<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2000
REGISTRATION NO. 333-96029
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------
INTERMUNE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8731 99-3296648
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------------
1710 GILBRETH ROAD
SUITE 301
BURLINGAME, CA 94010
(650) 409-2020
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
W. SCOTT HARKONEN, M.D.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
1710 GILBRETH ROAD
SUITE 301
BURLINGAME, CA 94010
(650) 409-2033
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN C. MENDELSON, ESQ. JONATHAN L. KRAVETZ, ESQ.
COOLEY GODWARD LLP EDWARD P. GONZALES, ESQ.
FIVE PALO ALTO SQUARE MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
3000 EL CAMINO REAL ONE FINANCIAL CENTER
PALO ALTO, CA 94306 BOSTON, MA 02111
(650) 843-5000 (617) 542-6000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common stock, $0.001 par value
per share................... 6,325,000 19.00 $113,850,000 $31,727
</TABLE>
(1) Includes 825,000 shares of common stock subject to the underwriters
over-allotment options.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(3) A registration fee of $26,717 was paid on February 2, 2000 for an aggregate
offering amount of $101,200,000, and a registration fee of $5,010 is paid
herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY PROSPECTUS Subject to completion, dated March 23, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
- --------------------------------------------------------------------------------
5,500,000 Shares
[LOGO]
Common Stock
- ------------------------------------------------------------
This is our initial public offering of shares of common stock. No public market
currently exists for our common stock. We expect the public offering price to be
between $17.00 and $19.00 per share.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "ITMN."
BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF
INVESTING IN OUR COMMON STOCK UNDER "RISK FACTORS" BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
- --------------------------------------------------------------------------------
Public offering price $ $
- --------------------------------------------------------------------------------
Underwriting discounts and commissions $ $
- --------------------------------------------------------------------------------
Proceeds, before expenses, to InterMune $ $
- --------------------------------------------------------------------------------
</TABLE>
The underwriters may also purchase up to 825,000 shares of common stock from us
at the public offering price, less the underwriting discounts and commissions,
within 30 days from the date of this prospectus. This option may be exercised to
cover over-allotments, if any. If the option is exercised in full, the total
underwriting discounts and commissions will be $ , and the total proceeds,
before expenses, to InterMune Pharmaceuticals, Inc. will be $ .
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2000.
Warburg Dillon Read LLC
Chase H&Q
Prudential Vector Healthcare
a unit of Prudential Securities
<PAGE>
DESCRIPTION OF GRAPHICS
[1. Title: ACTIMMUNE
2. Photograph of ACTIMMUNE packaging
3. Horizontal bar chart showing the FDA-approval status of our product and
prospective products.]
"InterMune" and the InterMune logo are trademarks of InterMune Pharmaceuticals,
Inc. Other trademarks and trade names appearing in this prospectus are the
property of their holders.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF
INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS."
OUR BUSINESS
InterMune Pharmaceuticals develops and commercializes innovative products
for the treatment of serious pulmonary and infectious diseases and congenital
disorders. We have the exclusive license rights in the United States to
ACTIMMUNE for a range of diseases, including:
- chronic granulomatous disease, a life-threatening congenital disorder of
the immune system;
- osteopetrosis, a life-threatening congenital disorder causing an
overgrowth of bony structures;
- idiopathic pulmonary fibrosis, a life-threatening lung condition;
- infections caused by a type of bacteria known as mycobacteria
(mycobacterial infections), such as tuberculosis;
- infections caused by various fungi that attack patients with weakened
immune systems (systemic fungal infections), such as cryptococcal
meningitis and pneumonia; and
- cystic fibrosis, a congenital disorder that leads to chronic pulmonary
infections in children.
We currently market ACTIMMUNE for chronic granulomatous disease and
osteopetrosis. We have active development programs underway for the other
disease areas, several of which are in mid-or advanced-stage human testing,
known as clinical trials. Idiopathic pulmonary fibrosis ($2.5 billion),
mycobacterial infections ($500 million) and systemic fungal infections
($500 million) are serious and difficult to treat diseases that we believe
represent a combined maximum market opportunity for ACTIMMUNE of approximately
$3.5 billion annually in the United States.
Interferon gamma-1b, the active ingredient in ACTIMMUNE, is a human protein
which plays a key role in preventing the formation of excessive scar, or
fibrotic, tissue and is a potent stimulator of the immune system. Interferon
gamma is biologically distinct from interferon alpha and interferon beta, two
related proteins that are currently marketed for the treatment of diseases such
as hepatitis B infection and multiple sclerosis. Interferon gamma has a superior
safety profile as compared to interferon alpha and interferon beta because it
results in fewer and less severe adverse side effects.
ACTIMMUNE--MARKETED DISEASE TREATMENTS
CHRONIC GRANULOMATOUS DISEASE. The U.S. Food and Drug Administration has
approved ACTIMMUNE for the treatment of chronic granulomatous disease, and we
currently market and sell ACTIMMUNE in the United States for this disease.
Chronic granulomatous disease causes patients to be vulnerable to severe
recurrent infections. This disease affects children, and no other FDA-approved
treatment specific to this disease currently exists. ACTIMMUNE was approved by
the FDA based on its ability to reduce the frequency and severity of infections
in these patients.
OSTEOPETROSIS. In February 2000, we received approval from the FDA for the
use of ACTIMMUNE for the treatment of osteopetrosis, and we currently market and
sell ACTIMMUNE in the United States for this disease. The FDA has granted
ACTIMMUNE orphan drug status for the treatment of osteopetrosis. Osteopetrosis
leads to blindness, deafness and increased susceptibility to infection. This
disorder primarily affects children, and no other effective treatment is
currently available.
ACTIMMUNE--DISEASE TREATMENTS IN DEVELOPMENT
IDIOPATHIC PULMONARY FIBROSIS. We believe the most significant near-term
use of ACTIMMUNE is for the treatment of idiopathic pulmonary fibrosis, which
afflicts at least 50,000 persons in the United States. Idiopathic pulmonary
fibrosis is characterized by progressive scarring of the lungs, which leads to
their deterioration and destruction. The prognosis of patients with idiopathic
pulmonary fibrosis is
3
<PAGE>
poor and most patients die from progressive loss of lung function, which leads
to suffocation. Treatment options for idiopathic pulmonary fibrosis are limited
and only minimally effective.
The results of testing to determine efficacy, known as a Phase II clinical
trial, published in October 1999 in The New England Journal of Medicine showed
statistically significant evidence that interferon gamma-1b halts and reverses
the progression of idiopathic pulmonary fibrosis. We are continuing the clinical
development of ACTIMMUNE for idiopathic pulmonary fibrosis by initiating an
accelerated clinical trial intended to provide sufficient data for approval,
known as a Phase II/III pivotal clinical trial, during the first half of 2000.
OTHER DISEASES. We are also developing ACTIMMUNE to treat a variety of
other diseases, including infectious diseases and cystic fibrosis. Preclinical
studies and clinical trials have demonstrated the therapeutic potential of
ACTIMMUNE against a broad range of infectious diseases, notably mycobacterial
and systemic fungal infections. A study published in May 1997 in The Lancet
showed that ACTIMMUNE was effective in the treatment of multidrug-resistant
tuberculosis, a type of mycobacterial infection. As a result of these studies,
we are initiating a clinical trial intended to provide sufficient data for
approval, known as a Phase III pivotal clinical trial, for ACTIMMUNE in the
treatment of multidrug-resistant tuberculosis and have commenced a Phase II
clinical trial in cryptococcal meningitis, a type of systemic fungal infection.
We intend to initiate Phase II clinical trials in cystic fibrosis and in
atypical mycobacterial infections, which are infections caused by mycobacteria
that differ appreciably from those that cause tuberculosis, in the second half
of 2000.
We believe that the risks and time required to obtain FDA approval for the
treatment of new diseases with ACTIMMUNE may be reduced because ACTIMMUNE has
proven to be safe for patients since its approval in 1990 for the treatment of
chronic granulomatous disease.
OTHER PRODUCTS IN DEVELOPMENT
We also have two preclinical development programs that address infections
caused by two types of bacteria, pseudomonas aeruginosa and staphylococcus
aureus.
STRATEGY
We plan to pursue a growth strategy through:
- growing product revenue;
- expanding the number of FDA-approved diseases for ACTIMMUNE;
- enhancing physician awareness and education;
- developing a sales and marketing organization to serve pulmonologists and
infectious disease specialists; and
- continuing to in-license preclinical and development-stage programs.
BACKGROUND
InterMune was formed in 1998 and began operations as a wholly owned
subsidiary of Connetics Corporation. In 1998, Connetics acquired from Genentech,
Inc., and subsequently sublicensed to us, rights to develop and commercialize
ACTIMMUNE for a broad range of diseases. We initially focused on marketing
ACTIMMUNE for chronic granulomatous disease and developing it for serious
infectious diseases and congenital disorders. We have since expanded our
development and commercialization plans to include idiopathic pulmonary fibrosis
as well as other life-threatening pulmonary diseases.
4
<PAGE>
THIS OFFERING
UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS ASSUMES:
- THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF OUR PREFERRED STOCK
INTO SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING;
- THE ISSUANCE OF 4,966,361 SHARES OF OUR SERIES B PREFERRED STOCK IN
JANUARY 2000; AND
- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
The following information assumes that the underwriters do not exercise the
over-allotment option granted by us to purchase additional shares in this
offering.
<TABLE>
<S> <C>
Common stock offered by us................ 5,500,000 shares
Common stock to be outstanding after this
offering................................ 20,192,194 shares(1)
Proposed Nasdaq National Market symbol.... ITMN
Use of proceeds........................... We intend to use the net proceeds from this offering for
clinical development and commercialization of our
existing products, working capital, payment of existing
debt for royalties payable, payment of obligations to
Connetics, in-licensing new products and general
corporate purposes. See "Use of Proceeds."
</TABLE>
- ------------------------
(1) The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999, and
excludes:
- 285,000 shares of common stock underlying options outstanding as of
December 31, 1999 at a weighted average exercise price of $0.238 per
share;
- 705,000 shares of common stock underlying options outstanding as of
December 31, 1999 and exercised in January 2000, at a weighted average
exercise price of $0.125 per share;
- 765,500 shares of common stock issuable upon the exercise of options
granted from January 1 through March 6, 2000 at a weighted average
exercise price of $4.21 per share;
- 64,500 shares of common stock available for issuance as of March 6, 2000
under our 1999 Equity Incentive Plan;
- 2,180,000 shares available for issuance or future grant under our 2000
Equity Incentive Plan and 2000 Non-Employee Directors' Stock Option Plan;
- 200,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 342,359 shares of stock available for issuance in connection with
convertible promissory notes for royalties payable.
Our principal executive offices are located at 1710 Gilbreth Road,
Suite 301, Burlingame, CA 94010. Our telephone number is (650) 409-2020. Our
website is http://www.intermune.com. We do not intend for the information found
on our website to be incorporated into or be a part of this prospectus.
5
<PAGE>
SUMMARY FINANCIAL DATA
We have prepared this information using our audited financial statements for
the period from February 25, 1998 (inception) to December 31, 1998 and the year
ended December 31, 1999. The following summary historical data should be read in
conjunction with our financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FEBRUARY 25, FEBRUARY 25,
1998 1998
(INCEPTION) TO YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
STATEMENT OF OPERATIONS DATA: 1998 1999 1999
- ----------------------------- -------------- ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Product sales, net...................................... $ -- $ 556 $ 556
Costs and expenses:
Cost of goods sold.................................... -- 240 240
Research and development.............................. 1,235 2,969 4,204
General and administrative............................ 892 2,656 3,548
Acquired pre-FDA approval rights...................... 4,000 1,094 5,094
------- ------- --------
Total costs and expenses................................ 6,127 6,959 13,086
Loss from operations.................................... (6,127) (6,403) (12,530)
Other income (expense):
Interest income....................................... 55 240 295
Interest expense...................................... -- (186) (186)
------- ------- --------
Net loss................................................ $(6,072) $(6,349) $(12,421)
------- ------- --------
Preferred stock accretion............................... -- (657) (657)
Net loss applicable to common stockholders.............. $(6,072) $(7,006) $(13,078)
======= ======= ========
Net loss per share, basic and diluted................... $ (9.12)
=======
Shares used in computing net loss per share,
basic and diluted..................................... 768
=======
</TABLE>
The pro forma balance sheet data reflects:
- the receipt of the net proceeds of approximately $25,762,000 from the sale
of 4,876,916 shares of our Series B preferred stock in a private placement
completed on January 7 and 27, 2000;
- the issuance on January 7, 2000 of 89,445 shares of our Series B preferred
stock to Connetics Corporation in payment of the $500,000 short-term
obligation payable to Connetics as of December 31, 1999; and
- the automatic conversion of all preferred shares into shares of our common
stock on a one-for-one basis upon the closing of this offering.
The pro forma as adjusted balance sheet reflects:
- the sale of 5,500,000 shares of our common stock in this offering at an
assumed price to the public of $18.00 per share, after deducting the
underwriting discounts and commissions and estimated offering expenses,
resulting in net proceeds of approximately $91 million;
- the payment of the contingent liability to Connetics in the amount of
$1,000,000, which will occur on the closing of this offering; and
- the payment of royalties payable to Genentech in the amount of $1,913,785.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
BALANCE SHEET DATA: ACTUAL PRO FORMA AS ADJUSTED
- ------------------- -------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments........... $ 4,214 $ 29,976 $ 118,107
Working capital............................................. 1,222 27,484 117,529
Total assets................................................ 5,855 31,617 119,748
Redeemable convertible preferred stock...................... 7,416 -- --
Deficit accumulated during the development stage............ (12,421) (12,421) (12,421)
Total stockholders' equity (deficit)........................ (7,540) 26,138 116,183
</TABLE>
6
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW TOGETHER WITH ALL OF
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT
DECISION.
RISKS RELATED TO OUR BUSINESS
WE ARE AN EARLY-STAGE COMPANY AND MAY NOT SUCCEED IN OUR DEVELOPMENT EFFORTS.
We commenced operations in 1998 and are at an early stage of development. We
have incurred significant losses to date, and our revenues have been limited to
sales of ACTIMMUNE for only one disease, chronic granulomatous disease. Although
we are developing ACTIMMUNE for the treatment of idiopathic pulmonary fibrosis,
multidrug-resistant tuberculosis, cryptococcal meningitis and cystic fibrosis,
ACTIMMUNE will not be marketed for any of these diseases before 2003, if at all.
IF WE FAIL TO OBTAIN THE CAPITAL NECESSARY TO FUND OUR OPERATIONS, WE WILL BE
UNABLE TO SUCCESSFULLY EXECUTE OUR BUSINESS PLAN.
We believe that the net proceeds from this offering, existing cash,
investment securities and cash flow from sales of ACTIMMUNE will be sufficient
to meet our capital requirements through at least the end of 2001. However, we
also expect capital outlays and operating expenditures to increase over the next
several years as we expand our infrastructure and research and development
activities. We may need to spend more money than currently expected because we
may need to change our product development plans or product offerings to address
difficulties with clinical studies or preparing for commercial sales for new
diseases. We have no committed sources of capital and do not know whether
additional financing will be available when needed, or, if available, that the
terms will be favorable to our stockholders or us. If additional funds are not
available, we may be forced to delay or terminate clinical trials, curtail
operations or obtain funds through collaborative and licensing arrangements that
may require us to relinquish commercial rights or potential markets or grant
licenses on terms that are not favorable to us. If adequate funds are not
available, we will not be able to execute our business plan.
IF WE CONTINUE TO INCUR NET LOSSES FOR A PERIOD LONGER THAN WE ANTICIPATE, WE
MAY BE UNABLE TO CONTINUE OUR BUSINESS.
