access during normal business hours to those
records of Triangle, its Affiliates and sublicensees as may be reasonably
necessary to verify the accuracy of the royalty reports required to be furnished
by Triangle pursuant to Section 4.1 of the Agreement. Such accountant may report
only the accuracy or inaccuracy of the royalty reports furnished by Triangle
and, in the event they are determined to be inaccurate, the corrections in the
amounts which need to be made to such reports. Triangle shall include in any
sublicenses granted pursuant to this Agreement a provision requiring the
sublicensee to keep and maintain records of sales made pursuant to such
sublicense in accordance with U.S. GAAP and to grant access to such records by
Dynavax' independent certified public accountant, as applicable, under the same
terms that Dynavax has access to Triangle's records. If such independent
certified public accountant's report shows any underpayment of royalties by
Triangle its Affiliates or sublicensees, within thirty (30) days after
Triangle's receipt of such report, Triangle shall remit or shall cause its
sublicensees to remit to Dynavax:
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(a) the amount of such underpayment; and
(b) if such underpayment exceeds *** (***%) percent of the total
royalties owed for the fiscal year then being reviewed, the reasonably necessary
fees and expenses of such independent certified public accountant performing the
audit. Otherwise, Dynavax' accountant's fees and expenses shall be borne by
Dynavax. Any overpayment of royalties shall be fully creditable against future
royalties payable in any subsequent royalty periods or if this Agreement
terminates or expires before such overpayment in fully credited, Dynavax agrees
to refund the uncredited portion of such overpayment within thirty (30) days
after receipt of the final royalty payment hereunder. Upon the expiration of ***
(***) months following the end of any fiscal year, the calculation of royalties
payable with respect to such fiscal year shall be binding and conclusive on
Dynavax and Triangle, unless an audit for such fiscal year is initiated before
expiration of such *** months. Triangle shall retain, and shall cause its
Affiliates and sublicensees to retain, those records required to be maintained
pursuant to this Section 4.2 in respect of each fiscal year for a period of ***
months after the end of such fiscal year.
4.3 Confidentiality of Records. All information subject to review under
this Article 4 shall be confidential. Except where otherwise required by law,
Dynavax and its accountant shall retain all such information in confidence.
ARTICLE 5. PAYMENTS
5.1 Payments and Due Dates.
(a) Except as otherwise provided herein, royalties and other amounts
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payable to Dynavax as a result of activities occurring during the period covered
by each royalty report provided for under Article 4 of this Agreement shall be
due and payable on the date such royalty report is due. Payments of royalties
and other amounts in whole or in part may be made in advance of such due date.
(b) All payments to Dynavax shall be made by wire transfer to an
account of Dynavax designated by Dynavax from time to time; provided, however,
that in the event that Dynavax fails to designate such account, Triangle or its
Affiliates and sublicensees may remit payment to Dynavax to the address
applicable for the receipt of notices hereunder; provided, further, that any
notice by Dynavax of such account or change in such account, shall not be
effective until *** (***) days after receipt thereof by Triangle.
5.2 Currency Restrictions. Except as hereinafter provided in this Section
5.2, all royalties and other amounts shall be paid in Dollars. If, at any time,
legal restrictions prevent the prompt remittance of part of or all royalties
with respect to any country in the Territory where Licensed Products are sold,
Triangle or its sublicensee shall have the right and option to make such
payments by depositing the amount thereof in local currency to Dynavax' accounts
in a bank or depository in such country.
5.3 Overdue Payments. In the event any payment due hereunder is not made
when due, the payment shall accrue interest (beginning on the date such payment
is due) calculated at the rate of *** percent (***%) per month and such payment
when made shall be accompanied by all interest so accrued. The remittance of
such interest shall not foreclose Dynavax from exercising any other rights it
may have pursuant to this Agreement because such payment is late.
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ARTICLE 6. RESEARCH PROGRAM
6.1 Research Obligations; Funding.
(a) In addition to the payments set forth in Article 3 hereof,
Triangle also agrees to sponsor certain research work to be performed by Dynavax
to assist in the development of the Licensed Products, pursuant to the
provisions set forth in this Article 6 (the "Research Program"). Dynavax agrees
to have the Research Program conducted under the supervision of qualified,
full-time employees.
(b) The general area of focus of the Research Program is further
described in Exhibit B, attached hereto and made a part hereof. The specific
areas of focus or work to be conducted by Dynavax under the Research Program
will be determined by Dynavax and Triangle within thirty (30) days after the
Effective Date; provided, however, that in the event the parties fail to agree
on the specific areas of focus or work to be conducted by Dynavax under the
Research Program, the commencement of Triangle's funding obligations pursuant to
Subsection 6.1(e) shall be deferred until such agreement is reached. Dynavax
agrees that all work under the Research Program will be conducted on its
premises or at such other locations, if any, approved in writing by Triangle,
which approval will not be unreasonably withheld or delayed.
(c) Dynavax agrees to provide Triangle with a written quarterly
report within thirty (30) days after the end of each quarter summarizing in
reasonable detail the results of the Research Program for the immediately
preceding quarter.
(d) Unless this Agreement or Triangle's funding obligation is sooner
terminated pursuant to the terms hereof, (i) the initial term of the Research
Program shall
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commence on the Effective Date and shall continue for a period of *** (***)
months (the "Initial Term"); and (ii) thereafter, if the Research Program is
extended pursuant to Section 6.3, the extended term shall continue for a period
of *** (***) months after the expiration of the initial term (the "Extended
Term").
(e) In full consideration of Dynavax' timely performance of its
obligations under the Research Program, Triangle agrees to pay Dynavax $*** for
each quarter during the Initial Term of the Research Program and $*** during
each quarter of the Extended Term of the Research Program. The initial quarterly
installment shall be payable within ten (10) days after the parties agree on the
specific areas of focus or work to be performed by Dynavax during the initial
term pursuant to Subsection 6.1(b) and each successive installment shall be
payable within *** (***) days after commencement of the second and each
succeeding *** (***) month period during the term of the Research Program.
Dynavax agrees that it will not use funds received from third parties directly
to support any work performed under the Research Program or enter into any other
contractual or funding arrangement with a third party pursuant to which such
third party would acquire any rights in the Results (as hereinafter defined) or
the Research Inventions (as hereinafter defined). Dynavax agrees to use the
amounts paid by Triangle under the Subsection 6.1(e) in a manner reasonably
calculated to accomplish the objectives of the Research Program.
6.2 Results; Research Program Inventions.
(a) All materials, information and data generated by Dynavax in the
performance of work under the Research Program (collectively the "Research
Program Results") shall be the property of Dynavax, except to the extent they
represent Joint
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Inventions. All Results which are reduced to writing shall be recorded in bound
(as opposed to loose-leaf) laboratory notebooks in such a manner so as to be
identifiable as Results. All entries in laboratory notebooks shall be made and
signed daily in indelible ink and corroborated at least weekly by a witness who
would not be considered an inventor or co-inventor. Copies of such notebooks
shall be available for inspection by Triangle or an authorized agent designated
by Triangle and copies of all or a portion of such notebooks shall be provided
to Triangle by Dynavax promptly upon request.
(b) Dynavax agrees promptly to disclose to Triangle any inventions
conceived solely or jointly by Dynavax employees during the Research Program
("Research Inventions"). All intellectual property covering Research Inventions
shall be Dynavax Patents or Dynavax Know-How and shall be included in the
license granted to Dynavax to Triangle pursuant to Section 2.1. Dynavax
represents that each employee (and any consultants or agents of Dynavax) who
participate in the performance of work on the Research Program will be required
to enter into a contract which provides for the assignment of Dynavax of all
inventions and discoveries made by such person during the course of his or her
work performed under the Research Program.
6.3 Extension of Research Program. Upon the effective date of the initial
IND for a Licensed Product, the Research Program will be automatically extended
for a period of *** months (irrespective of whether the Initial Term of the
Research Program expires prior to such effective date). The parties shall
attempt to reach an agreement on the specific areas of focus or work to be
performed by Dynavax under the Extended Term within thirty (30) days after the
commencement thereof; provided, however, that the commencement of Triangle's
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funding obligation for the Extended Term shall be deferred until such agreement
is reached.
6.4 Inspection. In addition to Triangle's inspection rights set forth in
Subsection 6.2(a), authorized representatives of Triangle shall have the right
to inspect progress of the Research Program on Dynavax' premises at any time
during normal business hours upon reasonable notice during the term of this
Agreement. Dynavax shall promptly notify Triangle of any findings that occur at
any time during the Research Program which Dynavax considers significant.
ARTICLE 7. DEVELOPMENT PROGRAM
7.1 Development Program. Subject to Dynavax' timely performance of its
obligations hereunder, including those set forth in Articles 6 and 9, and in
complete fulfillment of Triangle's diligence obligations hereunder, as
sublicensee under the Primary License Agreement and any such obligations implied
by law, Triangle will undertake, or, if applicable, will cause its Affiliates
and sublicensees to undertake, the development activities described in this
Article 7. Triangle shall, at its expense, use its best efforts (a) to conduct a
development program (the "Development Program") relating to the use of at least
one Licensed Product for each Disease Target and (b) if the results of the
Development Program so justify, to seek Registration for such Licensed Product
in the United States. For purposes of this Article 7, "best efforts" shall mean
that Triangle shall use reasonable efforts consistent with those used by it in
its development projects for other compounds in its development portfolio deemed
by it to have comparable commercial potential.
7.2 Fulfillment.
(a) Triangle's best efforts obligations set forth in this Article 7
shall be deemed to have been satisfied if Triangle:
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(i) files what it reasonably believes to be a complete NDA or BLA,
as applicable, for at least one Licensed Product in a Major Market Country
within *** (***) months after the Effective Date;
(ii) commences clinical trials for at least one Licensed Product for
the second and third Disease Targets within *** (***) months after the effective
date of the initial IND for the first Disease Target; and
(iii) files what it reasonably believes to be a complete NDA or BLA
in a Major Market Country for a Licensed Product for the second and third
Disease Targets within *** (***) months after the commencement of clinical
trials for such Licensed Product. The time periods set forth in clauses (i),
(ii) and (iii) above shall each be subject to up to four (4) extensions of ***
(***) months each, at Triangle's election, by payment to Dynavax of $*** for
each of the first two (2) extensions of a given time period and $*** for each of
the second two (2) extensions for a given time period.