We have lost money since we commenced operations in August 1998, and the
deficit accumulated during the development stage was approximately $12.4 million
at December 31, 1999. We expect to incur substantial additional net losses for
at least the next three to five years. The extent of our future net losses and
the timing of our profitability are highly uncertain, and we may never achieve
profitable operations. We are planning to expand the number of diseases for
which ACTIMMUNE may be marketed, and this expansion will require significant
expenditures. To date, we have generated revenues through the sale of ACTIMMUNE
for chronic granulomatous disease. After consideration of the direct costs of
marketing ACTIMMUNE for chronic granulomatous disease and osteopetrosis, and
royalties we must pay to Genentech, Inc. on sales of ACTIMMUNE, we do not
currently generate any operating profits on those sales. Even if we succeed in
developing ACTIMMUNE for additional diseases, we expect to incur net losses for
at least the next three to five years and expect that these net losses will
increase as we expand our research and development activities. If the time
required to achieve profitability is longer than we anticipate, we may not be
able to continue our business.
7
<PAGE>
IF OUR CLINICAL TRIALS FAIL TO DEMONSTRATE THAT ACTIMMUNE IS SAFE AND EFFECTIVE
FOR THE TREATMENT OF ADDITIONAL DISEASES, THE FDA WILL NOT PERMIT US TO MARKET
ACTIMMUNE FOR THOSE DISEASES.
In order to obtain the regulatory approvals we need for the additional
diseases we have targeted, we must conduct clinical trials to establish that
ACTIMMUNE is safe and effective for treating them. We must also conduct similar
clinical trials in Japan to obtain approval to market ACTIMMUNE in Japan for the
treatment of tuberculosis.
Clinical trials are inherently unpredictable. Although ACTIMMUNE appears
promising in these diseases based on past clinical trials, ACTIMMUNE may not be
successful in later clinical trials intended to confirm and expand upon those
trials. Our proposed clinical trials in these diseases might be delayed or
halted for various reasons, including that:
- ACTIMMUNE is not effective, or physicians think that ACTIMMUNE is not
effective, for a particular disease;
- the FDA does not approve our clinical trial protocol;
- patients experience severe adverse side effects during or following
treatment;
- patients die during a clinical trial because their disease is too advanced
or because they experience medical problems that are not related to
ACTIMMUNE;
- a sufficient quantity of patients do not enroll in the clinical trials at
the rate we expect; and
- the supply of ACTIMMUNE is not sufficient to treat the patients in some or
all of the proposed clinical trials.
In addition, the FDA and foreign regulatory authorities have substantial
discretion in the approval process and may impose ongoing requirements for
post-marketing studies.
IF THE FDA WITHDRAWS ITS APPROVAL FOR ACTIMMUNE FOR ANY DISEASE FOR WHICH IT HAS
BEEN APPROVED, WE COULD NO LONGER MARKET ACTIMMUNE FOR THAT DISEASE, AND OUR
REVENUES WOULD SUFFER.
The manufacturing, distribution, advertising and marketing of
pharmaceuticals are subject to extensive regulation. Any new disease approval
that we receive could include significant restrictions on the use or marketing
of ACTIMMUNE, and later discovery of previously unknown problems with ACTIMMUNE
or its manufacturing process or facility may result in further restrictions,
including withdrawal of ACTIMMUNE from the market. Our existing approvals for
chronic granulomatous disease and osteopetrosis and any new approval for other
disease that we have targeted, if granted, could be withdrawn for failure to
comply with regulatory requirements. In addition, governmental authorities could
seize our inventory of ACTIMMUNE or force us to recall ACTIMMUNE already in the
market if we fail to comply with strictly enforced FDA regulations.
WE COULD LOSE OUR RIGHT TO MARKET AND DEVELOP ACTIMMUNE IF OUR SUBLICENSE
AGREEMENT WITH CONNETICS CORPORATION TERMINATES, OR IF CONNETICS' LICENSE
AGREEMENT WITH GENENTECH TERMINATES.
We sublicense ACTIMMUNE from Connetics, which licenses ACTIMMUNE from
Genentech. If Connetics terminates its agreement with us or Genentech terminates
its agreement with Connetics, we will have no further rights to utilize the
patents or trade secrets covered by these agreements to develop and market
ACTIMMUNE. This two-tier license of ACTIMMUNE has the following risks:
- our sublicense agreement provides for termination by Connetics in the
event we breach that agreement, including our failure to pay royalties and
other fees on a timely basis;
8
<PAGE>
- if Connetics breaches its agreement with Genentech, and we are unable to
cure that breach, Genentech could terminate its license to Connetics, and
we could lose our rights to develop and market ACTIMMUNE; and
- if Genentech fails to maintain the intellectual property licensed to
Connetics, we may lose our rights to develop and market ACTIMMUNE and may
be forced to incur substantial additional costs to maintain the
intellectual property or to force Genentech to do so.
DISCOVERIES OR DEVELOPMENTS OF NEW TECHNOLOGIES BY ESTABLISHED DRUG COMPANIES OR
OTHERS MAY MAKE ACTIMMUNE OBSOLETE.
Our commercial opportunities will be reduced or eliminated if our
competitors develop and market products that are more effective, have fewer or
less severe adverse side effects or are less expensive than ACTIMMUNE for
chronic granulomatous disease, osteopetrosis, idiopathic pulmonary fibrosis,
multidrug-resistant tuberculosis, atypical mycobacterial infections,
cryptococcal meningitis, cystic fibrosis, or any other disease that we target.
With respect to our drug discovery programs in pseudonomas aeruginosa and
staphylococcus aureus, other companies have product candidates or research
programs that are further advanced in development than any of our potential
products and may result in effective, commercially successful products. Even if
we are successful in developing effective drugs, our products may not compete
effectively with these products or other successful products. Researchers are
continually learning more about diseases, which may lead to new technologies for
treatment. Our competitors may succeed in developing and marketing products
either that are more effective than those that we may develop, alone or with our
collaborators, or that are marketed before any products we develop are marketed.
Our competitors include fully-integrated pharmaceutical companies and
biotechnology companies that currently have drug and target discovery efforts,
as well as universities and public and private research institutions. Many of
the organizations competing with us have substantially greater capital
resources, larger research and development staffs and facilities, greater
experience in drug development and in obtaining regulatory approvals and greater
marketing capabilities than we do.
EVEN IF REGULATORY AUTHORITIES APPROVE ACTIMMUNE FOR THE TREATMENT OF THE
DISEASES WE ARE TARGETING, ACTIMMUNE MAY NOT BE COMMERCIALLY SUCCESSFUL.
ACTIMMUNE is an expensive drug, and we anticipate that the annual cost for
treatment under each of the diseases for which we are seeking approval will be
significant. Market acceptance of and demand for ACTIMMUNE will depend largely
on the following factors:
- acceptance by physicians and patients of ACTIMMUNE as a safe and effective
therapy for a particular disease;
- pricing of alternative products, for example, many of the existing
treatments for mycobacterial infections cost less than ACTIMMUNE;
- relative convenience and ease of administration of ACTIMMUNE; and
- prevalence and severity of adverse side effects associated with ACTIMMUNE.
IF THIRD-PARTY PAYORS WILL NOT PROVIDE COVERAGE OR REIMBURSE PATIENTS FOR
ACTIMMUNE, OUR REVENUES AND PROFITABILITY WILL SUFFER.
Our ability to commercialize ACTIMMUNE in additional diseases may depend in
part on the extent to which coverage and reimbursement for ACTIMMUNE will be
available from:
- governmental payors, such as Medicare and Medicaid;
9
<PAGE>
- private health insurers, including managed care organizations; and
- other third-party payors.
Significant uncertainty exists as to the coverage and reimbursement status
of pharmaceutical products. If governmental and other third-party payors do not
provide adequate coverage and reimbursement levels for ACTIMMUNE, the market
acceptance of ACTIMMUNE will be reduced, and our sales will suffer.
THE PRICING AND PROFITABILITY OF OUR PRODUCTS MAY BE SUBJECT TO CONTROL BY THE
GOVERNMENT AND OTHER THIRD-PARTY PAYORS.
The continuing efforts of governmental and other third-party payors to
contain or reduce the cost of health care through various means may adversely
affect our ability to successfully commercialize products. For example, in some
foreign markets, pricing and profitability of prescription pharmaceuticals are
subject to governmental control. In the United States, we expect that there will
continue to be federal and state proposals to implement similar governmental
control. In addition, increasing emphasis on managed care in the United States
will continue to put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that we would receive for ACTIMMUNE
or any products in the future, which would reduce our revenues and
profitability.
IF PRODUCT LIABILITY LAWSUITS ARE BROUGHT AGAINST US, WE MAY INCUR SUBSTANTIAL
LIABILITIES.
The testing, marketing, and sale of medical products entail an inherent risk
of product liability. If losses exceed our liability insurance coverage, we may
incur substantial liabilities. Whether or not we were ultimately successful in
product liability litigation, such litigation would consume substantial amounts
of our financial and managerial resources, and might result in adverse
publicity, all of which would impair our business. We may not be able to
maintain our clinical trial insurance or product liability insurance at an
acceptable cost, if at all, and this insurance may not provide adequate coverage
against potential claims or losses.
IF WE ARE UNABLE TO CONTRACT WITH THIRD PARTIES TO MANUFACTURE ACTIMMUNE IN
SUFFICIENT QUANTITIES, ON A TIMELY BASIS OR AT AN ACCEPTABLE COST, WE MAY BE
UNABLE TO MEET DEMAND FOR ACTIMMUNE AND MAY LOSE POTENTIAL REVENUES.
We do not have the resources, facilities or experience to manufacture
ACTIMMUNE ourselves. Completion of our clinical trials and commercialization of
ACTIMMUNE for new diseases requires access to, or development of, facilities to
manufacture a sufficient supply of ACTIMMUNE. The FDA must approve manufacturing
facilities for ACTIMMUNE. We depend on third parties with FDA-approved
manufacturing facilities for the manufacture of ACTIMMUNE for pre-clinical,
clinical, and commercial purposes. We presently rely on Genentech, Inc. for the
manufacture of commercially marketed ACTIMMUNE and on Boehringer Ingelheim
Austria GmbH for the supply of ACTIMMUNE for clinical trials. Our manufacturing
strategy presents the following risks:
- Before we can obtain approval for a new disease for ACTIMMUNE, we must
demonstrate to the FDA's satisfaction that the drug used in the clinical
trials is substantially equivalent to the commercial drug manufactured by
Genentech.
- Delays in increasing existing manufacturing capacity to meet our needs for
multiple clinical trials could delay clinical trials, regulatory
submissions and commercialization of ACTIMMUNE.
- Our current manufacturers of ACTIMMUNE are subject to ongoing periodic
inspection by the FDA and corresponding state agencies for compliance with
strictly enforced good manufacturing
10
<PAGE>
practices regulations and similar foreign standards, and we do not have
control over our third-party manufacturers' compliance with these
regulations and standards.
- If we need to change to other manufacturers, the FDA and comparable
foreign regulators must approve these manufacturers prior to our use. This
would require new testing and compliance inspections. The new
manufacturers would have to be educated in, or themselves develop,
substantially equivalent processes necessary for the production of
ACTIMMUNE. In addition, the FDA or comparable foreign regulators would
need to approve the new manufacturers.
- If market demand for ACTIMMUNE increases suddenly, our current
manufacturers might not be able to fulfill our commercial needs, which
would require us to seek new manufacturing arrangements and may result in
substantial delays in meeting market demand.
- If market demand for ACTIMMUNE is less than our purchase obligations to
our manufacturers, we may incur substantial penalties.
- Our supply arrangements with our manufacturers may be seriously
interrupted.
- We may not have intellectual property rights, or may have to share
intellectual property rights, to any improvements in the manufacturing
processes or new manufacturing processes for ACTIMMUNE.
Any of these factors could delay clinical trials or commercialization of
ACTIMMUNE for new diseases, interfere with current sales, entail higher costs
and result in our being unable to effectively sell ACTIMMUNE.
BECAUSE IT IS DIFFICULT AND COSTLY TO PROTECT OUR PROPRIETARY RIGHTS, WE MAY NOT
BE ABLE TO PROTECT THEM.
Our commercial success will depend in part on obtaining and maintaining
patent protection on our products and successfully defending these patents
against third party challenges. The patent positions of pharmaceutical and
biotechnology companies can be highly uncertain and involve complex legal and
factual questions. No consistent policy regarding the breadth of claims allowed
in biotechnology patents has emerged to date. Accordingly, we cannot predict the
breadth of claims that may be allowed in other companies' patents. In addition,
we could incur substantial costs in litigation if we are required to defend
against patent suits brought by third parties or if we initiate these suits.
Others may have filed and in the future may file patent applications
covering interferon gamma-1b and its uses and other products in our development
program. For example, we are aware that the principal investigator of
Phase I/II and Phase II clinical trials of interferon gamma-lb for the treatment
of idiopathic pulmonary fibrosis has filed a patent application in several
European countries claiming the use of interferon gamma-lb for this disease. We
cannot be certain that the investigator or any other third party has not filed
and will not obtain a U.S. patent claiming the use of interferon gamma-lb for
the treatment of idiopathic pulmonary fibrosis or any of the other diseases for
which we are developing ACTIMMUNE. If a third party were issued a patent that
blocked our ability to commercialize ACTIMMUNE for any of the diseases we are
targeting, a legal action could result.
Any legal action against our collaborators or us claiming damages and
seeking to enjoin commercial activities relating to the affected products and
processes could, in addition to subjecting us to potential liability for
damages, require our collaborators or us to obtain a license to continue to
manufacture or market the affected products and processes. We cannot predict
whether we or our collaborators would prevail in any of these actions or that
any license required under any of these patents would be made available on
commercially acceptable terms, if at all. We believe that there may be
significant litigation in our industry regarding patent and other intellectual
property rights.
11
<PAGE>
In addition, we generally do not control the patent prosecution of
technology that we license from others. Accordingly, we are unable to exercise
the same degree of control over this intellectual property as we would exercise
over technology that we own.
We rely on trade secrets to protect technology where we believe patent
protection is not appropriate or obtainable. However, trade secrets are
difficult to protect. While we require employees, academic collaborators and
consultants to enter into confidentiality agreements, which generally provide
that proprietary information developed or inventions conceived during the
relationship shall be our exclusive property, we may not be able to adequately
protect our trade secrets or other proprietary information.
Our research collaborators and scientific advisors have rights to publish
data and information in which we have rights. If we cannot maintain the
confidentiality of our technology and other confidential information in
connection with our collaborations, then our ability to receive patent
protection or protect our proprietary information will be impaired.
FAILURE TO ATTRACT, RETAIN AND MOTIVATE SKILLED PERSONNEL AND CULTIVATE KEY
ACADEMIC COLLABORATIONS WILL DELAY OUR PRODUCT DEVELOPMENT PROGRAMS AND OUR
BUSINESS DEVELOPMENT EFFORTS.
We have only 25 employees, and our success depends on our continued ability
to attract, retain and motivate highly qualified management and scientific
personnel and on our ability to develop relationships with leading academic
scientists. Competition for personnel and academic collaborations is intense. We
are highly dependent on our current management and key scientific and technical
personnel, including W. Scott Harkonen, Chief Executive Officer, President and
Chairman of our board of directors, as well as the other principal members of
our management. Our success will depend in part on retaining the services of our
existing management and key personnel and attracting and retaining new highly
qualified personnel. In addition, we may need to hire additional personnel and
develop additional collaborations as we continue to expand our research and
development activities. We do not know if we will be able to attract, retain or
motivate personnel or cultivate academic collaborations. Our inability to hire,
retain or motivate qualified personnel or cultivate academic collaborations
would harm our business and hinder the planned expansion of our business.
WE RELY ON THIRD PARTIES TO CONDUCT CLINICAL TRIALS FOR ACTIMMUNE, AND THOSE
THIRD PARTIES MAY NOT PERFORM SATISFACTORILY.