(b) Triangle agrees to use its best efforts to give Dynavax at least
ten (10) days' notice prior to the exercise of any extension pursuant to
Subsection 7.2 (a). Extension payments under Subsection 7.2(a) shall be made
within the first ten (10) days of each such extension period. Notwithstanding
any provision of Subsection 7.2(a) to the contrary, the time periods set forth
in Subsection 7.2(a) shall be adjusted appropriately (i) to account for any
material delay by Dynavax in the initial transfer of Dynavax Know-How beyond the
period specified in Section 12.1 and (ii) in the event the FDA or corresponding
regulatory agency in any other Major Market Country places a clinical hold on
one or more clinical
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studies relating to the applicable Licensed Product.
7.3 Dynavax Remedies.
(a) In the event Triangle fails to meet any diligence requirements
set forth in Subsection 7.2(a) with respect to a given Disease Target, and does
not demonstrate to Dynavax' reasonable satisfaction that, despite Triangle's
best efforts, the failure to meet the diligence requirement was delayed due to
reasons beyond Triangle's reasonable control, Dynavax shall have the option, as
its sole and exclusive remedy, to terminate the Agreement in the entire
Territory with respect only to that Disease Target (for either or both Disease
Indications). The remedy set forth in this Section 7.3 shall be Dynavax' sole
and exclusive remedy.
(b) Prior to exercising any rights under this Section 7.3, Dynavax
shall give Triangle *** (***) days' notice and shall meet with Triangle, at
Triangle's request, during such *** (***) day period, to discuss any
disagreements about whether Triangle has complied with the applicable diligence
requirements of this Article 7. Upon expiration of such *** (***) day period,
Dynavax shall have the right in its sole discretion to proceed with the exercise
of all rights and remedies provided for herein unless the applicable diligence
requirement is fulfilled during such *** (***) day period.
ARTICLE 8. JOINT PROJECT COMMITTEE
8.1 Appointment of Coordinators. As soon as practicable after the
Effective Date, Dynavax and Triangle shall each appoint an authorized
representative (a "Coordinator"). Each such party shall provide notice to the
other as to the identity of the individual so
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appointed. Each Coordinator shall be responsible for communications, other than
legal notices, between the parties with respect to the subject matter of this
Agreement. Each party may replace its Coordinator at any time for any or no
reason by providing written notice to the other party.
8.2 Joint Project Committee. The Coordinators shall establish the Joint
Project Committee consisting of representatives of Triangle and Dynavax. The
Joint Project Committee will consist of at least three (3) persons from each of
Triangle and Dynavax, such persons having significant responsibility for the
development and/or marketing of the Licensed Products. The Joint Project
Committee will meet from time to time at mutually agreeable times via
teleconference or in-person, but no less than semi-annually during the term of
the Agreement. The Coordinators shall set the agenda for each meeting, and each
Coordinator shall determine which regular members of Joint Project Committee and
other representatives of such Coordinator's party shall attend in light of the
agenda. Each party shall bear its own costs incurred in connection with
participation in the Joint Project Committee.
8.3 Objective of the Joint Project Committee. The primary objective of the
Joint Project Committee will be to facilitate the expeditious development and
Registration of Licensed Products by, inter alia:
(a) facilitating the exchange of data and study results between the
parties;
(b) providing a forum for protocol and development plan review;
(c) coordinating the developmental efforts of the parties so as to
avoid duplication and inconsistency of such efforts;
(d) coordinating the manufacturing of, and controls relating to, all
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Licensed Products during the Development Program; and
(e) reviewing the regulatory plans and timelines relating to the
Licensed Products.
Each party agrees to give due consideration to any input received from the
other party at such Joint Project Committee meetings; provided, however, that
all final decisions relating to the development of Licensed Products in the
Territory will be made by Triangle.
8.4 Exchange of Study Results. Each party shall submit a report detailing
the results of each study or test which it performs to the other party within
forty-five (45) days after completion of the final statistical analyses of the
results of such study. In addition, each party will provide the other party with
semi-annual progress reports summarizing its activities in respect of the
development of Licensed Products during the relevant semi-annual period. Such
reports shall cover the semi-annual periods ending each June 30 and December 31
and shall be due on or before July 15 and January 15 of each year, respectively.
8.5 Publications. Each party reserves the right to publish or publicly
present the results of its own development activities in respect of the Licensed
Products (all such results, including the Research Program Results, being
collectively referred to as the "Results"). The party proposing to publish or
publicly present the Results (the "publishing party") will, however, submit a
draft of any proposed manuscript, abstract, speech, transparencies, presentation
materials and press releases to the other party (the "non-publishing party") for
comments at least: (a) fifteen (15) days prior to submission for publication or
oral presentation in the case of full manuscripts; (b) three (3) days prior to
submission for publication or oral presentation in the case of abstracts; and
(c) one (1) day prior to publication in the case of press releases, except, in
the case of press releases, where
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applicable law, in the reasonable opinion of the publishing party, requires such
press release to be issued within time constraints which would make such review
impractical. The non-publishing party shall notify the publishing party in
writing within the applicable time period set forth above after receipt of such
draft whether such draft contains Information (as hereinafter defined) of the
non-publishing party which it considers to be confidential under the provisions
of Article 15 hereof, or information that if published would have an adverse
effect on a patent application for which the non-publishing party has initial
patent prosecution responsibility pursuant to Article 10 of this Agreement. In
the latter case, the non-publishing party shall have the right to request a
delay and the publishing party shall delay such publication for a period not
exceeding sixty (60) days. In any such notification, the non-publishing party
shall indicate with specificity its suggestions regarding the manner and degree
to which the publishing party may disclose such information. The publishing
party shall have the final authority to determine the scope and content of any
publication, provided that such authority shall be exercised with reasonable
regard for the interests of the non-publishing party, except that no publication
will contain any Information disclosed by the non-publishing party to the
publishing party without the non-publishing party's prior written permission.
Each party shall cause its Affiliates, licensees or sublicensees, as the case
may be, to comply with the requirements of this Section 8.5 with respect to any
of their proposed publications.
ARTICLE 9. SUPPLY AND MANUFACTURE
9.1 Supply of Finished Drug Substance.
(a) Dynavax agrees to supply Triangle, and Triangle agrees to
purchase from Dynavax, Triangle's requirements of Finished Drug Substance
necessary for Triangle to
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perform the Development Program at Dynavax' Acquisition Cost or Manufacturer
Cost therefor, as applicable. Triangle acknowledges that Dynavax may subcontract
its obligations hereunder to a third party which is reasonably acceptable to
Triangle. Dynavax shall not change any subcontractor without Triangle's prior
written consent which shall not be unreasonably withheld or delayed. Such
obligation shall include all preclinical studies, Phase I and Phase II clinical
trials and, at Triangle's option all Phase III clinical trials and expanded
access trials under the Development Program.
(b) The delivery schedule for all Finished Drug Substance shall be
determined from time to time by mutual agreement of the parties, but Dynavax
shall use its best efforts to comply with Triangle's requested delivery dates.
No Finished Drug Substance shall be supplied except pursuant to firm written
purchase orders submitted to Triangle by Dynavax. All Finished Drug Substance
supplied pursuant to this Section 9.1 shall (i) be manufactured in accordance
with Current Good Manufacturing Practices as promulgated by the FDA, and (ii)
meet specifications, determined in accordance with applicable analytical
methodology, to be mutually agreed upon in good faith by the parties hereto as
promptly as practicable after the Effective Date.
(c) During the Development Program, Dynavax shall use its best
efforts to provide Triangle, free of charge, with those quantities of (i)
analytical reference materials and (ii) all impurities and degradation products
which are measured when performing the analytical methodology for the Finished
Drug Substance and which are required by Triangle to conduct the analytical work
necessary to obtain Registration of the Licensed Products in each country of the
Territory.
(d) Within thirty (30) days after the Effective Date with respect to
the
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United States and within thirty (30) days after Triangle's request with respect
to other countries of the Territory, Dynavax shall use its best efforts to
establish, or shall use its best efforts to cause its subcontractors to
establish, a DMF (or its counterpart in other countries of the Territory) with
the FDA, and applicable government authorities for all other countries of the
Territory requested by Triangle, relating to the manufacture of the Finished
Drug Substance, and covering facilities from which all Finished Drug Substance
to be supplied to Triangle pursuant to Subsection 9.1(a) above will be supplied.
Dynavax shall provide, or shall cause its subcontractors to provide, Triangle
and its sublicensees with (i) access to the data and information of Dynavax and
its subcontractor's DMF's, and (ii) letters of authorization to the FDA and
other applicable government authorities in other countries of the Territory and
take such other actions as Triangle may reasonably request to allow Triangle or
its sublicensees to refer to Dynavax' and its subcontractor's DMF's or their
counterparts in connection with any submissions or filings which Triangle or its
sublicensees make with respect to the Licensed Product.
(e) Dynavax shall allow, and shall cause its subcontractors to
allow, Triangle employees and/or consultants and FDA and other regulatory
personnel to perform any quality assurance audits of Dynavax' and its
subcontractors' manufacturing facilities that may be required of Triangle by any
governmental authority or reasonably requested by Triangle.
(f) From time to time, Triangle shall have the right, at its own
expense, to have Triangle employees and its subcontractors participate in and
observe the development of the manufacturing, scale-up processes and analytical
testing of Dynavax and its subcontractors relating to Finished Drug Substance.
The parties agree that the intent of such
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participation/observation shall include, but not be limited to, assistance for
Triangle in subsequently implementing the same manufacturing in its facilities
of its subcontractors in the event Dynavax ceases to supply Finished Drug
Substance, and Dynavax shall take all reasonable steps to ensure that such
Triangle employees are provided with information, materials and training
necessary to facilitate such purposes.
(g) Dynavax shall reasonably assist, and shall cause its
subcontractors to reasonably assist, Triangle employees and/or consultants and
FDA and other regulatory personnel in the development of analytical methodology
and specifications so that the respective assay methods and specifications for
the Licensed Products and the Finished Drug Substance are consistent.
(h) Dynavax shall use its best efforts to generate, and shall use
its best efforts to cause its subcontractors to generate, all documentation
necessary to support registration of the Finished Drug Substance with the FDA
and other foreign regulatory authorities. Dynavax further agrees to prepare its
facilities, and to cause its subcontractors to prepare their facilities, for
pre-approval inspections by the FDA and foreign regulatory authorities, with the
reasonable assistance of Triangle employees and/or consultants. As soon as
practicable after the Effective Date, the parties will initiate discussions to
agree on a list of necessary documentation and validation studies required to be
performed prior to NDA filing and time frames for completion.
(i) Dynavax hereby certifies that it has not been debarred under the
provisions of the Generic Drug Enforcement Act of 1992, 21 U.S.C. ss.335a (a)
and (b). In the event that during the term of this Agreement, Dynavax becomes
debarred or receives notice of an action or threat of an action with respect to
its debarment, Dynavax shall notify
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Triangle immediately. Dynavax hereby certifies that it has not and will not use
in any capacity the services of any individual, corporation, partnership or
association which has been debarred under 21 U.S.C. ss.335a (a) or (b) in
connection with the performance of services hereunder. In the event that Dynavax
becomes aware of the debarment or threatened debarment of any individual,
corporation, partnership or association (the "Debarred Entity") providing
services to Dynavax which directly or indirectly relate to activities under this
Agreement, Dynavax shall notify Triangle immediately. Upon Triangle's request,
Dynavax agrees to cease using the services of the Debarred Entity.
(j) Upon request by Triangle, Dynavax agrees to submit promptly
documentation which reasonably substantiates Dynavax' Acquisition Cost or
Manufacturing Cost for the Licensed Products, as applicable. Triangle shall have
audit rights in respect of the Acquisition Costs or Manufacturing Costs for the
Licensed Products similar to those of Dynavax as set forth in Section 4.2,
mutatis mutandis. Dynavax shall use its best efforts to negotiate a commercially
reasonable Acquisition Cost for Finished Drug Substance.
9.2 Commercial Supply of Finished Drug Substance. Triangle shall be
responsible for the commercial supply of all Finished Drug Substance and the
transition to the commercial supplier shall commence at the Phase III clinical
trial stage for each Licensed Product, unless Triangle and Dynavax agree that
Dynavax will supply Phase III clinical trial material. Dynavax shall reasonable
cooperate, and shall cause its subcontractors to reasonably cooperate, with
Triangle and its contractor in connection with the transaction of manufacture
and supply responsibilities.
9.3 Regulatory and Quality Assurance.
(a) Dynavax acknowledges that, except for any of its subcontractor's
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DMF's, Triangle shall be solely responsible for (i) filing all regulatory
documents with the FDA and foreign regulatory agencies in connection with the
Development Program and Registration of all Licensed Products and (ii) quality
assurance oversight in respect of the Licensed Products. Dynavax will reasonably
assist Triangle by providing with such data as area available to Dynavax which
are necessary for Triangle to fulfill all FDA and foreign regulatory reporting
requirements in respect of the Licensed Products supplied hereunder. Dynavax
will use its best efforts to cause any subcontractor which it uses in connection
with the manufacture of the Licensed Products to fully disclose all data
relating to such subcontractor's manufacturing activities to Triangle.
(b) Dynavax shall use its best efforts to cause any subcontractors
it uses in connection with the supply and manufacture of the Licensed Products
to enter into such contractual arrangements with Triangle as are reasonably
necessary to comply with applicable FDA laws and regulations, relating to the
manufacturing, control, testing and release of the Licensed Products, including
the draft guidance entitled "Cooperative, Manufacturing Arrangements for
Licensed Products".
ARTICLE 10. PATENT PROSECUTION
10.1 Title to Inventions. Each party shall have and retain sole title in
inventions, whether or not patentable, made by it or on its behalf (as by its
employees or agents) in the course of work performed under this Agreement.
10.2 Dynavax Inventions. Dynavax shall, in consultation with Triangle,
file and prosecute such patent applications regarding any of Dynavax' sole
inventions which are reasonably necessary for the development, registration,
manufacture, use or sale of ISS, Conjugated ISS and the Licensed Products in the
Territory, and thereafter shall diligently and
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in the exercise of its discretion in a manner reasonably consistent with the
goals and expectations of the parties, giving due and reasonable consideration
to Triangle's position, prosecute and maintain in force the resulting Dynavax
Patents all at the expense of Dynavax. Dynavax shall enable Triangle or its
counsel to directly contact and confer with Dynavax' patent attorney with
respect to the prosecution of any patent applications constituting part of the
Dynavax Patents and shall use its reasonable efforts to amend, correct or refile
any patent or patent application included in the Dynavax Patents to include
claims reasonably requested by Triangle. The territorial scope of such filings
shall be the subject of specific discussion between the parties, but shall
include all Patent Filing Countries and all other countries reasonably requested
by Triangle to the extent not already applied for as of the Effective Date. If
for any reason Dynavax declines to file a patent application or, having filed,
declines to prosecute or maintain any of the Dynavax Patents within the
Territory, Triangle may so file, prosecute or maintain in Dynavax' name and at
Triangle's expense in such country, in which event, Dynavax shall at Triangle's
request and expense, provide all reasonable assistance; provided, however, that
Triangle shall be entitled to credit the out-of-pocket expenses so incurred
against royalties and Milestone Payments due hereunder with respect to Licensed
Products sold in such country.
10.3 Triangle Inventions. Triangle shall, in consultation with Dynavax,
file and prosecute such patent applications regarding any of the Triangle
Patents owned or controlled by Triangle, and thereafter shall diligently and in
the exercise of its discretion in a manner reasonably consistent with the goals
and expectations of the parties hereunder, giving due and reasonable
consideration to Dynavax' position, prosecute and maintain in force the
resulting Triangle Patents, all at Triangle's expense. Triangle shall enable
Dynavax or its
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counsel to directly contact and confer with Triangle's patent counsel, at
Dynavax' expense, with respect to the prosecution of any patent applications
constituting part of the Triangle Patents and shall use its reasonable efforts
to amend, correct or refile any patent or patent application included in the
Triangle Patents to include claims reasonably requested by Dynavax. The
territorial scope of such filings shall be the subject of specific discussion
between the parties. If for any reason Triangle declines to file a patent
application or, having filed, declines to prosecute or maintain any of the
Triangle Patents in any country, Dynavax may so file, prosecute or maintain in
Triangle's name and at Dynavax' expense in such country, in which event,
Triangle shall, at Dynavax' request and expense, provide all reasonable
assistance.
10.4 Joint Inventions. With respect to Joint Inventions: (a) all patent
applications and patents with respect thereto shall be jointly owned by Dynavax
and Triangle; (b) Triangle and its sublicensees and assignees shall be free to
use such patent applications and patents in the Territory and Dynavax and its
licensees and assignees shall be free to use such patent applications and
patents in any country of the Territory in which the license granted pursuant to
Section 2.1 is terminated only to the extent so terminated, in each event,
without payment of royalty or accounting therefor; (c) each party agrees to
consult with the other party and to give due and reasonable consideration to the
other party's position in determining the territorial scope of patent filings
within the Territory (in the case of Triangle) and outside the Territory (in the
case of Dynavax), and the prosecution and maintenance of resulting patent rights
based on Joint Inventions; and (d) Triangle shall have the sole right and
discretion to file any patent application and prosecute and maintain any
resulting patent rights on Joint Inventions, in which event, Dynavax shall, at
Triangle's
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request, provide all reasonable assistance and shall promptly reimburse Triangle
with *** percent (***%) of the out-of-pocket expenses so incurred by Triangle.
10.5 Further Obligations.
(a) Except as otherwise provided in Articles 11 and 20, each party's
responsibilities for patent prosecution activities pursuant to this Article 10
shall also include all ex parte and inter partes activities defending such
party's relevant patent applications and patents, including all interference,
opposition defense and observation defense proceedings before any patent offices
and litigation to determine the validity, enforceability, allowability or
subsistence of such patent applications and patents. Each party agrees to give
due consideration to the other party's position with respect to any such patent
prosecution activities (which term, as used herein, shall include without
limitation, any inter partes activities of the type described in the first
sentence of this Subsection 10.5 (a)). In the event a party fails to initiate or
pursue any patent prosecution activities for which it is responsible, or having
commenced such patent prosecution activities, declines to pursue such patent
prosecution activities, the other party may initiate, pursue or assume such
patent prosecution activities, at its sole expense.
(b) In conducting its patent prosecution activities under this
Agreement, each party may use patent attorneys selected by it and reasonably
acceptable to the other party. In addition to the other obligations set forth in
this Article 10, each party undertakes to keep the other party throughout the
term of this Agreement regularly informed of the status and progress of the
patent prosecution activities it undertakes under this Agreement including, but
not limited to, supplying the other, upon reasonable request and at reasonable
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intervals, with all correspondence with the patent offices in the Patent Filing
Countries. To the extent that a party has not previously done so, or promptly
upon request by the other party in order to assist such other party in
connection with any of its activities or the exercise of any of its rights
pursuant to Articles 10 and 11, such party shall provide the other party with
such additional relevant documentation which such other party may reasonably
request relating to such patent applications and patents in the Dynavax Patents,
Triangle Patents or those relating to Joint Inventions, as applicable, including
but not limited to, copies thereof and access to laboratory notebooks, other
supporting data and relevant employees. If a party decides to abandon or allow
to lapse any patent application or patent or not to initiate or any other patent
prosecution activity for which it has patent prosecution responsibility pursuant
to this Article 10, it shall give the other party notice thereof in a
sufficiently timely manner so as to enable such other party to determine whether
to assume patent prosecution activity in connection therewith. Each party shall
use its best efforts to give such notice at least *** (***) days before any
abandonment, lapse or any other relevant deadline.
(c) Each party shall have the independent right to challenge third
party patents or patent applications which may, in such party's sole discretion,
affect the ability to commercialize Licensed Products. The party choosing to
challenge such third party patents or patent applications shall advise the other
party of the challenge in writing at least thirty (30) days prior to initiating
the challenge.