If third parties do not successfully carry out their contractual duties or
meet expected deadlines, we will not be able to obtain regulatory approvals for
ACTIMMUNE and will not be able to successfully commercialize ACTIMMUNE for new
diseases. We do not have the ability to independently conduct clinical studies
for ACTIMMUNE, and we rely on third parties to perform this function. If these
third parties do not perform satisfactorily, we may not be able to locate
acceptable replacements or enter into favorable agreements with them, if at all.
RISKS RELATED TO THIS OFFERING
IF OUR OFFICERS, DIRECTORS AND LARGEST STOCKHOLDERS CHOOSE TO ACT TOGETHER, THEY
MAY BE ABLE TO CONTROL OUR MANAGEMENT AND OPERATIONS, ACTING IN THEIR BEST
INTERESTS AND NOT NECESSARILY THOSE OF OTHER STOCKHOLDERS.
Following completion of this offering, our directors, executive officers and
principal stockholders and their affiliates will beneficially own approximately
67% of our common stock. Accordingly, they collectively will have the ability to
determine the election of all of our directors and to determine the outcome of
most corporate actions requiring stockholder approval. They may exercise this
ability in a manner that advances their best interests and not necessarily those
of other stockholders.
12
<PAGE>
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW MAY
MAKE AN ACQUISITION OF US, WHICH MAY BE BENEFICIAL TO OUR STOCKHOLDERS, MORE
DIFFICULT.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would benefit our stockholders.
These provisions:
- establish a classified board of directors so that not all members of our
board may be elected at one time;
- authorize the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and hinder a takeover attempt;
- limit who may call a special meeting of stockholders;
- prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
- establish advance notice requirements for nominations for election to our
board of directors or for proposing matters that can be acted upon at
stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law, which
prohibits business combinations between us and one or more significant
stockholders unless specified conditions are met, may discourage, delay or
prevent a third party from acquiring us.
OUR STOCK PRICE MAY BE VOLATILE, AND YOUR INVESTMENT IN OUR STOCK COULD DECLINE
IN VALUE.
Prior to this offering, there has been no public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The initial public offering price of our common
stock will be determined by negotiations between the representatives of the
underwriters and us and may not be indicative of future market prices. The
following factors will be among those considered in determining the initial
public offering price of our common stock:
- clinical trial data;
- prevailing market conditions;
- estimates of our business potential and earnings prospects; and
- an assessment of our management.
If the market price of our common stock after this offering does not exceed
the initial public offering price, you may not realize any return on your
investment in us and may lose some or all of your investment.
SUBSTANTIAL SALES OF SHARES MAY IMPACT THE MARKET PRICE OF OUR COMMON STOCK.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, the market price of our
common stock may decline. These sales also might make it more difficult for us
to sell equity or equity-related securities in the future at a time and price
that we deem appropriate. We are unable to predict the effect that sales may
have on the then prevailing market price of our common stock. After completion
of this offering, we will have outstanding 20,192,194 shares of common stock,
assuming no exercise of outstanding options after December 31, 1999 and no
exercise of the underwriters' over-allotment option. Of these shares, the
5,500,000 shares sold in this offering will be freely tradeable without
restriction or further regulation, other than shares purchased by our officers,
directors or other "affiliates" within the meaning of Rule 144 under the
Securities Act of 1933.
13
<PAGE>
The remaining 14,692,194 shares of common stock held by existing
stockholders may not be sold publicly unless they are registered under the
Securities Act or are sold pursuant to Rule 144 or another exemption from
registration. These shares will become eligible for public resale at various
times over a period of less than one year following the completion of this
offering, subject to volume limitations.
We, our officers and directors and all of our current stockholders, have
agreed not to sell or offer to sell or otherwise dispose of any shares of common
stock held by us or them for a period of 180 days after the date of this
prospectus without the prior written consent of Warburg Dillon Read LLC. Warburg
Dillon Read LLC may release any or all of the shares subject to lock-up
agreements at any time without notice.
We further expect to file a registration statement covering shares of common
stock issuable upon exercise of options and other grants pursuant to our stock
plans. In addition, the holders of 13,656,361 shares of common stock are
entitled to registration rights.
THIS OFFERING WILL CAUSE DILUTION IN NET TANGIBLE BOOK VALUE.
Purchasers in this offering of our common stock will experience immediate
and substantial dilution in pro forma net tangible book value of $12.25 per
share. Additional dilution is likely to occur upon the exercise of options
granted by us. To the extent we raise additional capital by issuing equity
securities, our stockholders may experience additional substantial dilution.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------------------------------------------------------------
This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing such forward-looking statements are found
in the material set forth under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in this prospectus generally. When used
in this prospectus, the words "anticipate," "believe," "expect," "estimate" and
similar expressions are generally intended to identify forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of certain factors, including the
risks described in "Risk Factors" and elsewhere in this prospectus.
USE OF PROCEEDS
- --------------------------------------------------------------------------------
We estimate that the net proceeds from the sale of the 5,500,000 shares of
common stock that we are offering will be $91.0 million after deducting
estimated underwriters' discounts and commissions and estimated offering
expenses and assuming an initial public offering price of $18.00 per share. If
the underwriters' over-allotment option is exercised in full, we estimate that
the net proceeds will be $104.9 million.
We anticipate using the net proceeds from this offering for clinical
development ($45 million), commercialization of our existing products
($25 million), working capital ($10 million), payment of existing debt for
royalties payable ($1.9 million), payment of obligations to Connetics
($1.0 million), and in-licensing new products and general corporate purposes
($8.1 million). Please see note 9 of our financial statements for an explanation
of the terms of our existing debt. We will retain broad discretion over the use
of the net proceeds of this offering. The amounts and timing of the expenditures
may vary significantly depending on numerous factors, such as the progress of
our research and development efforts, technological advances and the competitive
environment for our products. We also might use a portion of the net proceeds to
acquire or invest in complementary businesses, products and technologies. We are
not currently planning any acquisition, and no portion of the net proceeds has
been allocated for any specific acquisition.
We believe that the net proceeds of this offering, existing cash, investment
securities and cash flow from sales of ACTIMMUNE will be sufficient to meet our
capital requirements through at least the end of 2001. Pending the use of the
net proceeds, we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
DIVIDEND POLICY
- --------------------------------------------------------------------------------
We have never declared or paid any cash dividends on our capital shares. We
currently intend to retain earnings, if any, to support the research and
development of our business and do not anticipate paying cash dividends for the
foreseeable future.
15
<PAGE>
DILUTION
- --------------------------------------------------------------------------------
The pro forma net tangible book value of the common stock as of
December 31, 1999, was $26,137,890 million or $1.78 per share, assuming the
issuance of 4,876,916 shares of our Series B preferred stock for cash on
January 7 and 27, 2000, the issuance of 89,445 shares of our Series B preferred
stock to Connetics on January 7, 2000, in payment of our $500,000 short-term
obligation to them as of December 31, 1999, and after giving effect to the
automatic conversion of all outstanding shares of preferred stock into an
aggregate of 12,801,361 shares of common stock. After giving effect to the sale
of the common stock pursuant to this offering at an assumed initial public
offering price of $18.00 per share, assuming that the underwriters'
over-allotment option is not exercised, and after deducting the estimated
underwriting discount and offering expenses and the payment of royalties payable
to Genentech of $1,913,785 and of our contingent liability to Connetics in the
amount of $1,000,000, which will occur upon the closing of this offering, the
adjusted pro forma net tangible book value at December 31, 1999, would have been
$116.2 million, or $5.75 per share.
Pro forma net tangible book value per share before this offering has been
determined by dividing pro forma net tangible book value (total tangible assets
less total liabilities) by the pro forma number of shares of common stock
outstanding at December 31, 1999. This offering will result in an increase in
pro forma net tangible book value per share of $3.97 to existing stockholders
and dilution in pro forma net tangible book value per share of $12.25 to new
investors who purchase shares in this offering. Dilution is determined by
subtracting pro forma net tangible book value per share after this offering from
the assumed initial public offering price of $18.00 per share. The following
table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $18.00
Pro forma net tangible book value per share at
December 31, 1999....................................... $ 1.78
Increase attributable to new investors.................... $ 3.97
Pro forma net tangible book value per share after this
offering.................................................. $ 5.75
------
Dilution in net tangible book value to new investors........ $12.25
</TABLE>
If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $6.19 per
share, the increase in net tangible book value per share to existing
stockholders would be $4.41 per share and the dilution in net tangible book
value to new investors would be $11.81 per share.
The following table summarizes, on a pro forma basis as of December 31, 1999
as adjusted for the January 2000 issuances of Series B preferred stock described
above, the differences between the total consideration paid and the average
price per share paid by the existing stockholders and the new investors with
respect to the number of shares of common stock purchased from us based on an
assumed public offering price of $18.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 14,692,194 72.8% $ 39,808,358 28.7% $ 2.71
New investors........................... 5,500,000 27.2 $ 99,000,000 71.3 $18.00
---------- ------ ------------ ------
Total................................... 20,192,194 100.0% $138,808,364 100.0%
========== ====== ============ ======
</TABLE>
The tables and calculations above assume no exercise of outstanding options.
At December 31, 1999, there were:
- 990,000 shares issuable upon the exercise of options outstanding at a
weighted average exercise price of $0.125 per share; and
- 663,000 shares subject to repurchase by us at a weighted average price of
$0.041 per share.
16
<PAGE>
CAPITALIZATION
- --------------------------------------------------------------------------------
The following table shows our actual capitalization as of December 31, 1999.
Our capitalization is presented in the column labeled pro forma to give effect
to:
- the issuance of 4,876,916 shares of our Series B preferred stock in
conjunction with the private placement on January 7 and 27, 2000;
- the issuance of 89,445 shares of our Series B preferred stock on January
7, 2000 to Connetics Corporation (in payment of the $500,000 short-term
payable as of December 31, 1999); and
- the automatic conversion of all preferred shares into shares of our common
stock on a one-for-one basis upon the closing of this offering.
Our capitalization is also presented in the column labeled pro forma as
adjusted to give effect to:
- the receipt of the estimated net proceeds from this sale of 5,500,000
shares of stock offered by this prospectus at an assumed initial public
offering price of $18.00 per share;
- the payment of the contingent liability to Connetics in the amount of
$1,000,000, which will occur upon the closing of this offering; and
- the payment of royalties payable to Genentech in the amount of $1,913,785.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Long-term obligations payable to Connetics.......... $ 1,624,343 $ 1,624,343 $ 1,624,343
============ ============ ============
Redeemable convertible preferred stock, no par value
Authorized shares--11,200,000 actual, pro forma
and pro forma as adjusted
Issued and outstanding shares 6,000,000 actual,
none pro forma and pro forma as adjusted...... 7,416,427 -- --
Stockholders' equity (deficit):
Convertible preferred stock, no par value
Authorized shares--14,870,000 actual pro forma
and pro forma as adjusted
Issued and outstanding shares 1,835,000 actual
and pro forma and none pro forma as
adjusted...................................... 4,506,804 -- --
Common stock, no par value
Authorized shares--30,000,000 actual
Issued and outstanding shares 1,890,833 actual,
14,692,194 pro forma and 20,192,194 pro forma
as adjusted................................... 5,659,164 43,844,349 133,889,349
Deferred compensation related to stock options.... (5,285,860) (5,285,860) (5,285,860)
Accumulated other comprehensive income............ 41 41 41
Deficit accumulated during the development
stage........................................... (12,420,640) (12,420,640) (12,420,640)
------------ ------------ ------------
Total stockholders' equity (deficit)................ $ (7,540,491) $ 26,137,890 $116,182,890
============ ============ ============
</TABLE>
The outstanding share information in the table above excludes
990,000 shares of common stock issuable upon the exercise of options outstanding
as of December 31, 1999 at a weighted average exercise price of $0.125 per
share, and 765,500 shares of common stock issuable upon the exercise of options
granted from January 1 through March 6, 2000 at a weighted average exercise
price of $4.21 per share.
17
<PAGE>
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
The following selected historical financial data should be read in
conjunction with our financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The statement of operations
data for the period from February 25, 1998 (inception) to December 31, 1998 and
for the year ended December 31, 1999, and the balance sheet data at
December 31, 1998 and 1999, are derived from our financial statements which have
been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere in this prospectus. The selected data in this section is not intended
to replace our financial statements. Historical results are not necessarily
indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FEBRUARY 25, FEBRUARY 25,
1998 1998
(INCEPTION) TO YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
STATEMENT OF OPERATIONS DATA 1998 1999 1999
- ---------------------------- -------------- ------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Product sales, net...................................... $ -- $ 556 $ 556
Costs and expenses:
Cost of goods sold.................................... -- 240 240
Research and development.............................. 1,235 2,969 4,204
General and administrative............................ 892 2,656 3,548
Acquired pre-FDA approval rights...................... 4,000 1,094 5,094
------- ------- --------
Total costs and expenses................................ 6,127 6,959 13,086
Loss from operations.................................... (6,127) (6,403) (12,530)
Other income (expense):
Interest income....................................... 55 240 295
Interest expense...................................... -- (186) (186)
------- ------- --------
Net loss................................................ $(6,072) $(6,349) $(12,421)
------- ------- --------
Preferred stock accretion............................... -- (657) (657)
Net loss applicable to common stockholders.............. $(6,072) $(7,006) $(13,078)
======= ======= ========
Net loss per share, basic and diluted................... $ (9.12)
=======
Shares used in computing net loss per share, basic and
diluted............................................... 768
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
BALANCE SHEET DATA 1998 1999
- ------------------ ---------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments........... $ 4,720 $ 4,214
Working capital............................................. 4,181 1,222
Total assets................................................ 4,720 5,855
Redeemable convertible preferred stock...................... -- 7,416
Deficit accumulated during the development stage............ (6,072) (12,421)
Total stockholders' equity (deficit)........................ 4,181 (7,540)
</TABLE>
Please see note 2 of our financial statements for an explanation of the
method used to calculate the net loss per share and the number of shares used in
the computation of per share amounts. Earnings per share data for 1998 has not
been presented as the capital structure changes that took place in 1999 made
such presentation less meaningful.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
OUR "SELECTED FINANCIAL DATA," OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We have been primarily involved in the research and development of ACTIMMUNE
for the treatment of serious infectious and pulmonary diseases and congenital
disorders. We licensed from Genentech, Inc. and Connetics Corporation the
exclusive U.S. rights to ACTIMMUNE (interferon gamma-1b injection), a
FDA-approved product. We currently market ACTIMMUNE in the United States for the
treatment of chronic granulomatous disease and osteopetrosis. We have the rights
and plan to develop ACTIMMUNE for a range of diseases including idiopathic
pulmonary fibrosis, infectious diseases and cystic fibrosis.
Since our inception, we have incurred significant losses and, as of
December 31, 1999, we had an accumulated deficit of $12,420,640.
Our expenses have consisted primarily of costs incurred in research and
development, sales and marketing and from general and administrative costs
associated with our operations. We expect our research and development expenses
to increase in the future as we expand our clinical trial activities for our
target diseases. Our sales and marketing expenses will increase as we continue
to commercialize ACTIMMUNE. Expansion of our operations and the additional
obligations of a public reporting entity will also add to our expenses. As a
result, we expect to incur losses for the foreseeable future.
We have a limited history of operations and anticipate that our quarterly
results of operations will fluctuate for the foreseeable future due to several
factors, including market acceptance of current or new products, patent
conflicts, the introduction of new products by our competitors, the timing and
extent of our research and development efforts, and the timing of significant
orders. Our limited operating history makes accurate prediction of future
operating results difficult or impossible.
STOCK COMPENSATION
During the year ended December 31, 1999, in connection with the grant of
stock options to employees, we recorded deferred stock compensation totaling
$5,630,871, representing the difference between the deemed fair value of our
common stock for financial reporting purposes on the date such options were
granted and the applicable exercise prices. Such amount is included as a
reduction of stockholders' equity and is being amortized using the graded
vesting method over the vesting period of the individual options, which is
generally five years. This graded vesting method provides for vesting of
portions of the overall award at interim dates and results in higher vesting in
earlier years than straight-line vesting. We recorded amortization of deferred
stock compensation of $345,011 for the year ended December 31, 1999. At
December 31, 1999, we had a total of $5,285,860 remaining to be amortized over
the vesting periods of the stock options. Please see notes 2 and 6 of our
financial statements.
SUBSEQUENT EVENTS
On January 7 and January 27, 2000, we issued 4,876,916 aggregate shares of
Series B preferred stock at $5.59 per share for aggregate proceeds of
$27,262,000. We will reflect a deemed dividend of up to $27,762,000 in our first
quarter 2000 financial statements in relation to the series B financing. See
note 12 of our financial statements. We incurred approximately $1.5 million of
associated issuance costs, including 120,000 shares of Series B preferred stock
valued at $5.59 per share. On January 7,
19
<PAGE>
2000, pursuant to the terms of the collaboration agreement with Connetics, we
also issued to Connetics 89,445 shares of our Series B preferred stock.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1999
REVENUE. We recognized no product sales of ACTIMMUNE for the period from
February 25, 1998 (inception) to December 31, 1998 and $556,401 for the year
ended December 31, 1999. The sales in 1999 represent our portion of ACTIMMUNE
sales that exceed the annual contractual baseline established with Connetics,
which increases nominally each year, until 2002, when it is discontinued. Sales
transacted for Connetics are recorded on a net basis, which are zero, because
any amounts in excess of net revenues less costs to produce and market are paid
to Connetics. We made no payments to Connetics in 1998 and a total of $1,357,436
for 1999. Please see notes 2 and 3 of our financial statements.
Connetics is entitled to net sales of ACTIMMUNE up to a predetermined
baseline for the period from January 15, 1999 through December 31, 2001 less
associated cost of goods sold and marketing expenses. The predetermined baseline
is preset for each calendar year under our agreement.
COST OF GOODS SOLD. We recognized no cost of goods sold for the period from
February 25, 1998 (inception) to December 31, 1998 because we had no product
sales. For the year ended December 31, 1999, cost of goods sold totaled $239,802
which included all product cost of goods sold, royalties and distribution costs
associated with our revenues.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased from $1,234,957 for the period from February 25, 1998 (inception) to
December 31, 1998, to a total of $2,969,474 in 1999. The increase resulted
primarily from increased costs for clinical trial study expenses for ACTIMMUNE
in additional diseases. We anticipate that to develop and prove efficacy in each
of the other diseases not yet approved will cost approximately $5-30 million and
take approximately three to seven years.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $892,295 for the period from February 25, 1998 (inception) to
December 31, 1998, to a total of $2,656,130 in 1999. The increase in expenses
for 1999 was primarily attributed to increased costs for additional personnel
and a full 12-month period of operations.
ACQUIRED PRE-FDA APPROVAL RIGHTS. Acquired pre-FDA approval rights totaled
$4,000,000 for the period from February 25, 1998 (inception) to December 31,
1998 in connection with the sublicensed rights of ACTIMMUNE and a total of
$1,093,750 for the year ended December 31, 1999 in connection with the
acquisition of additional development rights for ACTIMMUNE. Amounts in both
periods were expensed as acquired pre-FDA approval rights. Please see note 3 of
our financial statements.
INTEREST INCOME. Interest income increased from $55,531 for the period from
February 25, 1998 (inception) to December 31, 1998, to a total of $239,778 in
1999. The increase was due to higher average balances of cash and cash
equivalents and short-term investments in 1999, resulting from the investment of
the net proceeds from the sale of Series A-2 convertible preferred stock in
April 1999.
INTEREST EXPENSE. We recognized a total of $110,674 for imputed interest
expense on our long-term obligation to Connetics and $75,268 interest expense on
the royalty payable obligation to Genentech for the year ended December 31,
1999. The obligation to Connetics was incurred in April 1999, as part of our
collaboration agreement with them. The long-term obligation is described in
greater detail in note 3 of our financial statements. We had no interest expense
for the period from February 25, 1998 (inception) to December 31, 1998.
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LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations with $7,444,720 of private equity financings
and $1,173,723 (net) of contributions from Connetics. At December 31, 1998,
cash, cash equivalents and short-term investments totaled $4,719,831 compared to
$4,214,294 at December 31, 1999. Our cash reserves are held in a variety of
interest-bearing instruments including high-grade corporate bonds, commercial
paper and money market accounts.
Cash used in operations for the period from February 25, 1998 (inception) to
December 31, 1998, was $1,280,185 compared with cash used in operations of
$3,093,540 for the year ended December 31, 1999. A net loss of $6,348,919 for
the year ended December 31, 1999, was partially offset by non-cash charges of
$345,011 for the amortization of deferred compensation, $2,564 for depreciation,
$110,674 for the accretion of obligations payable to Genentech and preferred
stock issued for $1,093,750 for additional product rights from Genentech for
ACTIMMUNE.
Financing activities included the receipt of net proceeds of $6,000,000 as
capital contributed by Connetics in 1998, and $395,600 of expenses Connetics
incurred on our behalf in 1999. In 1999, we received net proceeds of $6,759,662
from the sale of Series A preferred stock to investors, $663,500 from the sale
of common stock, and $22,500 from the exercise of stock options. Also in 1999,
we returned capital to Connetics in the amount of $5,221,877.
Working capital of $4,181,295 at December 31, 1998 decreased to $1,222,378
at December 31, 1999. The decrease in working capital was due to our use of cash
in operations, higher accounts payable and royalty payables as a result of
product sales and increased corporate expenses offset in part by higher
inventory and accounts receivable balances.
We have deferred payment of the royalties due to Genentech for 1999
(approximately $1.9 million) under a series of interest-bearing promissory notes
that will become due upon the closing date of this offering. The amounts due
under these notes may be converted, at Genentech's option, into shares of our
stock sold in our most recent financing prior to the conversion, at the same
price per share.
We have entered into a supply agreement with Boehringer Ingelheim under
which it will manufacture both clinical and commercial supplies of ACTIMMUNE.
Under this agreement, we are required to maintain a standby letter of credit in
the amount of approximately $530,000. The amount of the standby letter of credit
approximates 20% of the total payment obligation under this agreement with
respect to Boehringer Ingelheim's establishment of comparability between its
product and Genentech's.
We believe our existing cash, cash equivalents and short-term investments,
together with cash flows and the net proceeds of this offering will be
sufficient to fund our operating expenses, debt obligations and capital
requirements through at least the end of 2001. Our future capital uses and
requirements depend on numerous factors, including:
- our progress with research and development;
- our ability to introduce and sell new products;
- our sales and marketing expenses;
- expenses associated with litigation;
- costs and timing of obtaining new patent rights; and
- regulatory changes and competition and technological developments in the
market.
Therefore, our capital requirements may increase in future periods. As a
result, we may require additional funds and may attempt to raise additional
funds through equity or debt financings, collaborative arrangements with
corporate partners or from other sources.
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We have no commitments for any additional financings, additional funding may
not be available to finance our operations when needed or, if available, the
terms for obtaining such funds may not be favorable or may result in dilution to
our stockholders.
IMPACT OF THE YEAR 2000
The computer systems and software programs of many companies and
governmental agencies are currently coded to accept or recognize only two digit
entries in the date code field. These systems may recognize a date using "00" as
the year 1900 rather than the year 2000. As a result, these computer systems
and/or software programs may need to be upgraded to comply with such year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
STATE OF READINESS. We have made an assessment of the year 2000 readiness
of our information technology systems. We believe that substantially all of our
applications, databases and infrastructure are year 2000 compliant. We are
currently assessing our non-information technology systems and will seek
assurances of year 2000 compliance from providers of these systems. Until such
testing is complete and these vendors and providers have replied to our
requests, we will not be able to completely evaluate whether our information
technology systems or non-information technology systems will need to be revised
or replaced.
We have not identified any internally used capital equipment or software
that will require an additional material expenditure for year 2000 compliance
upgrades.
RISKS. We are not currently aware of any year 2000 compliance problems
relating to our information technology or non-information technology systems
that would have a material adverse effect on our business. Third-party software,
hardware or services incorporated into our information technology and
non-information technology systems may need to be revised or replaced, all of
which could be time consuming and expensive. Our failure to fix or replace
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could have a material adverse effect on our
business. In addition, governmental agencies, utility companies, third-party
service providers and others outside our control may not be year 2000 compliant.
The failure by these entities to be year 2000 compliant could result in a
systemic failure beyond our control, such as a prolonged telecommunications or
electrical failure, which could have a material adverse effect on our business.
CONTINGENCY PLAN. In the event that year 2000-related problems materialize,
we maintain relationships with several suppliers of services and products to
mitigate the risks associated with using suppliers which are not year 2000
compliant.
UPDATE SINCE JANUARY 1, 2000. Since January 1, 2000, we have not incurred
any costs or operational interruptions resulting from year 2000 compliance
problems.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
changes the previous accounting definition of derivative, which focused on
freestanding contracts such as options and forwards, including futures and
swaps, expanding it to include embedded derivatives and many commodity
contracts. Under the statement, every derivative is recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivatives fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. We do not anticipate
that the adoption of SFAS No. 133 will have a material impact on our financial
position or results of operations.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve our
capital until it is required to fund operations while at the same time
maximizing the income we receive from our investments without significantly
increasing risk. To minimize this risk, we maintain a portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds and corporate debt securities. The average
duration of all our investments in 1999 was less than six months. Due to the
short term nature of these investments, a 10% movement in market interest rates
would not have a material impact on the total fair value of our portfolio as of
December 31, 1999.
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BUSINESS
- --------------------------------------------------------------------------------
OVERVIEW OF OUR BUSINESS
InterMune Pharmaceuticals develops and commercializes innovative products
for the treatment of serious pulmonary and infectious diseases and congenital
disorders. We have the exclusive license rights in the United States to
ACTIMMUNE for a range of diseases, including:
- chronic granulomatous disease, a life-threatening congenital disorder of
the immune system;
- osteopetrosis, a life-threatening congenital disorder causing an
overgrowth of bony structures;
- idiopathic pulmonary fibrosis, a life-threatening lung condition;
- infections caused by a type of bacteria known as mycobacteria
(mycobacterial infections), such as tuberculosis;
- infections caused by various fungi that attack patients with weakened
immune systems (systemic fungal infections), such as cryptococcal
meningitis and pneumonia; and
- cystic fibrosis, a congenital disorder that leads to chronic pulmonary
infections in children.
We have active development programs underway for these disease areas,
several of which are in mid- or advanced-stage trials. The FDA has approved
ACTIMMUNE for the treatment of chronic granulomatous disease and osteopetrosis,
and we currently market and sell ACTIMMUNE in the United States for these
diseases.
We believe the most significant near-term use of ACTIMMUNE is for the
treatment of idiopathic pulmonary fibrosis, which afflicts at least 50,000
persons in the United States. During the first half of 2000, we plan to initiate
an accelerated clinical trial intended to provide sufficient data for approval,
known as a Phase II/III pivotal clinical trial, to test dosing and efficacy of
ACTIMMUNE for the treatment of this condition. We are also commencing a clinical
trial intended to provide sufficient data for approval, known as a Phase III
pivotal clinical trial, of ACTIMMUNE for the treatment of multidrug-resistant
tuberculosis. We are currently conducting a clinical trial to determine
efficacy, known as a Phase II clinical trial, of ACTIMMUNE for the treatment of
cryptococcal meningitis, a type of systemic fungal infection. We plan to
initiate Phase II clinical trials of ACTIMMUNE for the treatment of cystic
fibrosis and atypical mycobacterial infections, infections caused by
mycobacteria that differ appreciably from those that cause tuberculosis, in the
second half of 2000. We believe that the risks and time required to obtain FDA
approval for ACTIMMUNE to treat new diseases may be reduced because ACTIMMUNE
has proven to be safe for patients since its approval in 1990 for the treatment
of chronic granulomatous disease and through its approval in February 2000 for
osteopetrosis.
Interferon gamma-1b, the active ingredient in ACTIMMUNE, is a human protein
which plays a key role in preventing the formation of excessive scar, or
fibrotic, tissue and is a potent stimulator of the immune system. The results of
a clinical trial published in October 1999 in THE NEW ENGLAND JOURNAL OF
MEDICINE showed statistically significant evidence that interferon gamma-1b can
halt and reverse the progression of idiopathic pulmonary fibrosis. In addition,
both animal studies, known as preclinical studies, and clinical trials have
demonstrated the therapeutic potential of interferon gamma-1b against a broad
range of infectious diseases, notably mycobacterial and systemic fungal
infections. A study published in May 1997 in THE LANCET showed that ACTIMMUNE
was effective in the treatment of multidrug-resistant tuberculosis, a type of
mycobacterial infection.
Idiopathic pulmonary fibrosis ($2.5 billion), mycobacterial infections
($500 million) and systemic fungal diseases ($500 million) are serious and
difficult to treat diseases that we believe represent a combined maximum market
opportunity for ACTIMMUNE of approximately $3.5 billion annually in the United
States.
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In addition to our late stage product development efforts with ACTIMMUNE, we
have two additional products in preclinical development to treat infections
caused by pseudomonas aeruginosa and staphylococcus aureus.
ACTIMMUNE
The active ingredient in ACTIMMUNE is interferon gamma-1b. Interferons are
comprised of two families of related proteins that are secreted by a variety of
cells in the body. Interferon alpha and interferon beta, which are included in
one family, have been approved and are currently marketed for the treatment of
diseases such as hepatitis B infection and multiple sclerosis. However,
interferon alpha and interferon beta are associated with serious adverse side
effects that may result in discontinuation of therapy. Interferon gamma, which
is included in a separate family of interferons, is biologically distinct from
interferon alpha and interferon beta. Interferon gamma has a superior safety
profile as compared to interferon alpha and interferon beta because it results
in fewer and less severe adverse side effects.
ACTIMMUNE performs two important activities in the human body. First,
ACTIMMUNE activates the immune system by stimulating a class of immune cells
known as macrophages. This action results in increased killing and removal of
infectious organisms, such as bacteria and fungi. We believe that interferon
gamma-1b may have the broadest range of therapeutic activity in bacterial and
fungal diseases of any protein yet identified. This activity enhances the body's
ability to fight infection and is the reason we are developing ACTIMMUNE for use
in the treatment of infectious diseases.
ACTIMMUNE's second important activity in the body is to regulate the
activity of the body's scar-forming cells, called fibroblasts. ACTIMMUNE
directly blocks the multiplication of fibroblasts and also inhibits the
production and action of TGF-beta, a potent scar-inducing molecule. The result
of these actions is the prevention of excessive scarring, which is known as
anti-fibrotic activity. The anti-fibrotic activity of ACTIMMUNE has been
demonstrated in both preclinical studies and in clinical trials. We are pursuing
a Phase II/III pivotal clinical trial using ACTIMMUNE for the treatment of
idiopathic pulmonary fibrosis because prior clinical trials have demonstrated
its anti-fibrotic activity.
BACKGROUND
InterMune was formed in 1998 and began operations as a wholly owned
subsidiary of Connetics Corporation. In 1998, Connetics acquired from Genentech
and subsequently sublicensed to us, the rights to develop and commercialize
ACTIMMUNE for a broad range of diseases, including infectious diseases,
congenital disorders and idiopathic pulmonary fibrosis. We initially focused on
expanding the sales of ACTIMMUNE for chronic granulomatous disease and on
developing ACTIMMUNE to treat serious infectious diseases and congenital
disorders. In April 1999, we became an independent company through venture
capital funding. We have since expanded our development and commercialization
plans to include idiopathic pulmonary fibrosis as well as other life-threatening
pulmonary diseases. In February 2000, we received FDA approval for the use of
ACTIMMUNE for osteopetrosis. Both Connetics and Genentech maintain significant
ownership positions in InterMune.