ARTICLE 11. INFRINGEMENT
11.1 Third Party Infringement. If Triangle or Dynavax becomes aware of any
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activity that it believes represents a substantial infringement of a Valid Claim
or patents relating to Joint Inventions, the party obtaining such knowledge
shall promptly advise the other of all relevant facts and circumstances
pertaining to the potential infringement. Dynavax shall have the right, but not
the obligation, to enforce any rights within the Dynavax Patents against such
infringement, at its own expense. Triangle shall have the right to enforce any
rights within the Triangle Patents and patents relating to Joint Inventions, at
its expense.
11.2 Dynavax Infringement Suits.
(a) Dynavax will give Triangle prompt written notice of any proposed
settlement, consent judgment or voluntary disposition of any suit or legal
action relating to an infringement of the Dynavax Patents, and will consider any
and all comments and suggestions relating thereto provided by Triangle prior to
any such settlement, judgment or disposition; provided that Triangle delivers
all such comments and suggestions in a timely manner; and provided further that,
notwithstanding the above, Dynavax, in Dynavax' sole discretion, exercised in
good faith, may enter into any settlement, consent judgment or voluntary final
disposition of any suit or legal action on behalf of Dynavax and Triangle so
long as such settlement, judgment or disposition does not adversely affect
Triangle's rights under the license agreement nor impose any obligations on
Triangle other than as explicitly set forth in the license agreement.
(b) In the event that Dynavax recovers any settlement amount or any
damages for past infringement as a result of such suit or legal action, such
amount or damages shall be applied first to reimburse Dynavax for any
unreimbursed expenses and legal fees relating to such suit or legal action,
second to reimburse, on a pro rata basis,
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Triangle or its sublicensees and other licensees of Dynavax having an interest
in such infringement action, if any, for any unreimbursed expenses and legal
fees relating to such suit or legal action, and third, after such
reimbursements, to the extent that the remaining amount of such settlement
amount or damages, in whole or in part, can be reasonably attributed to losses
actually incurred as a result of such infringement by Triangle and such other
licensees of Dynavax, if any, such remaining amount will be shared such that ***
percent (***%) will be retained by Dynavax and ***% will be distributed on a pro
rata basis among Triangle and such other licensees, if any, in accordance with
each party's reasonably attributed losses or damages. In the event Triangle and
Dynavax cannot reach agreement on what constitutes a pro rata distribution, the
matter shall be referred to an independent certified public accountant (not
regularly employed by either party) for a final determination of such pro rata
distribution.
11.3 Triangle Infringement Suits.
(a) If Dynavax shall fail, within *** (***) days after receiving
notice from Triangle of a potential infringement of the Dynavax Patents or after
giving Triangle notice of such infringement, either (a) to terminate such
infringement or (b) to institute an action to prevent continuation thereof and,
thereafter, to prosecute such action diligently, or if Dynavax notifies Triangle
that it does not plan to terminate the infringement of the Dynavax Patents or
institute such action, then Triangle shall have the right to do so. Dynavax
shall cooperate with Triangle in such effort, including being joined as a party
to such action if necessary. In the event Triangle institutes any action
relating to infringement of the Dynavax Patents, Triangle may deposit up to ***
percent (***%) of any royalties which are otherwise
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payable to Dynavax during the pendency of any such infringement action in an
interest-bearing escrow account (bearing interest at rates comparable to other
Triangle deposits of immediately available funds). Triangle shall, upon the
final resolution or settlement of such infringement action, provide Dynavax with
an accounting of the total royalty payments escrowed (and interest thereon) and
Triangle's expenses incurred in such infringement action. Triangle shall be
entitled to offset any expenses which Triangle fails to recoup from any damage
award or settlement payments arising from such infringement action against such
escrowed royalties. Any escrowed payments (and interest thereon) in excess of
Triangle's unrecouped expenses shall be immediately paid to Dynavax.
(b) Any damage award or settlement payments made to Triangle for
infringement of the Dynavax Patents in excess of Triangle's expenses in
connection with any infringement action it initiates relating to the Dynavax
Patents shall next be used to reimburse Dynavax for any legal fees and expenses
it incurs in connection with such infringement action and any remaining amount
shall then be divided as follows: *** percent (***%) to Dynavax and *** percent
(***%) to Triangle. Any damage award or settlement payments made to Triangle in
connection with any action relating to infringement of the patents relating to
Joint Inventions, after first reimbursing Triangle for its expenses, shall be
equally divided by the parties. Any damage award or settlement payments made to
Triangle in connection with any action relating to infringement of the Triangle
Patents shall be retained by Triangle. Notwithstanding the above, Triangle may
not and shall have no authority to settle any such suit or legal action, or
reach an agreement with any third party, relating to the Dynavax Patents without
the prior written consent of Dynavax, which consent
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will not be unreasonably withheld or delayed.
11.4 Alleged Infringement of Third Party Patents. In the event that a
third party commences an action against Triangle alleging that Triangle's, its
Affiliates' or sublicensees' making, having made, using, importing, offering for
sale or selling a Licensed Product in one or more countries in the Territory
infringes or will infringe such third party's patent rights, Triangle may elect
to defend such suit at its sole expense and discretion. Triangle may, subsequent
to the commencement of such action, reduce all royalty payments on its, its
Affiliates' and sublicensees' sales of Licensed Products allegedly infringing
such third party's patent rights by *** percent (***%). If a court of competent
jurisdiction issues a decision which is unappealable or unappealed within the
time allowed therefor that such third party's patent rights are not being
infringed by Triangle, its Affiliates or sublicensees or that such third party's
patent rights are not valid or are unenforceable, the former royalty rates shall
be restored and the royalty payments not theretofore made and interest earned
therein, after first reimbursing Triangle for the legal fees relating to such
action, shall become due and payable to Dynavax.
ARTICLE 12. TRANSFER OF KNOW-HOW; TECHNICAL ASSISTANCE
12.1 Transfer by Dynavax. Within forty five (45) days following the
Effective Date and as far as it has not previously done so, Dynavax shall supply
Triangle with all Dynavax Know-How. With respect to any Dynavax Know-How
developed by Dynavax during the term of this Agreement, such disclosure will be
made at least on a quarterly basis or sooner, if practicable.
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12.2 Technical Assistance.
(a) Dynavax shall, upon request by Triangle, provide Triangle with
reasonable cooperation and assistance, consistent with the other provisions
hereof, in connection with the transfer of Dynavax Know-How. Such assistance may
include, but is not limited to, development of the formulations of the Licensed
Products; procurement of supplies and raw materials; initial developmental and
production batch manufacturing runs; process, specification and analytical
methodology design and improvement; and, in general, such other assistance as
may contribute to the efficient application by Triangle of the Dynavax Know-How.
In this regard, Dynavax agrees to make appropriate employees of Dynavax
reasonably available to assist Triangle, and Dynavax agrees to provide
reasonable numbers of appropriate Triangle personnel with access during normal
business hours to the appropriate personnel and operations of Dynavax for such
periods of time as may be reasonable in order to familiarize Triangle personnel
with the Dynavax Know-How as applied by Dynavax. At Triangle's reasonable
request, such assistance shall be furnished at Triangle's or its subcontractors'
or sublicensees' facilities in the Territory, subject to a mutually agreed upon
schedule. Such technical assistance shall include but not be limited to the
following:
(i) Dynavax shall: (A) provide Triangle with access to any and all
DMF's or counterparts thereof in any countries of the Territory of Dynavax
relating to the manufacture of Finished Drug Substance existing as of the
Effective Date; (B) provide Triangle with letters of authorization to the FDA
and other applicable government authorities in other countries of the Territory
to refer to Dynavax' DMF's; and (C) reasonably cooperate with Triangle in
obtaining access to and letters of authorization to refer to the DMF's of
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Dynavax' subcontractors which are, or will be, supplying any Finished Drug
Substance; and
(ii) Within forty five (45) days after the Effective Date, Dynavax
shall provide Triangle with copies of all documentation in Dynavax' possession,
including all correspondence between Dynavax and its subcontractors, regarding
the manufacture of the Finished Drug Substance which would be necessary or
useful to assist Triangle in the commercial production of Finished Drug
Substance or to support Registration of the Licensed Products.
(b) During the period prior to the fifth anniversary of the
Effective Date, (i) Dynavax shall provide up to *** (***) man-days of such
technical assistance during each year of such period at Dynavax' sole expense
and (ii) subsequent to such *** (***) man-days of technical assistance, Dynavax
shall provide such additional technical assistance as may be reasonably
requested by Triangle, provided, that all reasonable out-of-pocket travel costs
and expenses incurred by Dynavax in rendering technical assistance pursuant to
this Section 12.2 in excess of such *** (***) man-days per year shall be
reimbursed to Dynavax by Triangle and, in addition, Triangle will pay Dynavax a
consultancy fee in an amount to be negotiated by the parties hereto in good
faith (but not to exceed the consultancy fee, if any, then being charged by
Dynavax to third parties) for each consultancy day in excess of *** (***)
man-days spent by personnel of Dynavax in rendering technical assistance to
Triangle. Technical assistance furnished pursuant to this Section 12.2 shall
continue only until the fifth anniversary of the Effective Date of this
Agreement.
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12.3 Transfer by Triangle. With respect to any Triangle Know-How developed
by Triangle during the term of this Agreement, Triangle shall supply Dynavax
with such Triangle Know-How on at least a quarterly basis or sooner, if
practicable.
12.4 Language of Disclosures. All disclosures pursuant to this Agreement
will be in English.