STRATEGY
We plan to pursue a growth strategy through the following:
GROW PRODUCT REVENUE. We assumed commercial operations for ACTIMMUNE in
January 1999. In 1999, we were able to increase the sales of ACTIMMUNE by
approximately 41% in the United States, compared to 1998. We accomplished this
increase in sales through a product price increase and by increasing awareness
of ACTIMMUNE through direct mailings and trade shows targeted at the
academic-centered physician community. We believe increased physician awareness
resulted in increased usage of the product for chronic granulomatous disease and
other diseases.
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EXPAND THE NUMBER OF FDA-APPROVED DISEASES FOR ACTIMMUNE. We plan to
develop ACTIMMUNE for a number of diseases where preclinical studies and
clinical trials have shown promise for ACTIMMUNE as a potential treatment. Some
of the diseases for which ACTIMMUNE has demonstrated therapeutic activity
include idiopathic pulmonary fibrosis, mycobacterial infections, systemic fungal
infections and cystic fibrosis. We believe that the risks and time required to
obtain FDA approval of ACTIMMUNE for new diseases may be reduced because of its
established safety profile. We also believe that the life-threatening nature of
some of the diseases that we intend to treat will enable us to obtain
accelerated, or fast track, approval for ACTIMMUNE for these diseases.
ENHANCE PHYSICIAN AWARENESS AND EDUCATION. We have initiated a program to
further heighten physician awareness of ACTIMMUNE through a group of at least 12
medical science liaisons as well as through peer-reviewed journal advertisements
for ACTIMMUNE and our recently launched ACTIMMUNE.com website. Although
ACTIMMUNE is currently only approved for chronic granulomatous disease and
osteopetrosis, we believe that some physicians may prescribe ACTIMMUNE to treat
patients with idiopathic pulmonary fibrosis, as well as other diseases, based on
available clinical data and publications of such data in THE NEW ENGLAND JOURNAL
OF MEDICINE, THE LANCET and other peer-reviewed publications. To the extent
allowed by law, we intend to disseminate these peer-reviewed articles to our
physician customers for the purpose of off-label education.
DEVELOP A SALES AND MARKETING ORGANIZATION TO SERVE PULMONOLOGISTS AND
INFECTIOUS DISEASE SPECIALISTS. Pulmonologists are the physicians who generally
treat idiopathic pulmonary fibrosis, and infectious disease specialists are the
physicians who generally treat multidrug-resistant tuberculosis, atypical
mycobacterial and systemic fungal infections. Accordingly, we intend to develop
a sales and marketing force to target the approximately 6,000 pulmonologists and
4,000 infectious disease specialists practicing in the United States. In
addition, because these pulmonologists and infectious disease specialists are
primarily hospital-based and concentrated in major metropolitan areas, we
believe that a focused marketing organization and specialized sales force can
effectively serve them.
CONTINUE TO IN-LICENSE PRECLINICAL AND DEVELOPMENT-STAGE PROGRAMS. We plan
to continue to in-license and acquire rights to preclinical and
development-stage programs, especially those for the treatment of
life-threatening pulmonary and infectious diseases. To date, we have in-licensed
ACTIMMUNE, our pseudomonas aeruginosa program and our staphylococcus aureus
program. We believe that increasing consolidation in the pharmaceutical and
biotechnology industries and continuing changes in the health care system will
provide us with significant opportunities to in-license or acquire additional
products and programs from pharmaceutical companies and research and academic
institutions.
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MARKETED PRODUCT AND PRODUCT DEVELOPMENT
The following table summarizes key information concerning the diseases for
which we intend to develop and commercialize, or are currently commercializing,
ACTIMMUNE and the status of our product development:
<TABLE>
PRODUCT/PROGRAM DISEASE STATUS MARKETING RIGHTS
<S> <C> <C> <C>
ACTIMMUNE Chronic granulomatous Marketed United States
disease
ACTIMMUNE Osteopetrosis Marketed United States
ACTIMMUNE Idiopathic pulmonary Phase II/III clinical United States
fibrosis trial planned for first
half 2000
ACTIMMUNE MYCOBACTERIAL INFECTIONS
- Multidrug-resistant Phase III clinical trial United States
tuberculosis planned for first half and Japan
2000
- Atypical mycobacterial Phase II clinical trial United States
infections planned for second half
2000
ACTIMMUNE SYSTEMIC FUNGAL
INFECTIONS
- Cryptococcal Phase II clinical trial United States
meningitis ongoing
ACTIMMUNE Cystic fibrosis Phase II clinical trial United States
planned for second half
2000
Pseudomonas aeruginosa Pseudomonas aeruginosa Preclinical studies Worldwide
program infection
Staphylococcus aureus Staphylococcus aureus Preclinical studies Worldwide
program infection
</TABLE>
ACTIMMUNE--Marketed Disease Treatments
CHRONIC GRANULOMATOUS DISEASE
ACTIMMUNE is currently approved for the treatment of chronic granulomatous
disease, a life-threatening congenital disorder of the immune system that
affects children. This disorder causes patients to be vulnerable to severe
recurrent bacterial and fungal infections that result in frequent and prolonged
hospitalizations and are commonly a cause of death.
In 1990, ACTIMMUNE was approved by the FDA for the treatment of chronic
granulomatous disease based on its ability to reduce the frequency and severity
of infections in these patients. A randomized, double blind, placebo-controlled
study of ACTIMMUNE in patients with chronic granulomatous disease demonstrated
that ACTIMMUNE effectively reduced the frequency and severity of serious
infections associated with chronic granulomatous disease. Overall, patients
treated with ACTIMMUNE had 67% fewer disease-related infections compared to the
placebo group. Additionally, ACTIMMUNE reduced hospitalizations associated with
chronic granulomatous disease by 67% compared to the placebo group.
There are an estimated 400 patients with chronic granulomatous disease in
the United States for whom treatment with ACTIMMUNE may be appropriate, and
there is no FDA-approved treatment
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specifically for this disease other than ACTIMMUNE. Based on the indicated
dosage levels of 100 micrograms of ACTIMMUNE three times per week, the annual
cost per patient is approximately $25,000. Accordingly, we believe that chronic
granulomatous disease represents a maximum annual market opportunity of
approximately $10 million in the United States for ACTIMMUNE.
OSTEOPETROSIS
In February 2000, the FDA approved ACTIMMUNE for the treatment of
osteopetrosis and granted ACTIMMUNE orphan drug status for the treatment of
osteopetrosis. Osteopetrosis is a life-threatening, congenital disorder in which
an overgrowth of bony structures leads to blindness, deafness and increased
susceptibility to infection. This disorder primarily affects children, and no
other effective treatment is currently available other than ACTIMMUNE.
The results of a Phase II clinical trial, which were published in June 1995
in THE NEW ENGLAND JOURNAL OF MEDICINE, demonstrated that osteopetrosis patients
treated with ACTIMMUNE had a statistically significant improvement in the course
of the disease. In addition, patients treated with ACTIMMUNE in a Phase III
clinical trial experienced a statistically significant reduction in the rate of
disease progression compared to the placebo group.
There are approximately 400 patients with osteopetrosis in the United States
for whom treatment with ACTIMMUNE may be appropriate. Based on the indicated
dosage levels for osteopetrosis patients of 100 micrograms of ACTIMMUNE three
times per week, the annual cost per patient is approximately $25,000.
Accordingly, we believe that osteopetrosis represents a maximum annual market
opportunity of approximately $10 million in the United States for ACTIMMUNE.
ACTIMMUNE--DISEASE TREATMENTS UNDER DEVELOPMENT
IDIOPATHIC PULMONARY FIBROSIS
Idiopathic pulmonary fibrosis is a life-threatening disease characterized by
progressive scarring, or fibrosis, of the lungs, which leads to their
deterioration and destruction. The cause of idiopathic pulmonary fibrosis is
unknown. The prognosis is poor for patients with idiopathic pulmonary fibrosis,
which occurs primarily in persons 40 to 70 years old. Most patients die from
progressive loss of lung function, which leads to suffocation. The median life
span for patients suffering from idiopathic pulmonary fibrosis is approximately
three to five years from the time of diagnosis. There are at least 50,000
patients in the United States with idiopathic pulmonary fibrosis. We plan to
commence a Phase II/III pivotal clinical trial for this disease in the first
half of 2000.
CURRENT THERAPY. Treatment options for idiopathic pulmonary fibrosis are
limited and only minimally effective. Approximately 70% to 80% of patients with
idiopathic pulmonary fibrosis do not respond to any currently available drug
therapy. Attempted drug therapies include high dose corticosteroids and
anti-cancer drugs, both of which are minimally effective and may result in
significant adverse side effects. For these reasons, treatment with
corticosteroids and anti-cancer drugs are not recommended for all patients with
idiopathic pulmonary fibrosis. As a last resort, a small percentage of patients
undergo lung transplantation, but donors are limited, and many patients die
while awaiting a transplant.
PRIOR CLINICAL TRIALS OF INTERFERON GAMMA-1B AS A TREATMENT FOR IDIOPATHIC
PULMONARY FIBROSIS. Independent investigators conducted two clinical trials of
interferon gamma-1b for the treatment of idiopathic pulmonary fibrosis. The
results of these clinical trials demonstrated that interferon gamma-1b can be
safely administered with minimal adverse side effects and can halt and reverse
the deterioration in lung function in patients.
The results of one of these clinical trials, a Phase II clinical trial
published in October 1999 in THE NEW ENGLAND JOURNAL OF MEDICINE, demonstrated
that interferon gamma-1b may be effective in the treatment of idiopathic
pulmonary fibrosis. Investigators at the University of Vienna conducted the
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clinical trial with 18 patients who had not responded to treatment with
corticosteroids or anti-cancer agents. Nine patients were treated for 12 months
with oral prednisolone, a corticosteroid, and nine patients were treated with a
combination of interferon gamma-1b and prednisolone.
Lung function, as measured by total lung capacity and blood oxygen levels,
deteriorated in all nine patients in the group given prednisolone alone. Total
lung capacity decreased from a mean of 66% at the start of the trial to 62%
after 12 months. In contrast, in the group receiving interferon gamma-1b plus
prednisolone, total lung capacity increased from a mean of 70% at the start of
the trial to 79% after 12 months. Similarly, in the nine patients in the group
given prednisolone alone, blood oxygen levels of patients at rest decreased from
a mean of 65% at the start of the trial to 62% after 12 months; in the group
receiving interferon gamma-1b plus prednisolone, blood oxygen levels of patients
at rest increased from a mean of 65% at the start of the trial to 76% after
12 months. Both of these results are statistically significant, each with a
p value < 0.001. This means that, applying widely-used statistical methods, the
chance that these results occurred by accident is less than 1 in 1000. All
patients treated with interferon gamma-1b exhibited improved pulmonary function
for the trial period of 12 months. In contrast, patients receiving treatment
with prednisolone alone showed gradual impairment of their pulmonary function,
and two of them died following the 12-month clinical trial.
These results confirmed the observations of an initial clinical trial in
patients, or Phase I/II clinical trial, by the same investigators. In the
initial clinical trial, the investigators tested safety and dosing of interferon
gamma-1b in combination with prednisolone for the treatment of idiopathic
pulmonary fibrosis in 30 patients. The clinical data showed that the ten
patients who received 200 micrograms of ACTIMMUNE demonstrated overall
improvement in lung function. In the ten patients that received 100 micrograms
of interferon gamma-1b, four showed improvement. None of the ten patients in the
control group, who were not treated with interferon gamma-1b, improved. Overall,
the investigators concluded that patients who received interferon gamma-1b in
combination with prednisolone showed significant improvement in lung function
compared to the control group that received prednisolone alone.
OUR PHASE II/III PIVOTAL CLINICAL TRIAL. We are continuing the clinical
development of ACTIMMUNE in idiopathic pulmonary fibrosis by initiating a Phase
II/III pivotal clinical trial during the first half of 2000. Our clinical trial
will enroll patients with documented idiopathic pulmonary fibrosis who have not
responded to previous treatment with corticosteroids and who have evidence of
deteriorating lung function. We anticipate that our trial will compare two
different doses, 100 micrograms and 200 micrograms, of ACTIMMUNE in combination
with corticosteriods to a control group that receives corticosteriods alone.
Outcomes will include several measures of lung function, including lung
capacity, blood oxygen levels and several measures of quality of life.
IDIOPATHIC PULMONARY FIBROSIS MARKET. There are at least 50,000 patients
with idiopathic pulmonary fibrosis in the United States. Based on the expected
dosing level of 200 micrograms of ACTIMMUNE three times per week for idiopathic
pulmonary fibrosis patients, the annual cost per patient would be approximately
$50,000. Assuming this treatment regimen, we believe that idiopathic pulmonary
fibrosis represents a maximum annual market opportunity of approximately
$2.5 billion in the United States for ACTIMMUNE. In addition, if ACTIMMUNE is
approved to treat idiopathic pulmonary fibrosis, we anticipate that it may also
be used to treat some other forms of pulmonary fibrosis, including fibrosis
caused by sarcoidosis, radiation, some environmental exposures and connective
tissue diseases such as scleroderma.
MYCOBACTERIAL INFECTIONS
Mycobacteria are the cause of several infectious diseases, including
tuberculosis, multidrug-resistant tuberculosis and atypical mycobacterial
infections. Tuberculosis is a major worldwide health threat. Tuberculosis is a
difficult disease to treat and requires multidrug regimens of at least six
months for
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eradication. It is estimated that 1% to 10% of tuberculosis cases, classified as
multidrug-resistant tuberculosis, are caused by mycobacteria that are resistant
to standard drug therapy. During the past ten years, multidrug-resistant
tuberculosis has emerged as a global health issue.
In the United States, each year there are approximately 17,000 new cases of
tuberculosis, of which approximately 170 are multidrug-resistant tuberculosis,
and 4,000 cases of atypical mycobacterial infection. In Japan, where we have
commercial rights for the use of ACTIMMUNE in the treatment of tuberculosis,
there are approximately 43,000 new cases of tuberculosis each year, of which
approximately 2,000 are multidrug-resistant tuberculosis. Based upon expected
dosing levels of 100 to 500 micrograms of ACTIMMUNE three times per week, we
believe that mycobacterial infections represent a maximum annual market
opportunity of approximately $500 million for ACTIMMUNE in the United States and
Japan.
MULTIDRUG-RESISTANT TUBERCULOSIS. A recent clinical trial conducted at
Bellevue Hospital in New York and published in THE LANCET in May 1997 found that
patients with multidrug-resistant tuberculosis were able to respond to
conventional tuberculosis drugs when ACTIMMUNE was added to their treatment
regimen. In contrast, none of these patients had responded to conventional
tuberculosis drugs alone after an average of 13 months of therapy. We plan to
initiate a Phase III clinical trial of ACTIMMUNE for the treatment of
multidrug-resistant tuberculosis in the first half of 2000.
ATYPICAL MYCOBACTERIAL INFECTION. In May 1994, THE NEW ENGLAND JOURNAL OF
MEDICINE published the results of a clinical trial showing ACTIMMUNE to be
successful in reducing fever and other signs of infection in patients with
atypical mycobacterial infection. We plan to initiate a Phase II clinical trial
for this disease in the second half of 2000.
SYSTEMIC FUNGAL INFECTIONS--CRYPTOCOCCAL MENINGITIS
Systemic fungal infections, such as cryptococcal meningitis, an infection of
the lining of the brain, and pneumonia, are life-threatening diseases caused by
various fungi that attack patients with weakened immune systems. Currently
available therapies for these infections are often ineffective and result in
serious adverse side effects. Mortality from systemic fungal infections remains
high. There is a clear need for new, effective and less toxic drugs to treat
them. Recent research results support the potential benefit of combining
ACTIMMUNE with conventional antifungal therapy in the treatment of several of
the most prevalent types of systemic fungal infections. Because ACTIMMUNE works
by acting directly on the immune system, we believe that new antifungal agents
will also have greater efficacy when combined with ACTIMMUNE.
Our strategy for the development of ACTIMMUNE for the treatment of systemic
fungal diseases is twofold. We plan to conduct clinical trials and seek
regulatory approval in cryptococcal meningitis and one other systemic fungal
disease. To this end, we are currently conducting a Phase II clinical trial
designed to determine dose and efficacy of ACTIMMUNE in combination therapy for
the treatment of cryptococcal meningitis. Upon regulatory approval in two
specific systemic fungal diseases, we plan to seek broad labeling from the FDA
for systemic fungal diseases in general. There are approximately 100,000
patients with systemic fungal infections in the United States. Based on expected
dosing levels of 100 micrograms of ACTIMMUNE three times per week for these
patients, we believe that systemic fungal infections represent a maximum annual
market opportunity of approximately $500 million for ACTIMMUNE in the United
States.
CYSTIC FIBROSIS
Cystic fibrosis is a congenital disorder that leads to chronic pulmonary
infections in children, usually by four years of age. These infections result in
an exaggerated inflammatory response, leading to clogging and obstruction of the
airways. Chronic pulmonary infection is the major cause of mortality in these
patients. Due to its ability to regulate the immune system, we believe that
ACTIMMUNE may
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have the potential to modify many of the processes that lead to the exaggerated
inflammation and to reduce the chronic inflammation in the lungs. By preventing
excessive inflammation in the airways, ACTIMMUNE may be able to slow the
progression of pulmonary deterioration. We are currently evaluating ACTIMMUNE in
animal models of cystic fibrosis and plan to initiate a Phase I/II clinical
trial of ACTIMMUNE in patients with cystic fibrosis in the second half of 2000.
Cystic fibrosis affects an estimated 23,000 persons in the United States. We
believe that cystic fibrosis represents an annual market opportunity of
approximately $500 million for ACTIMMUNE in the United States.
OTHER PROGRAMS
PSEUDOMONAS AERUGINOSA INFECTION
Pseudomonas aeruginosa is a bacterial infection that often affects patients
using respirators and catheters as well as patients with a number of conditions,
including burns, low white blood cell counts and cystic fibrosis. Because the
types of patients at risk generally have pre-existing illnesses, pseudomonas
aeruginosa infection most often occurs in a hospital setting.
Scientists at the Medical College of Wisconsin have identified a protein,
designated PcrV, on the surface of pseudomonas aeruginosa bacteria that enables
the bacteria to invade human tissue. By directing antibodies against the PcrV
protein, they have been able to demonstrate highly effective treatment, as well
as prevention, of infections caused by pseudomonas in animal models. We are
currently working with a third party to generate a human monoclonal antibody
directed against the PcrV protein as a therapeutic, in combination with
antibiotics. This antibody would treat pseudomonas aeruginosa infection and
prevent infection in high-risk patients.
Pseudomonas aeruginosa infections account for 71,000 annual cases in the
United States of pneumonia in hospitalized patients, 30% to 40% of which die
from their pneumonia. Furthermore, chronic pseudomonas aeruginosa is the leading
cause of pulmonary infection and resulting mortality in patients with cystic
fibrosis, which annually affects an estimated 23,000 persons in the United
States.
STAPHYLOCOCCUS AUREUS INFECTION
Staphylococcus aureus is a bacteria that causes diseases ranging from minor
skin infections to life-threatening deep tissue infections such as pneumonia,
meningitis, heart valve infections, post-operative wound infections, bloodstream
infections and toxic shock syndrome. The emergence of antibiotic resistance has
made many anti-infective agents ineffective. We are working with collaborators
to discover protein fragments, known as peptides, that block infections caused
by staphylococcus aureus. The efficacy of one of these peptides, known as VIF,
has been demonstrated in animal models, and we intend to develop one or more
peptides as therapy to be used in conjunction with antibiotics in the treatment
of infections caused by staphylococcus aureus. We are also in the early stages
of development for a vaccine for the prevention of infections caused by
staphylococcus aureus in high-risk populations.
In the United States, there are at least 500,000 infections caused by
staphylococcus aureus a year. These infections extend hospitalization and
increase required medical and nursing care, and it would be highly
cost-effective to immunize these high-risk patient groups with a staphylococcal
vaccine.
LICENSE AND OTHER AGREEMENTS
CONNETICS CORPORATION (ACTIMMUNE)
In August 1998, we entered into an Exclusive Sublicense Agreement with
Connetics under which we obtained an exclusive sublicense under the rights
granted to Connetics by Genentech through a license agreement relating to
interferon gamma-1b. We also agreed to assume many of Connetics' obligations to
Genentech under that license agreement. We entered into an Amended and Restated
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Exclusive Sublicense Agreement with Connetics in April 1999 in order to broaden
the scope of rights granted to us. The agreement terminates on the later of
May 5, 2018 and the date that the last of the patents licensed under the
agreement expires.
Our sublicensed rights include exclusive and non-exclusive rights. The
exclusive rights are to commercialize ACTIMMUNE in the United States for the
treatment and prevention of all human diseases and conditions, including
infectious diseases and pulmonary fibrosis, but excluding arthritis and cardiac
and cardiovascular diseases and conditions. The non-exclusive rights include the
right to commercialize ACTIMMUNE for gene therapy in the United States, except
for cardiac and cardiovascular diseases and conditions. In Japan, we have the
exclusive license rights to commercialize interferon gamma-1b for tuberculosis.
We also have the opportunity, under specified conditions, to obtain further
rights to interferon gamma-1b in Japan. We pay to both Connetics and Genentech
royalties on the sales of ACTIMMUNE, and make one-time payments to Genentech
upon the occurrence of specified milestone events. Connetics must satisfy
specified obligations under the agreement with Genentech to maintain its license
from Genentech. We are obligated under the agreement to develop and
commercialize ACTIMMUNE for a number of diseases.
Beginning on January 1, 2002, we are obligated to pay to Connetics a royalty
of .25% of our net U.S. sales for ACTIMMUNE until our net U.S. sales surpass
$1 billion. Thereafter, we are obligated to pay a royalty of .5% of our net U.S.
sales. In addition, we are obligated to pay to Connetics aggregate milestone
payments of $1,500,000 upon the achievement of various levels of net U.S. sales.
Depending on the level of net U.S. sales, we are obligated to pay cash and/or to
furnish to Connetics promissory notes that have an interest rate of the prime
rate plus two percentage points.
We have deferred payment of the royalties due to Genentech for 1999
(approximately $1.9 million) under a series of interest-bearing promissory notes
that will become due upon the closing date of this offering. The amounts due
under these notes may be converted, at Genentech's option, into shares of our
stock sold in our most recent financing prior to the conversion at the same
price per share.
Until April 2004, Connetics has an option under our agreement to obtain the
exclusive, royalty-free right to commercialize ACTIMMUNE for dermatological
diseases in the United States. If Connetics exercises its option, then it will
make one-time payments to us upon the occurrence of milestones. Connetics also
has a first right of negotiation to become our marketing partner for the sale of
ACTIMMUNE to dermatologists for diseases that are not primarily dermatological
in origin.
In connection with the execution of the Amended and Restated Exclusive
Sublicense Agreement, we also entered into a Transition Agreement with
Connetics. Under the Transition Agreement, Connetics books the net sales of
ACTIMMUNE, up to a baseline amount through December 2001, less associated cost
of goods sold and marketing expenses. We book all net sales in excess of that
baseline. This agreement also provides for economic incentives to transition the
manufacturing of ACTIMMUNE from Genentech to a third party.
MEDICAL COLLEGE OF WISCONSIN (PCRV PROTEIN)
In March 1999, we entered into a License Agreement with the Medical College
of Wisconsin under which we received exclusive, worldwide rights to technology
owned by the College relating to PcrV protein. We are obligated to pay the
College one-time payments of up to an aggregate of $2,050,000 on the occurrence
of milestone events, as well as a royalty on the sales of products covered by
this technology. We have also entered into a research agreement with the College
to sponsor basic research relating to pseudomonas aeruginosa.
PANORAMA RESEARCH, INC. (STAPHYLOCOCCUS AUREUS)
In January 2000, we entered into a Sponsored Research and License Agreement
with Panorama Research, Inc. under which we received exclusive, worldwide rights
to technology owned by Panorama relating to staphylococcus aureus, as well as to
technology to be developed by Panorama pursuant to the staphylococcus aureus
research program that we support. We will pay to Panorama one-time payments on
the occurrence of milestone events, as well as a royalty on the sales of
products covered
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by this technology. Within 30 days of our receipt of FDA approval of a new drug
application for a product, we are obligated to pay $500,000 to Panorama. In
addition we will grant to three consultants employed by Panorama stock options
for the purchase of up to an aggregate of 100,000 shares of our common stock
that will vest monthly and be fully vested in January 2003.
MANUFACTURING
We contract with qualified third-party manufacturers to produce our
products. This manufacturing strategy enables us to direct financial resources
to the development and commercialization of products rather than diverting
resources to establishing a manufacturing infrastructure that complies with the
FDA's regulations. Genentech currently manufactures and formulates bulk active
ingredient and fills and finishes ACTIMMUNE destined for commercial supply. We
have contracted with CORD Logistics for the commercial distribution of ACTIMMUNE
in the United States. We are negotiating with a third party to perform the
packaging and distribution of ACTIMMUNE for our clinical trials.
Boehringer Ingelheim manufactures and formulates bulk active ingredient and
fills and finishes ACTIMMUNE destined for clinical supply. Boehringer Ingelheim
is currently pursuing qualification by the FDA to manufacture ACTIMMUNE for our
commercial supply. We believe that the FDA will approve Boehringer Ingelheim as
a manufacturer of commercial supply of ACTIMMUNE by mid-2001.
We recently entered into a supply agreement with Boehringer Ingelheim to
manufacture both clinical and commercial supply of ACTIMMUNE. The agreement
generally provides for the mutual exclusive supply by Boehringer Ingelheim and
purchase by us of interferon gamma-1b. If we do not purchase a minimum amount of
interferon gamma-1b, we pay a penalty. If Boehringer Ingelheim is not able to
supply all of our requirements for interferon gamma-1b, we may choose an
additional manufacturer. Under this agreement, we are required to maintain a
standby letter of credit in the amount of approximately $530,000. The amount of
the standby letter of credit approximates 20% of the total payment obligation
under this agreement with respect to Boehringer Ingelheim's establishment of
comparability between its product and Genentech's. The term of the agreement
expires on December 31, 2006 and automatically renews for successive terms,
except if either Boehringer Ingelheim or we choose not to continue at a defined
time prior to the expiration of the then current term.
PATENTS AND PROPRIETARY RIGHTS
The proprietary nature of, and protection for, our products, product
candidates, processes and know-how are important to our business. We plan to
prosecute and defend aggressively our patents and proprietary technology. Our
policy is to patent or in-license the technology, inventions, and improvements
that we consider important to the development of our business. We also rely on
trade secrets, know-how, and continuing innovation to develop and maintain our
competitive position.
We have acquired proprietary rights in the United States and Japan to make,
use and sell interferon gamma-1b, ACTIMMUNE, in particular fields in connection
with our Amended and Restated Exclusive Sublicense Agreement with Connetics.
This sublicense agreement covers 15 U.S. patents and 9 corresponding Japanese
patents. We have also licensed a patent application in the area of pseudomonas
vaccine methods and have filed patent applications in the area of interferon
gamma treatment methods and compositions and treatment methods for
staphylococcus infections. We expect to continue to protect our proprietary
technology with additional filings as appropriate.
The degree of future protection for our proprietary rights is uncertain, and
we cannot ensure that:
- we were the first to make the inventions covered by each of our pending
patent applications;
- we were the first to file patent applications for these inventions;
- others will not independently develop similar or alternative technologies
or duplicate any of our technologies;
- any of our pending patent applications will result in issued patents;
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- any patents issued to us or our collaborators will provide a basis for
commercially viable products or will provide us with any competitive
advantages or will not be challenged by third parties;
- we will develop additional proprietary technologies that are patentable;
or
- the patents of others will not have an adverse effect on our business.
We attempt to ensure that our technology does not infringe the rights of
others. We are not aware of any asserted or unasserted claims that our
technology violates the proprietary rights of others. We are aware that the
principal investigator of Phase I/II and Phase II clinical trials of interferon
gamma-1b for the treatment of idiopathic pulmonary fibrosis has filed a patent
application in several European countries claiming the use of interferon
gamma-1b for this disease. We do not believe that a corresponding patent
application has been filed in the United States. Further, we believe it is
unlikely that the investigator could successfully obtain patent protection in
the United States for the use of interferon gamma-1b to treat idiopathic
pulmonary fibrosis. However, we cannot be certain that the investigator or a
third party has not filed and will not obtain a U.S. patent claiming the use of
interferon gamma-1b for the treatment of idiopathic pulmonary fibrosis or any of
the other diseases for which we are developing ACTIMMUNE. If a third party were
issued a patent that blocked our ability to commercialize ACTIMMUNE for any of
the diseases we are targeting, we and our collaborators would be subject to
legal action, unless we obtained a license under that patent in order to
continue our commercialization efforts for those diseases.
COMPETITION
ACTIMMUNE is the only FDA-approved therapy for each of chronic granulomatous
disease and osteopetrosis. There is no currently available effective therapy for
the treatment of idiopathic pulmonary fibrosis. The main potential competition
for ACTIMMUNE in idiopathic pulmonary fibrosis is the development of Avonex
interferon beta by Biogen, Inc. Biogen, which currently markets Avonex for
multiple sclerosis, is conducting a Phase II clinical trial of Avonex for
idiopathic pulmonary fibrosis. We believe that successful development of Avonex
for idiopathic pulmonary fibrosis will have a limited impact on ACTIMMUNE for
idiopathic pulmonary fibrosis due to the more favorable side effect profile of
ACTIMMUNE relative to interferon beta.
We believe that the primary competition for ACTIMMUNE in serious infectious
diseases such as mycobacterial and systemic fungal infections consists of:
- the potential development of new generations of advanced antibiotics and
anti-fungal agents that successfully treat these diseases; and
- the current treatment regimens, which may be less effective in many cases,
but cost substantially less than the current price for ACTIMMUNE.
The primary competition for ACTIMMUNE in cystic fibrosis are the
FDA-approved drugs marketed by Genentech and Pathogenesis Corporation.
SALES AND MARKETING
We are currently marketing ACTIMMUNE in the United States for the treatment
of chronic granulomatous disease and osteopetrosis. Our marketing efforts
currently consist of the following:
- direct mailings to physicians;
- advertisements for ACTIMMUNE;
- our ACTIMMUNE.com website, which contains product and disease information
for physicians and patients; and
- attendance at physician trade shows.
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We have contracted the services of 12 medical science liaisons who will
educate physicians and increase their awareness of ACTIMMUNE. We also plan to
sponsor speaker programs, medical symposia and continuing medical education
programs regarding ACTIMMUNE.
FDA REGULATION AND PRODUCT APPROVAL
The FDA and comparable regulatory agencies in state and local jurisdictions
and in foreign countries impose substantial requirements upon the clinical
development, manufacture and marketing of pharmaceutical products. These
agencies and other federal, state and local entities regulate research and
development activities and the testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record keeping, approval, advertising and
promotion of our products. We believe that our products will be regulated as
biologics by the FDA.
The process required by the FDA before our products, or new diseases for
approved products, may be marketed in the United States generally involves the
following:
- preclinical laboratory and animal tests;
- submission of an investigational new drug, or IND, application, which must
become effective before clinical trials may begin;
- adequate and well-controlled human clinical trials to establish the safety
and efficacy of the proposed drug for its intended use; and
- FDA approval of a new biologics license application, or BLA, supplement.