ARTICLE 13. WARRANTIES AND REPRESENTATIONS; LIMITATION OF LIABILITY;
DISCLAIMERS; AND COVENANTS
13.1 Warranties and Representations of Dynavax. Dynavax warrants and
represents, except as otherwise specifically disclosed in a disclosure letter
(referencing the appropriate schedule or section number) supplied by Dynavax to
Triangle and dated as of the date hereof, as of the date hereof and as of the
Effective Date, the following:
(a) It possesses the necessary right, power and authority to enter
into this License Agreement;
(b) the copy of the Primary License Agreement delivered to Triangle
on or about February 14, 2000 is a true, complete and accurate copy of the
Primary License Agreement;
(c) Exhibit A is a complete list of all patents and patent
applications included in the Dynavax Patents;
(d) it is not aware of any material facts which it has not disclosed
to Triangle regarding the manufacture, use or sale of any Licensed Products or
the practice of any inventions included in the Dynavax Patents or the use of the
Dynavax Know-How by Triangle (except, potentially, details regarding the Dynavax
Know-How to be provided under Article 12), including without limitation any
material facts regarding the possibility that such manufacture, use, sale or
practice might infringe any third party's know-how, patent rights or
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other intellectual property in the Territory;
(e) it is aware of no third party using or infringing all or any of
the Dynavax Patents in derogation of the rights granted pursuant to this
Agreement;
(f) it is aware of no third party claim to any rights in the Dynavax
Patents or the Dynavax Know-How;
(g) it is aware of no pending interference or opposition proceeding
or litigation or any communication which threatens an interference or opposition
proceeding or litigation before any patent and trademark office, court, or any
other governmental entity or court in any jurisdiction in regard to the Dynavax
Patents; and
(h) with respect to the Primary License Agreement (i) Dynavax and,
to Dynavax' knowledge, the Primary Licensor has performed all the material
obligations required to be performed by each to date, and are not in default or
breach under the Primary License Agreement; (ii) the Primary License Agreement
has been duly authorized, executed and delivered by Dynavax and constitutes the
legal, valid and binding obligation of Dynavax, enforceable in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar rights affecting the enforcement of creditors'
rights generally and the application of general principles of equity; (iii)
Dynavax has no knowledge that the Primary License Agreement has not been duly
authorized, executed or delivered by the Primary Licensor, or does not
constitute the legal, valid and binding obligation of the other party thereto,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium or similar rights
affecting the enforcement of creditors' rights generally and the application of
general principles of equity; (iv) the rights under this Agreement may be
granted in full
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without any consent of the Primary Licensor that has not been obtained; and (v)
the execution of this Agreement and the performance of the transactions
contemplated hereby will not change in any respect, or result in the termination
of, any terms or provisions of the Primary License Agreement.
13.2 Warranties and Representations of Each Party. Each party hereto
warrants and represents to: (a) the other that it is free to enter into this
Agreement (including the receipt of all corporate authorizations) and to carry
out all of the provisions hereof, including, its grant to the other of the
licenses described in Article 2; (b) to its knowledge, there is no failure to
comply with, no violation of or any default under, any law, permit or court
order applicable to it which might have a material adverse effect on its ability
to execute, deliver and perform this Agreement or on its ability to consummate
the transactions contemplated hereby; and (c) it shall comply with laws and
regulations relating to the performance of its obligations or the exercise of
its rights hereunder including, in the case of Triangle, those relating to the
manufacture, processing, producing, use, sale, or distribution of Licensed
Products; and that it shall not take any action which would cause it or the
other party to violate such laws and regulations.
13.3 Disclaimer of Warranties. EXCEPT AS OTHERWISE SET FORTH IN SECTION
13.1 ABOVE, DYNAVAX MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT
TO THE DYNAVAX PATENTS OR DYNAVAX KNOW-HOW AND EXPRESSLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE
CAPABILITIES, SAFETY, UTILITY, OR COMMERCIAL APPLICATION OF
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DYNAVAX PATENTS OR DYNAVAX KNOW-HOW.
13.4 Limitation of Liability.
(a) Neither party shall be liable to the other party or its
Affiliates, sublicensees or any of its or their customers for any special,
incidental or consequential damages resulting from defects in the testing,
labeling, manufacture or other application of the Licensed Products
manufactured, tested or sold pursuant to this Agreement.
(b) Any provision of this Agreement to the contrary notwithstanding,
Dynavax shall not be liable to Triangle, its Affiliates or sublicensees for any
damage that any party may suffer as a result of any third party actions for
patent infringement or for any other claims against Triangle, its Affiliates or
sublicensees in connection with their use of Dynavax Patents or Dynavax
Know-How; provided, however, that the foregoing limitation shall in no way
affect or otherwise limit any remedies which Triangle or its Affiliates or
sublicensees may have against Dynavax as a result of Dynavax' breach of any of
its warranties and representations set forth in Article 13 hereof.
13.5 Insurance. Without limiting Triangle's indemnity obligations under
Article 14, Triangle shall maintain throughout the term of this Agreement a
commercial, general liability insurance policy, written by a reputable insurance
company authorized to do business in the United States, which:
(a) insures Indemnitees for all claims, damages, and actions
mentioned in Section 14.1 of this Agreement;
(b) includes a contractual endorsement providing coverage for all
liability arising out of bodily injury and property damage; and
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(c) provides the Indemnitees with product liability coverage in an
amount no less than *** Dollars ($***) per occurrence for bodily injury and ***
Dollars ($***) per occurrence for property damage, subject to a reasonable
aggregate amount not to exceed *** Dollars ($***). Upon request, Triangle shall
provide Dynavax with certificates of insurance evidencing the above insurance
coverage.
13.6 Special Dynavax Covenants.
(a) Dynavax agrees that it shall (i) maintain the Primary License
Agreement in full force and effect during the term of this Agreement; (ii) take
no action that would constitute a breach or default of the Primary License
Agreement; (iii) keep Triangle informed with respect to all material
developments affecting the Agreement, including, without limitation, by promptly
forwarding to Triangle a copy of any notice provided to Dynavax by the Primary
Licensor pursuant to the Primary License Agreement; (iv) in addition, to the
extent Triangle in accordance with this Agreement pays money or provides
information or materials to Dynavax, Dynavax shall promptly forward the same to
the Primary Licensor in a manner and in such time so as not to cause a breach or
default under the Primary License Agreement; and (v) will not amend the Primary
License Agreement in a manner which adversely affects Triangle's rights and
obligations hereunder. Dynavax further agrees that Triangle shall have the right
to pay any amounts due and payable by Dynavax to the Primary Licensor pursuant
to the Primary License Agreement in the event Dynavax does not pay such amounts
in a timely manner. In such event, Triangle may totally offset such amounts paid
to the Primary Licensor against any amounts payable to Dynavax hereunder and
such offset shall not be taken into account when calculating any limitation on
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royalty reductions prescribed in Article 3 hereof.
(b) Within thirty (30) days after the Effective Date, Dynavax agrees
that it will deliver to the Primary Licensor a copy of the amendment to the
Primary License Agreement in form and substance attached hereto as Exhibit C and
request that the Primary Licensor execute such amendment. Dynavax agrees to
execute such amendment and will inform Triangle of the Primary Licensor's
response to the foregoing request.
(c) Dynavax agrees to use its best efforts to prepare and file all
patent applications relating to the Dynavax Patents as promptly as reasonably
possible.
ARTICLE 14. INDEMNIFICATION
14.1 Triangle's Indemnification. Subject to compliance by the Indemnitees
with the provisions set forth in Section 14.3, Triangle shall defend, indemnify,
and hold harmless the Indemnitees, from and against any and all claims, demands,
losses, liabilities, expenses, and damages including investigative costs, court
costs and reasonable attorneys' fees (collectively, the "Liabilities") which
Indemnitees may suffer, pay, or incur as a result of or in connection with: (a)
any and all personal injury (including death) and property damage caused or
contributed to, in whole or in part, by manufacture, testing, design, use, sale,
or labeling of any Licensed Products or the practice of the Dynavax Patents or
Dynavax Know-How by Triangle or Triangle's Affiliates or sublicensees, excluding
any Liabilities arising as a result of Dynavax' or, if applicable, its
subcontractor's negligence, intentional misconduct or breach of contract in
supplying Finished Drug Substance or Dynavax' breach of its representations and
warranties and covenants under this Agreement; and (b) any breach by Triangle of
its representations, warranties and covenants contained in this Agreement.
Triangle's obligations under this Article shall survive the expiration or
termination of this
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Agreement for any reason.
14.2 Dynavax' Indemnification. Subject to compliance by the Indemnitees
with the provisions set forth in Section 14.3, Dynavax shall indemnify and hold
the Indemnitees harmless from and against any and all Liabilities which
Indemnitees may suffer, pay or incur as a result of or in connection with: (a)
any breach by Dynavax of any of its representations, warranties and covenants
set forth in this Agreement; (b) any claims or suits asserted or commenced by
the Primary Licensor regarding any default or alleged default by Dynavax under
the Primary License Agreement. Dynavax' obligations under this Article shall
survive expiration or termination of this Agreement for any reason; and (c)
Dynavax' or, if applicable, its subcontractor's negligence, intentional
misconduct or breach of contract in supplying Finished Drug Substance.
14.3 Indemnification Procedures. Any Indemnitee which intends to claim
indemnification under this Article shall, promptly after becoming aware thereof,
notify the party from whom it is seeking indemnification (the "Indemnitor") in
writing of any matter in respect of which the Indemnitee or any of its employees
intend to claim such indemnification. The Indemnitee shall permit, and shall
cause its employees to permit, the Indemnitor, at its discretion, to settle any
such matter and agrees to the complete control of such defense or settlement by
the Indemnitor; provided, however, that such settlement does not adversely
affect the Indemnitee's rights hereunder or impose any obligations on the
Indemnitee in addition to those set forth herein in order for it to exercise
such rights. No such matter shall be settled by such Indemnitee without the
prior written consent of the Indemnitor and neither the Indemnitor nor the
Indemnitee shall be responsible for any legal fees or other costs incurred other
than as provided herein. The Indemnitee and its employees
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shall cooperate fully with the Indemnitor and its legal representatives in the
investigation and defense of any matter covered by the applicable
indemnification. The Indemnitee shall have the right, but not the obligation, to
be represented by counsel of its own selection and expense.
ARTICLE 15. CONFIDENTIALITY
15.1 Treatment of Confidential Information. Except as otherwise provided
hereunder, during the term of this Agreement and for a period of (***) *** years
thereafter:
(a) Triangle and its Affiliates and sublicensees shall retain in
confidence and use only for purposes of this Agreement, any written information
and data supplied by or on behalf of Dynavax under this Agreement and the
Non-Disclosure Agreement, dated April 9, 1999, between Dynavax and Triangle (the
"Confidentiality Agreement"); and
(b) Dynavax shall retain in confidence and use only for purposes of
this Agreement any written information and data supplied by or on behalf of
Triangle to Dynavax under this Agreement.