The testing and approval process requires substantial time, effort, and
financial resources, and we cannot be certain that any new approvals for
ACTIMMUNE will be granted on a timely basis, if at all.
Prior to commencing a clinical trial, we must submit an IND application to
the FDA. The IND automatically becomes effective 30 days after receipt by the
FDA, unless the FDA, within the 30-day time period, raises concerns or questions
about the conduct of the trial. In such a case, the IND sponsor and the FDA must
resolve any outstanding concerns before the clinical trial can begin. Our
submission of an IND may not result in FDA authorization to commence a clinical
trial. Further, an independent institutional review board at the medical center
proposing to conduct the clinical trial must review and approve the plan for any
clinical trial before it commences.
Human clinical trials are typically conducted in three sequential phases
that may overlap:
- PHASE I: The drug is initially introduced into healthy human subjects or
patients and tested for safety, dosage tolerance, absorption, metabolism,
distribution and excretion.
- PHASE II: Involves studies in a limited patient population to identify
possible adverse effects and safety risks, to determine the efficacy of
the product for specific targeted diseases and to determine dosage
tolerance and optimal dosage.
- PHASE III: When Phase II evaluations demonstrate that a dosage range of
the product is effective and has an acceptable safety profile, Phase III
trials are undertaken to further evaluate dosage, clinical efficacy and to
further test for safety in an expanded patient population at
geographically dispersed clinical study sites.
- In the case of products for severe or life-threatening diseases such as
idiopathic pulmonary fibrosis, the initial human testing is often
conducted in patients rather than in healthy volunteers. Because these
patients already have the target disease, these studies may provide
initial evidence of efficacy traditionally obtained in Phase II trials,
and thus these trials are frequently referred to as Phase I/II trials.
We may not successfully complete Phase I, Phase II or Phase III testing of
ACTIMMUNE within any specific time period, if at all. Furthermore, the FDA or an
institutional review board or the sponsor may suspend a clinical trial at any
time on various grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health risk.
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The results of product development, preclinical studies and clinical studies
are submitted to the FDA as part of a BLA, or a BLA supplement, for approval of
a new disease if the product is already approved for a disease. The FDA may deny
a BLA or BLA supplement if the applicable regulatory criteria are not satisfied
or may require additional clinical data. Even if such data is submitted, the FDA
may ultimately decide that the BLA or BLA supplement does not satisfy the
criteria for approval. Once issued, the FDA may withdraw product approval if
compliance with regulatory standards is not maintained or if problems occur
after the product reaches the market. In addition, the FDA may require testing
and surveillance programs to monitor the effect of approved products which have
been commercialized, and the FDA has the power to prevent or limit further
marketing of a product based on the results of these post-marketing programs.
The FDA's fast track program is intended to facilitate the development and
expedite the review of drugs intended for the treatment of serious or
life-threatening diseases and that demonstrate the potential to address unmet
medical needs for such conditions. Under this program, the FDA can, for example,
review portions of a BLA for a fast track product before the entire application
is complete, thus potentially beginning the review process at an earlier time.
We cannot guarantee that the FDA will grant any of our requests for fast track
designation, that any fast track designation would affect the time of review, or
that the FDA will approve the BLA submitted for any of our drug candidates,
whether or not fast track designation is granted. Additionally, the FDA's
approval of a fast track product can include restrictions on the product's use
or distribution, such as permitting use only for specified medical procedures or
limiting distribution to physicians or facilities with special training or
experience. Approval of fast track products can be conditional with a
requirement for additional clinical studies after approval.
Satisfaction of FDA requirements or similar requirements of state, local and
foreign regulatory agencies typically takes several years and the actual time
required may vary substantially, based upon the type, complexity and novelty of
the product or disease. Government regulation may delay or prevent marketing of
potential products or new diseases for a considerable period of time and to
impose costly procedures upon our activities. We cannot be certain that the FDA
or any other regulatory agency will grant additional approvals for ACTIMMUNE on
a timely basis, if at all. Success in early stage clinical trials does not
assure success in later stage clinical trials. Data obtained from clinical
activities is not always conclusive and may be susceptible to varying
interpretations which could delay, limit or prevent regulatory approval. Even if
a product receives regulatory approval, the approval may be significantly
limited to specific diseases and dosages. Further, even after regulatory
approval is obtained, later discovery of previously unknown problems with a
product may result in restrictions on the product or even complete withdrawal of
the product from the market. Delays in obtaining, or failures to obtain
additional regulatory approvals for ACTIMMUNE would have a material adverse
effect on our business. In addition, we cannot predict what adverse governmental
regulations may arise from future U.S. or foreign governmental action.
Any products manufactured or distributed by us pursuant to FDA approvals are
subject to continuing regulation by the FDA, including record-keeping
requirements and reporting of adverse experiences with the drug. Drug
manufacturers and their subcontractors are required to register their
establishments with the FDA and certain state agencies, and are subject to
periodic unannounced inspections by the FDA and certain state agencies for
compliance with good manufacturing practices, which impose certain procedural
and documentation requirements upon us and our third party manufacturers. We
cannot be certain that we or our present or future suppliers will be able to
comply with the good manufacturing practices regulations and other FDA
regulatory requirements.
Physicians may prescribe drugs for uses that are not described in the
product's labeling for uses that differ from those tested by us and approved by
the FDA. Such off-label uses are common across medical specialties. Physicians
may believe that such off-label uses are the best treatment for many patients in
varied circumstances. The FDA does not regulate the behavior of physicians in
their choice of treatments. The FDA does, however, restrict manufacturer's
communications on the subject of
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off-label use. Companies cannot actively promote FDA-approved drugs for
off-label uses, but a recent court decision now allows them to disseminate to
physicians articles published in peer-reviewed journals, like THE NEW ENGLAND
JOURNAL OF MEDICINE, that discuss off-label uses of approved products. To the
extent allowed by law, we intend to disseminate peer-reviewed articles on
ACTIMMUNE to our physician customers.
The FDA's policies may change and additional government regulations may be
enacted which could prevent or delay regulatory approval of our potential
products or new diseases for ACTIMMUNE. We cannot predict the likelihood, nature
or extent of adverse governmental regulation which might arise from future
legislative or administrative action, either in the United States or abroad.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a rare disease or condition, which is generally a
disease or condition that affects fewer than 200,000 individuals in the United
States. Orphan drug designation must be requested before submitting a BLA. After
the FDA grants orphan drug designation, the generic identity of the therapeutic
agent and its potential orphan use are disclosed publicly by the FDA. Orphan
drug designation does not convey any advantage in or shorten the duration of the
regulatory review and approval process. If a product that has orphan drug
designation subsequently receives FDA approval for the disease for which it has
such designation, the product is entitled to orphan exclusivity, i.e., the FDA
may not approve any other applications to market the same drug for the same
disease, except in very limited circumstances, for seven years. We intend to
file for orphan drug designation for those ACTIMMUNE diseases which meet the
criteria for orphan exclusivity. Although obtaining FDA approval to market a
product with orphan drug exclusivity can be advantageous, there can be no
assurance that it would provide us with a material commercial advantage.
RESEARCH AND DEVELOPMENT
We direct financial resources efficiently to goal-oriented projects by
reducing the time and infrastructure spent on research and development. We do
not conduct in-house preclinical research and development. Instead, we contract
these activities to qualified third-party research and development institutions
such as academia or private contract labs. We have two contracted research and
development programs. The first is with the Medical College of Wisconsin and is
focused on the development of monoclonal antibodies against pseudomonas
aeruginosa. The other program is in collaboration with Panorama Research and is
focused on the development of peptides that block staphylococcus aureus
infections.
EMPLOYEES
As of March 6, 2000, we had 23 full-time employees. Of the full-time
employees, 14 were engaged in research and development and 9 were engaged in
sales, general and administrative positions. In addition, we have contracted
with consultants, including the 12 full-time medical science liaisons, that we
estimate are the equivalent of 20 additional full-time employees. We believe our
relations with our employees are good.
FACILITIES
Our facilities consist of approximately 7,000 square feet of office space
located at 1710 Gilbreth Road, Suite 301, Burlingame, California that is leased
to us until 2004. We currently have no option to renew this lease. We have no
laboratory or research facilities. We believe that our current facilities are
adequate for our needs for the foreseeable future and that, should it be needed,
suitable additional space will be available to accommodate expansion of our
operations on commercially reasonable terms.
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MANAGEMENT
- --------------------------------------------------------------------------------
The following table provides information regarding our directors, executive
officers, and key employees:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- -------------------- ------------------------------------------
<S> <C> <C>
W. Scott Harkonen, M.D.................... 48 Chief Executive Officer, President and
Chairman of the Board of Directors
Timothy P. Lynch.......................... 30 Chief Financial Officer, Vice President of
Business Development
Stephen N. Rosenfield..................... 50 Senior Vice President of Legal Affairs and
General Counsel
Peter Van Vlasselaer, Ph.D................ 41 Senior Vice President of Technical
Operations
David Cory, R.Ph.......................... 36 Vice President of Sales and Marketing
Christine Czarniecki, Ph.D................ 49 Vice President of Regulatory Affairs
J. Woodruff Emlen, M.D.................... 53 Vice President of Scientific Affairs
Edgar Engleman, M.D....................... 54 Director
James I. Healy, M.D., Ph.D................ 35 Director
John L. Higgins........................... 29 Director
Wayne Hockmeyer, Ph.D..................... 55 Director
Jonathan S. Leff.......................... 31 Director
Nicholas J. Simon......................... 45 Director
</TABLE>
- ------------------------
W. SCOTT HARKONEN, M.D. Dr. Harkonen founded InterMune in February 1998 and
has served as a member of our board of directors since inception and is
currently the Chairman of the Board. Dr. Harkonen has been our Chief Executive
Officer and President since inception. From September 1995 to April 1999,
Dr. Harkonen served as Senior Vice President of Product Development and
Operations at Connetics Corporation. From March 1991 to September 1995,
Dr. Harkonen served as Vice President of Medical and Regulatory Affairs at
Univax Biologics. Dr. Harkonen holds an M.D. from the University of Minnesota
and an M.B.A. from the Haas School of Business at the University of California
at Berkeley.
TIMOTHY P. LYNCH. Mr. Lynch has served as our Chief Financial Officer and
Vice President of Business Development since November 1999. From July 1999 to
October 1999, Mr. Lynch served as the Director of Business Development at
ePhysician, Inc. From August 1997 to July 1999, Mr. Lynch served as Director of
Strategic Planning at Elan Corporation, plc. From August 1993 to June 1995,
Mr. Lynch was employed by Goldman, Sachs & Co. in the investment banking
division. From June 1992 to August 1993, Mr. Lynch was employed by Chase
Securities, Inc. in the investment banking division. Mr. Lynch holds an M.B.A.
from the Harvard Graduate School of Business.
STEPHEN N. ROSENFIELD. Mr. Rosenfield has served as our Senior Vice
President of Legal Affairs and General Counsel since March 2000. From February
1996 to February 2000, Mr. Rosenfield was an associate at Cooley Godward LLP.
From September 1992 to January 1996, Mr. Rosenfield was an associate at Coblentz
Cahen McCabe & Breyer LLP. Mr. Rosenfield holds a J.D. from Northeastern
University School of Law.
PETER VAN VLASSELAER, PH.D. Dr. Van Vlasselaer has served as our Senior Vice
President of Technical Operations since November 1999. From July 1993 to
November 1999, Dr. Van Vlasselaer served as
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Vice President of Development at Dendreon Corporation. Dr. Van Vlasselaer holds
a Ph.D. from the University of Leuven in Belgium and was an immunology fellow at
Stanford University.
DAVID A. CORY, R.PH. Mr. Cory has served as our Vice President of Sales and
Marketing since February 2000. From November 1999 to January 2000, Mr. Cory was
a pharmaceutical industry consultant. From November 1988 to October 1999,
Mr. Cory served in both sales and marketing management capacities, most recently
as Commercial Director of Marketing, at Glaxo Wellcome, Inc. Mr. Cory holds a
degree in Pharmacy from the University of Cincinnati.
CHRISTINE CZARNIECKI, PH.D. Dr. Czarniecki has served as our Vice President
of Regulatory Affairs since January 2000. From March 1997 to January 2000,
Dr. Czarniecki served as Director of Regulatory Affairs and Quality at Axys
Pharmaceuticals Inc. From July 1993 to March 1997, Dr. Czarniecki served as
Director of Regulatory Affairs at ICOS Corporation. Dr. Czarniecki holds a Ph.D.
from Georgetown University.
J. WOODRUFF EMLEN, M.D. Dr. Emlen has served as our Vice President of
Scientific Affairs since October 1998. From August 1997 to October 1998,
Dr. Emlen served as Vice President of Exploratory Medicine at Connetics
Corporation. From September 1987 to August 1997, Dr. Emlen served as a professor
of medicine and immunology at the University of Colorado Health Services Center.
Dr. Emlen holds an M.D. from the University of California at San Diego.
EDGAR ENGLEMAN, M.D. Dr. Engleman has served as a member of our board of
directors since April 1999. Dr. Engleman joined BioAsia Investments, LLC in 1997
and is currently a General Partner of BioAsia Investments, LLC. Dr. Engleman has
served on the faculty of Stanford University Medical School since 1978 and is
currently Professor of Pathology and Medicine. Dr. Engleman serves on the board
of directors of several private companies. Dr. Engleman holds an M.D. from
Columbia University School of Medicine.
JAMES I. HEALY, M.D., PH.D. Dr. Healy has served as a member of our board of
directors since April 1999 and as the interim chairman of the board of directors
from October 1999 through January 2000. From January 1998 to March 2000,
Dr. Healy was a partner at Sanderling Ventures. From August 1997 to December
1997, Dr. Healy was a Novartis Foundation Fellow at Brigham & Women's Hospital.
From August 1990 to July 1997 he was employed by the Howard Hughes Medical
Institute and Stanford University. Dr. Healy serves on the board of directors of
several private companies. Dr. Healy holds an M.D. and a Ph.D. from Stanford
University.
JOHN L. HIGGINS. Mr. Higgins has served as a member of our board of
directors since April 1999. Mr. Higgins joined Connetics Corporation in
September 1997 and currently serves as Chief Financial Officer and Executive
Vice President of Finance and Administration. From August 1994 to
September 1997, Mr. Higgins worked at BioCryst Pharmaceuticals, Inc. serving in
various management positions, including Executive Vice President of Corporate
Development.
JONATHAN S. LEFF. Mr. Leff has served as a member of our board of directors
since January 2000. Mr. Leff joined E.M. Warburg, Pincus & Co., LLC in 1996 and
is currently a Managing Director. Mr. Leff serves on the board of directors of
Visible Genetics, Inc. and VitalCom, Inc., both of which are publicly held, and
is on the board of directors of several private companies. Mr. Leff holds an
M.B.A. from Stanford University.
NICHOLAS J. SIMON. Mr. Simon has served as a member of our board of
directors since August 1999. Mr. Simon joined Genentech, Inc. in December 1989
and is currently serving as Vice President of Business and Corporate
Development. Mr. Simon serves on the board of directors of several private
companies. Mr. Simon holds an M.B.A. from Loyola College.
WAYNE HOCKMEYER, PH.D. Dr. Hockmeyer has served as a member of our board of
directors since February 2000. Dr. Hockmeyer founded MedImmune, Inc. in April
1988, has served as its chief
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executive officer since April 1988 and as chairman of its board of directors
since May 1993. Dr. Hockmeyer holds a Ph.D. from the University of Florida.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers. Although no
director has a contractual right to serve as a member of our board of directors,
pursuant to the Amended and Restated Investor Rights Agreement, dated
January 7, 2000, among the holders of our preferred stock and us, we have agreed
to use reasonable efforts to elect:
- a representative designated by Sanderling Ventures until the earlier of
January 7, 2004 or such time as the entities affiliated with Sanderling
Ventures beneficially own less than 95% of the aggregate capital stock
beneficially owned by them at the closing of our Series B preferred stock
financing in January 2000 and
- a representative designated by Warburg, Pincus Equity Partners, L.P. until
the earlier of January 7, 2004 or such time as the entities affiliated
with Warburg, Pincus Equity Partners, L.P. beneficially own less than 95%
of the aggregate capital stock beneficially owned by them at the closing
of our Series B preferred stock financing in January 2000.