For purposes of this Agreement, all such information and data which a
party is obligated to retain in confidence shall be called "Information."
15.2 Right to Disclose. To the extent that it is reasonably necessary to
fulfill its obligations or exercise its rights under this Agreement, or any
rights which survive termination or expiration hereof, each party may disclose
Information to its Affiliates, sublicensees (actual or prospective),
consultants, outside contractors, actual or prospective investors, and clinical
investigators on condition that such entities or persons agree in
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writing:
(a) to keep the Information confidential for a period of at least
*** (***) years from the date of disclosure by such party to the same extent as
such party is required to keep the Information confidential; and
(b) to use the Information only for those purposes for which the
disclosing party is authorized to use the Information.
Each party or its Affiliates or sublicensees, as applicable, may disclose
Information to the government or other regulatory authorities to the extent that
such disclosure (i) is necessary for the prosecution and enforcement of patents,
or authorizations to conduct preclinical or clinical trials to commercially
market Licensed Products, provided such party is then otherwise entitled to
engage in such activities in accordance with the provisions of this Agreement,
or (ii) is legally required.
15.3 Release from Restrictions. The obligation not to disclose or use
Information shall not apply to any part of such Information that:
(a) is or becomes patented (but the existence of a patent shall only
permit disclosure and not, unless otherwise provided hereunder, use), published
or otherwise part of the public domain, other than by unauthorized acts of the
party obligated not to disclose such Information (for purposes of this Article
15 the "receiving party") or its Affiliates or sublicensees in contravention of
this Agreement; or
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(b) is disclosed to the receiving party or its Affiliates or
sublicensees by a third party provided that such Information was not obtained by
such third party directly or indirectly from the other party to this Agreement;
or
(c) prior to disclosure under the Confidentiality Agreement or this
Agreement, as the case may be, was already in the possession of the receiving
party, its Affiliates or sublicensees, provided that such Information was not
obtained directly or indirectly from the other party to this Agreement; or
(d) results from research and development by the receiving party or
its Affiliates or sublicensees, independent of disclosures from the other party
to this Agreement, provided that the persons developing such information have
not had exposure to the information received from the other party to this
Agreement; or
(e) is required by law to be disclosed by the receiving party,
provided that in the case of disclosure in connection with any litigation, the
receiving party uses reasonable efforts to notify the other party immediately
upon learning of such requirement in order to give the other party reasonable
opportunity to oppose such requirement; or
(f) Triangle and Dynavax agree in writing may be disclosed.
ARTICLE 16. CONDITIONS PRECEDENT
This Agreement will not become effective until Dynavax and Triangle
have executed and delivered the Stock Purchase Agreement and the Closing (as
defined in the Stock Purchase Agreement) shall have occurred. In the event the
condition set forth in this Article 16 has not been satisfied within thirty (30)
days from the date set forth at the beginning of this Agreement, Triangle may
terminate this Agreement by giving Dynavax ten (10) days' prior notice.
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ARTICLE 17. TERM AND TERMINATION
17.1 Term. Unless sooner terminated as otherwise provided in this
Agreement, the term of this Agreement shall commence on the Effective Date and
shall continue in full force and effect until the expiration of Triangle's
obligations to pay royalties hereunder.
17.2 Termination by Default.
(a) If either party defaults in the performance of, or fails to be
in compliance with, any material agreement, condition or covenant of this
Agreement, the non-defaulting party may terminate this Agreement with respect to
the defaulting party if such default or noncompliance shall not have been
remedied, or, in the event the default or non-compliance cannot be remedied
within such period, reasonable steps shall not have been initiated to remedy the
same, within sixty (60) days after receipt by the defaulting party of a written
notice thereof from the non- defaulting party. If the defaulting party's default
relates solely to its obligations under the Research Program, the non-defaulting
party may elect to terminate only the Research Program pursuant to the Section
17.2(a) without affecting the remainder of the Agreement.
(b) In the event that: (i) any proceeding is commenced by or against
a party seeking relief under any bankruptcy, insolvency or similar law and if
such proceeding is involuntary, it remains undismissed for sixty (60) days; or a
party, by action or answer, approves of, consents to or acquiesces in such
proceeding or admits the material allegations of or defaults in answering a
petition filed in such proceeding; or (ii) a receiver, liquidator, assignee,
custodian or trustee (or similar official) is appointed for a party in respect
of any substantial part of its assets or for purposes of the winding-up or
liquidation of its business and such appointment remains unstayed and in effect
for a period of sixty (60) days; or (iii) a
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party makes an assignment for the benefit of creditors; then, in any such event,
such party shall be deemed in default for purposes of this Section 17.2.
17.3 Termination by Triangle. Triangle shall have the right to terminate
this Agreement by giving Dynavax sixty (60) days' prior written notice thereof.
Such termination may be made with respect to one or more (a) countries of the
Territory; (b) Disease Indications; or (c) form of Licensed Product in respect
of an indication, without affecting this Agreement in respect of other
countries, Disease Indications or forms of Licensed Products.
17.4 Obligations Upon Termination. If this Agreement is terminated as a
result of Triangle's breach pursuant to Section 17.2, or is terminated in whole
or in part by Dynavax in accordance with Section 7.3 or by Triangle in
accordance with Section 17.3, then in the case of termination in the entire
Territory, Triangle shall use, and shall cause its Affiliates and sublicensees
to use, its and their best efforts to return, or at Dynavax' direction, destroy
all data, writings and other documents and tangible materials supplied to
Triangle by Dynavax properly organized; and (b) with respect to those countries
with respect to which termination occurs, provided the parties reach agreement
on the terms of the license described in Section 2.4, Triangle shall provide
Dynavax with full and complete copies of all toxicity, efficacy, and other data
generated by Triangle or Triangle's Affiliates, and sublicensees, in the course
of Triangle's efforts to develop Licensed Products or to obtain governmental
approval for the sale of Licensed Products, including but not limited to any
regulatory filings with any government agency in such countries. Dynavax shall
be authorized to cross-reference any such regulatory filings made by Triangle,
its Affiliates and sublicensees in the countries in which termination occurs
where permitted by law. Dynavax
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shall be entitled to provide information pertaining to the Triangle Patents,
Triangle Know-How and Joint Know-How to any third party with a bona fide
interest in licensing such technology in the countries in which termination
occurs. Such data shall be provided on a confidential basis; provided, however,
that if such third party concludes a license with Dynavax, such third party
shall be free to use such data for all purposes, including to obtain government
approvals to sell any product containing any Compound in such countries, subject
to Dynavax' obligation to Triangle in respect thereof.
17.5 Effect of Termination. In the event of any expiration or termination
pursuant to this Article 17, neither party shall have any remaining rights or
obligations under this Agreement other than as provided below:
(a) Dynavax will have the right to receive all payments accrued
prior to the effective date of termination;
(b) termination or expiration of this Agreement for any reason shall
have no effect on the parties' obligations under Articles 11, 14 and 15 or their
respective rights in Joint Know-How set forth in Section 1.28;
(c) upon expiration of Triangle's royalty obligations under this
Agreement in a given country, Triangle shall have a perpetual, fully paid-up,
non-exclusive license to use the Dynavax Know-How in such country;
(d) termination of this Agreement by Dynavax pursuant to Section 7.3
or 17.2 or by Triangle pursuant to Section 17.3, shall have no effect on the
rights and obligations of the parties under Section 17.4; and
(e) the parties' shall retain any other remedies for breach of this
Agreement they may otherwise have.
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17.6 Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Dynavax to Triangle are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101(56) of the Bankruptcy Code.
The parties agree Triangle, as a licensee of such rights and licenses, shall
retain and may fully exercise all of its rights and elections under the
Bankruptcy Code. The parties further agree that, in the event that any
proceeding shall be instituted by or against Dynavax seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief of composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking an entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property or it shall take any action to authorize any of the foregoing
actions (each a "Proceeding"), Triangle shall have the right to retain and
enforce its rights under this Agreement, including but not limited to the
following rights:
(a) the right to continue to use the Dynavax Patents and Dynavax
Know-How and all versions and derivatives thereof, and all documentation and
other supporting material related thereto, in accordance with the terms and
conditions of this Agreement; and
(b) the right to a complete duplicate of (or complete access to, as
appropriate) all Dynavax Patents and Dynavax Know-How and all embodiments of
such, and the same, if not already in Triangle's possession, shall be promptly
delivered to Triangle (i) upon any such commencement of a Proceeding upon
written request therefor by Triangle, unless Dynavax elects to continue to
perform all of its obligations under this Agreement; or (ii) if not delivered
under (i) above, upon the rejection of this Agreement by or on behalf of
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Dynavax upon written request therefor by Triangle; and
(c) the right to obtain from Dynavax all documentation and other
supporting materials related to the Dynavax Patents and Dynavax Know-How and all
versions and derivatives thereof.
ARTICLE 18. ASSIGNMENT
Neither party shall assign this Agreement or any part thereof without the
prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Each party may, however, without such consent,
assign or sell its rights under this Agreement (a) in connection with the sale
or transfer of all or substantially all of its pharmaceutical business to a
third party; (b) in the event of a merger or consolidation with a third party;
or (c) to an Affiliate. No assignment shall relieve any party of responsibility
for the performance of any accrued obligation which such party has under this
Agreement. Any assignment shall be contingent upon the assignee assuming in
writing all of the obligations of its assignor under this Agreement.
ARTICLE 19. REGISTRATION OF LICENSE
Triangle, at its expense, may register the license granted under this
Agreement in any country of the Territory where the use, sale or manufacture of
a Licensed Product in such country would be covered by a Valid Claim. Upon
request by Triangle, Dynavax agrees promptly to execute any "short form"
licenses consistent with the terms and conditions of this Agreement submitted to
it by Triangle reasonably necessary in order to effect the foregoing
registration in such country.
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ARTICLE 20. NOTIFICATION AND AUTHORIZATION UNDER DRUG PRICE COMPETITION AND
PATENT TERM RESTORATION ACT
20.1 Notices Relating to the Act. Dynavax shall notify, and shall use its
best efforts to cause the Primary Licensor to notify, Triangle of (a) the
issuance of each U.S. patent included among the Dynavax Patents, giving the date
of issue and patent number for each such patent; and (b) each notice pertaining
to any patent included among the Dynavax Patents which the Primary Licensor
receive as patent owners pursuant to the Drug Price Competition and Patent Term
Restoration Act of 1984 (hereinafter the "Act"), including but not necessarily
limited to notices pursuant to ss.ss.101 and 103 of the Act from persons who
have filed an abbreviated NDA ("ANDA") or a "paper" NDA. Such notices shall be
given promptly, but in any event within ten (10) days of notice of each such
patent's date of issue or receipt of each such notice pursuant to the Act,
whichever is applicable.
20.2 Authorization Relating to Patent Term Extension. Dynavax hereby
authorizes Triangle and will use its best efforts to obtain the Primary
Licensor's authorization for Triangle (a) to include in any NDA for a Licensed
Product, as Triangle may deem appropriate under the Act, a list of patents
included among the Dynavax Patents that relate to such Licensed Product and such
other information as Triangle in its reasonable discretion believes is
appropriate to be filed pursuant to the Act; (b) to commence suit for any
infringement of the Dynavax Patents under ss. 271(e) (2) of Title 35 of the
United States Code occasioned by the submission by a third party of an IND or a
paper NDA for a Licensed Product pursuant to ss.ss.101 or 103 of the Act; and
(c) in consultation with Dynavax and the Primary Licensor, to exercise any
rights that may be exercisable by Dynavax or the Primary Licensor, as
applicable, as patent owners under the Act to apply for an extension of the term
of any patent included among the Dynavax Patents. In the event that applicable
law in any
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other country of the Territory hereafter provides for the extension of the term
of any patent included among the Dynavax Patents in such country, upon request
by Triangle, Dynavax shall authorize Triangle and shall use its best efforts to
obtain the Primary Licensor's authorization for Triangle or, if requested by
Triangle, its sublicensees, to apply for such extension, in consultation with
Dynavax and the Primary Licensor. Dynavax agrees to cooperate and shall use its
best efforts to cause the Primary Licensor to cooperate with Triangle or its
sublicensees, as applicable, in the exercise of the authorizations granted
herein or which may be granted pursuant to this Section 20.2 and will execute
such documents and take such additional action and use its best efforts to cause
the Primary Licensor to execute such documents and to take such additional
actions as Triangle may reasonably request in connection therewith, including,
if necessary, permitting itself and using its best efforts to permit the Primary
Licensor to permit themselves to be joined as proper parties in any suit for
infringement brought by Triangle under subsection (b) above. Triangle shall bear
the costs and expenses, including but not limited to attorneys' fees, of any
suit for infringement brought by Triangle under subsection (b) above.
ARTICLE 21. DISPUTE RESOLUTION AND ARBITRATION
21.1 Initial Resolution. In the case of any disputes between the parties
arising from this Agreement (including, but not limited to, disputes regarding
alleged defaults), and in case this Agreement does not specifically provide for
how to resolve such disputes or prescribe that one party has final
decision-making authority with respect to such dispute, the parties shall
discuss and negotiate in good faith a solution acceptable to both parties and in
the spirit of this Agreement. If after negotiating in good faith pursuant to the
foregoing sentence, the parties fail to reach agreement within thirty (30) days,
then the President and
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Chief Executive Officer of Dynavax and the Chief Executive Officer of Triangle
shall discuss in good faith an appropriate resolution to the dispute. If these
executives fail, after good faith discussions not to exceed thirty (30) days, to
reach an amicable agreement either party may demand binding arbitration pursuant
to Section 21.2 ("Arbitration"). The date of submission of the matter to
substrate shall be the "Dispute Date".
21.2 Arbitration. The following provisions shall govern any arbitration
pursuant to this Agreement.
(a) Arbitration shall be conducted in accordance with the Rules of
the American Arbitration Association. In the event of any conflict between the
Rules and this Section, the provisions of this Section shall govern. The
Arbitration shall be conducted in *** if arbitration is demanded by Dynavax or
*** if arbitration is demanded by Triangle.
(b) The Arbitration shall be heard by a panel of three arbitrators
(each an "Arbitrator"). Triangle and Dynavax shall each select one Arbitrator.
Such Arbitrators shall be attorneys, licensed to practice law in the state in
which the Arbitration is being held, actively engaged in the full-time practice
of law for a period of no less than seven (7) years. Such Arbitrators shall not
be affiliated, directly or indirectly, with the parties or the attorneys
representing the parties in the Arbitration and shall not have any prior
involvement in the matter. In the event that either party fails within fifteen
(15) days after the Dispute Date (i) to select an Arbitrator who, to its
knowledge, meets the requirements set forth in this subsection (b) and (ii) to
notify the other party of the selection, the other party will then have the
right to select such Arbitrator. The third Arbitrator shall be selected by
mutual agreement of the parties from a list of neutral arbitrators compiled by
the American Arbitration Association for
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the parties. The third Arbitrator shall not have any prior or current
relationship, direct or indirect, with any party to this Agreement. If the
parties to the Arbitration are unable to agree upon the third Arbitrator within
fifteen (15) days from the Dispute Date, the appointment of the third Arbitrator
shall be made as expeditiously as possible and in compliance with this Section
21.2 by the two Arbitrators selected by the parties. If those Arbitrators cannot
agree on the third Arbitrator within ten (10) days, then the third Arbitrator
shall be designated by the American Arbitration Association or the appropriate
designated representative thereof upon the written request of any party with
simultaneous notice of such request to the other party to the Arbitration. The
third Arbitrator shall preside over the panel of Arbitrators and the
Arbitration.
(c) The Arbitrators shall apply the substantive laws of the *** to
the validity, construction and interpretation of this Agreement as is applicable
to contracts made wholly performable within the state.
(d) The Arbitration shall be resolved no later than sixty (60) days
from the date of acceptance by the third Arbitrator of his or her appointment
unless otherwise agreed to by the parties to the Arbitration.
(e) Each party shall bear the expenses and costs of the Arbitrator
selected by the party. The third Arbitrator shall be compensated for services
rendered at the prevailing hourly rate of compensation and reimbursed for any
expenses incurred in connection with rendering such services. The non-prevailing
party shall bear the costs and expenses of compensation and reimbursement for
the third Arbitrator.
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(f) The decision of the Arbitrators shall be rendered in writing
and shall be final and binding and may be enforced at the request of either
party to the Arbitration in any United States District Court in the state where
the Arbitration takes place or any state court of such state having competent
jurisdiction. Such decision may not be appealed except upon a claim of bad faith
or fraud by the Arbitrators.
(g) This Article 21 shall not apply to issues relating to the
validity, construction or effect of the Dynavax Patents. In the event that, in
any Arbitration, any issue arises concerning the validity, construction or
effect of any of the Dynavax Patents, the Arbitrators shall assume the validity
of all claims as set forth in such Dynavax Patents. Matters, controversies or
disputes concerning the Dynavax Patents shall be resolved in any court having
jurisdiction thereof or in any other manner mutually agreed to by the parties.
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ARTICLE 22. GENERAL PROVISIONS
22.1 Export Controls. Dynavax acknowledges that Triangle is subject to
United States laws and regulations controlling the export of technical data,
biological materials, chemical compositions and other commodities and that
Triangle's obligations under this Agreement are contingent upon compliance with
applicable United States export laws and regulations. The transfer of technical
data, biological materials, chemical compositions and commodities may require a
license from the cognizant agency of the United States government or written
assurances by Dynavax that Dynavax shall not export data or commodities to
certain foreign countries without the prior approval of certain United States
agencies, or as otherwise prescribed by applicable law or regulation. Triangle
neither represents that an export license shall not be required nor that, if
required, such export license shall issue.
22.2 Independent Contractors. It is understood and agreed that the
parties hereto are independent contractors and are engaged in the operation of
their own respective businesses, and neither party hereto is to be considered
the agent of the other party for any purpose whatsoever, and neither party shall
have any authority to enter into any contracts or assume any obligations for the
other party nor make any warranties or representations on behalf of that other
party.
22.3 Patent Marking. Triangle shall mark Licensed Products sold in the
United States with United States patent numbers. Licensed Products manufactured
or sold in other countries shall be marked in compliance with the intellectual
property laws in force in such countries. The foregoing obligations shall be
subject to size and space limitations. If Dynavax believes that a Licensed
Product should be marked with the number of a Dynavax
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Patent, Dynavax shall provide written notice to Triangle which identifies the
patent number and the Licensed Product on which it should appear. It shall also
be Dynavax' responsibility to inform Triangle in writing when marking with a
Dynavax Patent number should be discontinued. To the extent that Triangle
complies with Dynavax' instructions, Dynavax shall indemnify and hold Triangle
harmless for any liability, claim or action for false patent marking or
non-marking.
22.4 Publicity. The parties agree to issue mutual press releases
concerning their entry into this Agreement, with the content of such releases to
be approved (which consent shall not be unreasonably withheld or delayed) in
advance by the parties. In all other respects, except as required by law,
neither party shall use the name of the other party in any publicity release
without the prior written permission of such other party, which shall not be
unreasonably withheld. The other party shall have a reasonable opportunity to
review and comment on any such proposed publicity release. Except as required by
law, neither party shall publicly disclose the terms of this Agreement or issue
any publicity release with regard thereto unless expressly authorized to do so
by the other party which authorization shall be agreed upon.
22.5 Governing Law. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the ***, exclusive of its
conflicts of laws principles.
22.6 Entire Agreement. This Agreement, together with the Exhibits
attached hereto, constitutes the entire agreement between Dynavax and Triangle
with respect to the subject matter hereof and shall not be modified, amended or
terminated, except as herein
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provided or except by another agreement in writing executed by the parties
hereto. Upon the Effective Date, the Confidentiality Agreement shall terminate.
22.7 Waiver. No provision of this Agreement may be waived except by a
writing signed by the party entitled to the benefit thereof, and no such waiver
of any provision hereof in one instance shall constitute a waiver of any other
provision or of such provision in any other instance. No omission, delay or
failure on the part of any party hereto in exercising any rights hereunder will
constitute a waiver of such rights or of any other rights hereunder.
22.8 Severability. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement,
not essential to the commercial purpose of this Agreement, shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions, or portions thereof, shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which shall implement the commercial purpose of the illegal, invalid, or
unenforceable provision. In the event that any provision essential to the
commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable and cannot be replaced by a valid provision which will implement
the commercial purpose of this Agreement, this Agreement and the rights granted
herein shall terminate.
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22.9 Force Majeure.
(a) Any delays in, or failure of performance of, any party to this
Agreement, shall not constitute a default hereunder, or give rise to any claim
for damages, if and to the extent caused by occurrences beyond the control of
the party affected, including, but not limited to, acts of God, strikes or other
concerted acts of workmen, civil disturbances, fires, floods, explosions, riots,
war, rebellion, sabotage, acts of governmental authority or failure of
governmental authority to issue licenses or approvals which may be required
("Force Majeure"), provided that any such delay shall not extend for more than
twelve (12) months.
(b) The party asserting the Force Majeure shall promptly notify the
other party of the event constituting Force Majeure and of all relevant details
of the occurrence and where appropriate an estimate of how long such Force
Majeure event shall continue.
(c) If such Force Majeure event continues thereafter and in any
event, the parties shall consult with each other in order to find a fair
solution and shall use all reasonable endeavors to minimize the consequences of
such Force Majeure.
22.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22.11 Notices. All notices, statements, and reports required to be given
under this Agreement shall be in writing and shall be deemed to have been given
upon delivery in person or, when deposited (a) in the mail in the country of
residence of the party giving the notice, registered or certified postage
prepaid or (b) with a professional courier service (e.g., FedEx or UPS), and
addressed as follows:
78
<PAGE>
To Dynavax: Dynavax Technologies Corporation
Attention: President and Chief Executive Officer
717 Potter Street, Suite 100
Berkeley, California 94710
Facsimile: (510) 848-5694
To Triangle: Triangle Pharmaceuticals, Inc.
Attention: Chris A. Rallis, Executive Vice President
Business Development, General Counsel
(By Express Courier): 4 University Place, 4611 University Drive
Durham, NC 27707
(By Mail): P.O. Box 50530
Durham, NC 27717-0530
Facsimile: (919) 402-1148
Any party hereto may change the address to which notices to such party are to be
sent by giving notice to the other party at the address and in the manner
provided above. Any notice may be given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving such notice
obtains acknowledgment by telex, facsimile or cable that such notice has been
received by the party to be notified. Notices made in this manner shall be
deemed to have been given when such acknowledgment has been transmitted.
[THE REMAINDER OF THIS PAGE
HAS BEEN INTENTIONALLY LEFT BLANK]
79
<PAGE>
IN WITNESS WHEREOF, Dynavax and Triangle have caused this Agreement to be
signed by their duly authorized representatives, under seal, as of the day and
year indicated above.
DYNAVAX TECHNOLOGIES CORPORATION
By: /s/ Dino Dina
------------------------------------------
Title:
----------------------------------------
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Chris A. Rallis
------------------------------------------
Title: President and COO
----------------------------------------
[SIGNATURE PAGE FOR DYNAVAX/TRIANGLE LICENSE AGREEMENT]
80
<PAGE>
EXHIBIT A
DYNAVAX PATENTS
Note: Only pending US cases are listed. None of the following have issued as
patents.
- ------------------------------------------------------------------------------
Docket No. Country Serial No. Filing Date
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20024.41 Australia 18418/97 January 28, 1997
- ------------------------------------------------------------------------------
20024.42 Japan 09-527752 January 28, 1997
- ------------------------------------------------------------------------------
20024.43 Canada 2,244,946 January 28, 1997
- ------------------------------------------------------------------------------
20024.44 Europe 97903998.9 January 28, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20025.41 Australia 49921/97 October 9, 1997
- ------------------------------------------------------------------------------
20025.42 Japan 10-518649 October 9, 1997
- ------------------------------------------------------------------------------
20025.43 Canada 2,268,825 October 9, 1997
- ------------------------------------------------------------------------------
20025.44 Europe 97912831 October 9, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20027.40 PCT PCT/US98/18382 September 4, 1998
- ------------------------------------------------------------------------------
20027.41 Europe 98945877.3 September 4, 1998
- ------------------------------------------------------------------------------
20027.42 Australia Unassigned(1) September 4, 1998
- ------------------------------------------------------------------------------
20027.43 Canada Unassigned(1) September 4, 1998
- ------------------------------------------------------------------------------
20027.44 Japan Unassigned(1) September 4, 1998
- ------------------------------------------------------------------------------
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
(1) based on PCT/US98/18382
A-1
<PAGE>
- ------------------------------------------------------------------------------
Docket No. Country Serial No. Filing Date
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20004.41 Australia 78178/98 June 5, 1998
- ------------------------------------------------------------------------------
20004.42 Canada 2,291,483 June 5, 1998
- ------------------------------------------------------------------------------
20004.43 Europe 98926311.6 June 5, 1998
- ------------------------------------------------------------------------------
20004.44 Japan Unassigned(2) June 5, 1998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20002.40 PCT PCT/US99/12538 June 4, 1999
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
20007.40 PCT PCT/US99/23677 October 9, 1999
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
***
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
(2) based on PCT/US98/11578
A-2
<PAGE>
EXHIBIT B
SCOPE OF WORK UNDER RESEARCH PROGRAM
Dynavax-Triangle HBV/ISS Research Program
Months ***
***
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
B-1
<PAGE>
Months ***
***
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
B-2
<PAGE>
EXHIBIT C
AMENDMENT NUMBER 4
to
EXCLUSIVE LICENSE AGREEMENT
between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
DYNAVAX TECHNOLOGIES CORPORATION
This AMENDMENT NUMBER 4, dated as of ________________, 2000, and effective
in accordance with Paragraph 6 hereof, by and between the THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA, a California corporation having its statewide
administrative offices 1111 Franklin Street, 12th Floor, Oakland, California
94607-5200 ("THE REGENTS") and DYNAVAX TECHNOLOGIES CORPORATION, with offices
located at 717 Potter Street, Suite 100, Berkeley, California 94710
("LICENSEE").
WITNESSETH:
WHEREAS,THE REGENTS and LICENSEE have entered into an Exclusive License
Agreement for Administration of Naked Nucleotides which Express Biologically
Active Peptides and Immunostimulatory Oligonucleotide Conjugates, effective ***
(the "Primary License Agreement"); and
WHEREAS, LICENSEE and TRIANGLE PHARMACEUTICALS, INC., a Delaware
corporation with offices located at 4 University Place, 4611 University Drive,
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
C-1
<PAGE>
Durham, North Carolina 27707 ("TRIANGLE") have entered into a license agreement,
dated as of even date herewith (the "Triangle Sublicense Agreement"), pursuant
to which LICENSEE has granted TRIANGLE an exclusive sublicense to the Dynavax
Patents and Dynavax Know-How within the Fields (each as defined in the Triangle
Sublicense Agreement), in the entire world; and
WHEREAS, TRIANGLE has requested that LICENSEE and THE REGENTS execute this
Amendment Number 4 in order, inter alia, to reconcile certain inconsistencies
between this Primary License Agreement and the Triangle Sublicense Agreement and
LICENSEE and THE REGENTS are willing to do so;
NOW, THEREFORE, THE REGENTS and LICENSEE agree as follows:
1. All capitalized terms used in this Amendment Number 4 and not defined in
this Amendment Number 4 shall have the meanings given them in the Primary
License Agreement, except as otherwise explicitly set forth herein.
2. THE REGENTS confirm that the Primary License Agreement is in full force
and effect and THE REGENTS are not aware of any breach thereof by any
party thereto.
3. As of the date hereof, LICENSEE has complied with its diligence
obligations set forth in Article 9 of the Primary License Agreement.
4. The following *** is added to the Primary License Agreement:
***
5. THE REGENTS and LICENSEE agree not to amend the Primary License Agreement
in any manner which would adversely affect TRIANGLE's rights and
obligations under the Triangle Sublicense Agreement. Any such purported
amendment, without TRIANGLE's prior written consent (which Triangle may
withhold at its sole
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed seperately with the Commission.
C-2
<PAGE>
discretion), shall be void. THE REGENTS and LICENSEE agree to give
TRIANGLE at least thirty (30) days' notice of any other proposed amendment
to the Primary License Agreement (including a true and correct copy
thereof) and will not enter into such an amendment if prior to such thirty
(30) days' TRIANGLE identifies any provisions contained in such proposed
amendment which would adversely affect the rights and obligations of
TRIANGLE under the Triangle Sublicense Agreement. If TRIANGLE gives such
notice in a timely fashion, the parties will meet in an attempt to
mutually agree on acceptable terms of such amendment or, in lieu thereof,
THE REGENTS and LICENSEE may enter into such amendment deleting the
adverse provisions identified in TRIANGLE's notice.
6. This Amendment Number 4 shall become effective upon the Effective Date of
the Triangle Sublicense Agreement (as defined therein) provided, however,
that in the event the Triangle Sublicense Agreement terminates in one or
more countries, this Amendment Number 4 shall terminate automatically in
respect of such countries.
7. Except as otherwise expressly amended hereby, the Primary License
Agreement remains in full force and effect.
8. This Amendment Number 4 may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
C-3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized representatives, under seal, as of the date set forth
above.
LICENSOR: LICENSEE:
THE REGENTS OF THE DYNAVAX TECHNOLOGIES
UNIVERSITY OF CALIFORNIA CORPORATION
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
[Corporate Seal] [Corporate Seal]
[SIGNATURE PAGE TO AMENDMENT NO. 4]
C-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains consolidated summary financial information
extracted from Form 10-Q for the quarterly period ended March 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 52,678,000
<SECURITIES> 61,456,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,919,000
<PP&E> 8,993,000
<DEPRECIATION> (2,927,000)
<TOTAL-ASSETS> 146,339,000
<CURRENT-LIABILITIES> 34,445,000
<BONDS> 4,000
0
0
<COMMON> 38,000
<OTHER-SE> 90,048,000
<TOTAL-LIABILITY-AND-EQUITY> 146,339,000
<SALES> 0
<TOTAL-REVENUES> 1,982,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 35,644,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (31,386,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,386,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,386,000)
<EPS-BASIC> (0.83)
<EPS-DILUTED> (0.83)
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