BOARD COMPOSITION
Dr. Harkonen is currently the chairman of our board of directors. We are
searching for an independent chairman.
Our board of directors consists of seven directors. Upon the closing of the
offering, our board of directors will be divided into three classes:
- Class I directors, Mr. Higgins and Dr. Hockmeyer, whose term will expire
at the annual meeting of stockholders to be held in 2001;
- Class II directors, Drs. Engelman, Harkonen and Healy, whose term will
expire at the annual meeting of stockholders to be held in 2002; and
- Class III directors, Messrs. Leff and Simon, whose term will expire at the
annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. This
classification of our board of directors may have the effect of delaying or
preventing changes in control or management of us.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. Our audit committee, consisting currently of Messrs.
Higgins and Simon and Dr. Engelman, was recently formed in connection with this
offering. The audit committee will review our internal accounting procedures and
consult with and review the services provided by our independent auditors.
COMPENSATION COMMITTEE. Our compensation committee, consisting currently of
Messrs. Leff and Simon and Dr. Harkonen, was recently formed in connection with
this offering. The compensation committee will review and recommend to our board
of directors the compensation and benefits of all our officers and establish and
review general policies relating to compensation and benefits of our employees.
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<PAGE>
COMPENSATION OF DIRECTORS
We do not provide cash compensation to members of our board of directors for
serving on our board of directors or for attendance at committee meetings.
Members of our board of directors are reimbursed for some out-of-pocket expenses
in connection with attendance at board and committee meetings. In July 1999,
each of Messrs. Engleman, Healy and Higgins, three of our non-employee
directors, received option grants to purchase 30,000 shares of common stock at
exercise price of $0.125 per share. In October 1999, Mr. Simon, one of our
non-employee directors, received an option grant to purchase 30,000 shares of
common stock at an exercise price of $0.125 per share. In January 2000, each of
Messrs. Leff and Powell, two of our non-employee directors, received option
grants to purchase 30,000 shares of common stock at exercise prices of $4.50 per
share. Under each of these grants, the option shares vest over a three-year
period in monthly installments. In July 1999, Messrs. Engleman and Healy each
received an option grant for the purchase of 70,000 shares of fully vested
common stock at an exercise price of $0.125 per share. In February 2000,
Mr. Hockmeyer, a non-employee director, received an option grant to purchase
30,000 shares of common stock at an exercise price of $4.50 per share. Under the
30,000 share grant, the option shares vest monthly over a three-year period. In
February 2000, each of Drs. Engleman, Healy and Hockmeyer and Messrs. Higgins,
Leff and Simon received an option grant for the purchase of 10,000 shares of
common stock at an exercise price of $4.50 per share. Under each of the 10,000
share grants, the option shares vest monthly over a one-year period. Our 2000
Non-Employee Directors' Stock Option Plan, which will become effective upon the
closing of this offering, will provide for ongoing option grants to our
non-employee directors. See "Management--Stock Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither member of our compensation committee has at any time been an officer
or employee of ours. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any interlocking relationship existed in
the past.
EMPLOYMENT AGREEMENTS
In April 1999, we entered into an executive employment agreement with Dr.
Harkonen, our Chairman, Chief Executive Officer and President. The employment
agreement provides for an annual salary of $225,000 and the payment of bonuses
upon the achievement of milestones to be agreed to on an annual basis. In
connection with his employment with us, we sold Dr. Harkonen 690,000 shares of
common stock subject to a five-year vesting schedule. If Dr. Harkonen's
employment is terminated by us in an involuntary termination, other than for
cause, as these terms are defined in the employment agreement, including
circumstances involving a change in control, he will be entitled to receive his
salary for an additional six months and will vest for an additional 28% of his
common stock.
In October 1999, we entered into an employment offer letter with Mr. Lynch,
our Chief Financial Officer and Vice President of Business Development. The
offer letter provides for an annual salary of $160,000. It also provides that if
we terminate Mr. Lynch's employment other than for cause or if there is a
significant change in his responsibilities following a change of control, he
will be entitled to receive salary and benefits for an additional six months and
will continue to vest for an additional six-month period.
In October 1999, we entered into an employment offer letter with Dr. Van
Vlasselaer, our Senior Vice President of Technical Operations. The offer letter
provides for an annual salary of $165,000. It also provides that if we terminate
Dr. Van Vlasselaer's employment other than for cause, he will be entitled to
receive salary and benefits for an additional three months and will continue to
vest for an additional three-month period.
In December 1999, we entered into an employment offer letter with Dr.
Czarniecki, our Vice President of Regulatory Affairs. The offer letter provides
for an annual salary of $175,000. It also
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<PAGE>
provides that if we terminate Dr. Czarniecki's employment other than for cause,
she will be entitled to receive salary and benefits for an additional four
months and will continue to vest for an additional four-month period.
In February 2000, we entered into an employment offer letter with Mr. Cory,
our Vice President of Sales and Marketing. The offer letter provides for an
annual salary of $165,000, a $25,000 signing bonus and a $55,000 relocation
allowance.
In March 2000, we entered into an employment offer letter with
Mr. Rosenfield, our Senior Vice President of Legal Affairs and General Counsel.
The offer letter provides for an annual salary of $205,000 and a $50,000 signing
bonus. It also provides that if we terminate Mr. Rosenfield's employment other
than for cause or if there is a significant change in his responsibilities
following a change of control, he will be entitled to receive salary and
benefits for an additional six months and his stock options will continue to
vest for an additional six-month period.
We have entered into change of control agreements with Dr. Harkonen,
Mr. Lynch, Mr. Rosenfield, Dr. Van Vlasselaer, Mr. Cory, Dr. Czarniecki and
Dr. Emlen that provide for accelerated vesting of each officer's unvested stocks
upon a change of control and either a termination of the officer's employment by
the acquiror or a material change in the officer's compensation, duties,
responsibilities or working conditions. The accelerated vesting of the unvested
stock for Dr. Harkonen, Mr. Lynch and Mr. Rosenfield will be 100% of their
unvested shares and for Dr. Van Vlasselaer, Mr. Cory, Dr. Czarniecki and
Dr. Emlen, it will be 50% of their unvested shares.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation that
we paid during 1999 to our Chief Executive Officer and our other most highly
compensated executive officers whose salary and bonus for such year was in
excess of $100,000 on an annualized basis. All option grants were made under our
1999 equity incentive plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ------------
------------ SECURITIES ALL OTHER
SALARY UNDERLYING COMPENSATION($)
NAME AND PRINCIPAL POSITION ($) OPTIONS (1)
- --------------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
W. Scott Harkonen, M.D............................... $212,534 -- $10,749
Chief Executive Officer, President and Chairman of
the Board of Directors
Timothy P. Lynch..................................... $ 26,667 180,000 $10,024
Chief Financial Officer and Vice President of
Business Development
Peter Van Vlasselaer, Ph.D........................... $ 21,240 160,000 $10,042
Senior Vice President of Technical Operations
J. Woodruff Emlen, M.D............................... $155,294 90,000 $ 5,439
Vice President of Clinical Research
Nzeera Virani-Ketter, M.D.(2)........................ $ 60,000 120,000 186
Vice President of Scientific Affairs
</TABLE>
- ------------------------
(1) Includes term-life insurance premiums paid by us on behalf of these named
executive officers signing and annual bonuses, and excess long-term
disability.
(2) Dr. Virani-Ketter has given notice to resign her employment with us as of
March 10, 2000.
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<PAGE>
OPTION GRANTS
The following table sets forth summary information regarding the option
grants made to our Chief Executive Officer and each of our other executive
officers whose salary and bonus was in excess of $100,000 on an annualized basis
during 1999. Options granted to purchase shares of our common stock under our
1999 equity incentive plan are generally immediately exercisable by the optionee
but are subject to a right of repurchase pursuant to the vesting schedule of
each specific grant. In the event that a purchaser ceases to provide service to
us, we have the right to repurchase any of that person's unvested shares of
common stock at the original option exercise price. The exercise price per share
is equal to the fair market value of our common stock on the date of grant as
determined by our board of directors. The percentage of total options was
calculated based on options to purchase an aggregate of 1,170,000 shares of
common stock granted under our 1999 equity incentive plan in 1999. The potential
realizable value was calculated based on the ten-year term of the options and
assumed rates of stock appreciation of 5% and 10%, compounded annually from the
date the options were granted to their expiration date based on the fair market
value of the common stock on the date of grant. For our employees and officers,
20% of the option grant generally vests on the one-year anniversary of
employment, and the remainder vest in a series of equal monthly installments
beginning on the one-year anniversary of employment and continuing over the next
four years of service. However, 15,000 of Mr. Lynch's shares will vest upon the
closing of this offering. See "Stock Plans" for a description of the material
terms of these options.
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<PAGE>
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR (PER SHARE) DATE 5% 10%
- ---- ---------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Scott Harkonen M.D.............. -- -- -- $ $
Timothy P. Lynch................... 165,000 14.10% $0.125 11/16/09 $ 2,869,094 $ 8,553
15,000 1.28% 0.125 11/16/09 260,827 415,323
Peter Van Vlasselaer, Ph.D......... 160,000 13.68% 0.125 11/16/09 3,251,274 5,177,110
J. Woodruff Emlen, M.D............. 70,000 5.98% 0.125 7/29/09 1,422,432 2,264,986
20,000 1.71% 0.125 11/16/09 406,409 627,139
Nzeera Virani-Ketter, M.D.......... 120,000 10.26% 0.125 11/16/09 2,438,455 3,882,832
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by our Chief
Executive Officer and our other most highly compensated executive officers with
annualized base salaries in excess of $100,000 as of December 31, 1999. Options
granted to purchase shares of our common stock under our 1999 equity incentive
plan are generally immediately exercisable by optionees but are subject to a
right of repurchase pursuant to the vesting schedule of each specific grant. The
repurchase option generally lapses over a five-year period with 20% lapsing
after the first year and 1.667% lapsing monthly thereafter. In the event that a
purchaser ceases to provide service to us or our affiliates, we have the right
to repurchase any of that person's unvested shares of common stock at the
original option exercise price. Amounts shown in the value realized column were
calculated based on the difference between the option exercise price and the
fair market value of the common stock on the date of exercise, without taking
into account any taxes that may be payable in connection with the transaction,
multiplied by the number of shares of common stock underlying the option. The
exercise price for all options granted in 1999 was $0.125.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
DECEMBER 31, 1999 AT DECEMBER 31, 1999(2)
SHARES ACQUIRED ---------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED(1) VESTED UNVESTED EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Scott Harkonen, M.D........ -- -- -- -- -- --
Timothy P. Lynch.............. 180,000 $3,217,500 -- 180,000 $3,217,500 --
Peter Van Vlasselaer, Ph.D.... 0 0 -- 160,000 2,860,000 --
J. Woodruff Emlen, M.D........ 0 0 16,333 73,667 1,608,750 --
Nzeera Virani-Ketter, M.D..... 0 0 -- 120,000 2,415,000 --
</TABLE>
- ------------------------
(1) Based on an assumed initial public offering price of $18.00 per share, minus
the per share exercise price, multiplied by the number of shares issued upon
exercise of the option.
(2) The value of unexercised in-the-money options is calculated based on the
difference between an assumed initial public offering price of $18.00 per
share and the exercise price for those shares, multiplied by the number of
shares underlying the option.
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<PAGE>
STOCK PLANS
2000 EQUITY INCENTIVE PLAN
Our board of directors adopted the 2000 plan in January 2000 and our
stockholders approved the 2000 plan in February 2000. The 2000 plan will become
effective on the effective date of this offering.
SHARE RESERVE. A total of 2,000,000 shares of our common stock have been
reserved for issuance under the 2000 plan. On January 1 of each year, commencing
with January 1, 2001, the share reserve will increase by the least of the
following:
- 3% of our total outstanding common stock (on a fully diluted, as converted
basis) at the time of an increase;
- an amount less than that above as determined by our board of directors.
No more than 10,000,000 of the shares reserved can be issued through the
exercise of incentive stock options. When a stock award expires or is terminated
before it is exercised, the shares not acquired pursuant to the stock award
again become available for issuance under the 2000 plan.
ADMINISTRATION. Our board of directors administers the 2000 plan. Our board
of directors, however, may delegate this authority to a committee of one or more
board members. The board or a committee of the board has the authority to
construe, interpret and amend the 2000 plan as well as to determine:
- the recipient of any stock award;
- the number of stock awards a recipient may receive;
- the grant date of a stock award;
- the number of shares subject to a stock award;
- the exercisability and vesting of a stock award;
- the exercise price of a stock award;
- the type of consideration to receive stock under a stock award; and
- the other terms of a stock award.
Our board of directors may amend or modify the 2000 plan at any time.
However, no amendment or modification shall adversely affect the rights and
obligations with respect to stock awards unless the holder consents to that
amendment or modification. In addition, our board of directors may, if required
or desirable, seek the approval of our stockholders to:
- increase the maximum number of shares issuable under incentive stock
options under the 2000 plan or the rate at which shares are added to the
reserve of the 2000 plan (except for permissible adjustments in the event
of certain changes in our capitalization);
- materially modify the eligibility requirements for participation; or
- materially increase the benefits accruing to participants.
ELIGIBILITY. The 2000 plan permits granting stock awards to employees,
directors and consultants of ours or certain of our affiliates. A stock award
may be an "incentive stock option" (ISO), within the meaning of Section 422 of
the Internal Revenue Code, a nonstatutory stock option (NSO), a right to
purchase restricted stock or a restricted stock bonus.
Section 162(m) of the Internal Revenue Code, among other things, denies a
deduction to publicly held corporations for compensation paid to the chief
executive officer or any of the four highest compensated officers (excluding the
chief executive officer) in a taxable year to the extent that the compensation
of that officer exceeds $1,000,000. To prevent options granted under the 2000
plan from being included in this compensation, in any calendar year the board
may not grant options under the 2000 plan to an employee covering an aggregate
of more than 1,000,000 shares.
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<PAGE>
STOCK OPTION PROVISIONS GENERALLY. In general, the duration of a stock
option granted under the 2000 plan cannot exceed ten years. The exercise price
of an ISO cannot be less than 100% of the fair market value of the common stock
on the date of grant. The exercise price of an NSO cannot be less than 50% of
the fair market value of the common stock on the date of grant. An ISO may be
transferred only on death, but an NSO may also be transferable to the extent
permitted in the stock option agreement.
Unless the terms of an optionholder's stock option agreement provide for
earlier or later termination, if all of an optionholder's service relationships
with us and our affiliates terminate, then generally that optionholder (or that
optionholder's beneficiary if that optionholder has died) may exercise vested
options within:
- 18 months after that date if termination is due to death;
- 12 months after that date if termination is due to disability; or
- 3 months after that date if termination is for any reason other than
disability or death.
ISOs may be granted only to our employees (including those of certain
affiliates). The aggregate fair market value, determined at the time of grant,
of shares of our common stock with respect to which ISOs are exercisable for the
first time by an optionholder during any calendar year under all of our stock
plans may not exceed $100,000. An ISO granted to a person who at the time of
grant owns or is deemed to own more than 10% of the total combined voting power
of us or any of our affiliates must have a term of no more than five years and
an exercise price that is at least 110% of fair market value at the time of
grant.
PROVISIONS OF OTHER STOCK AWARDS GENERALLY. The board or a committee of the
board determines the purchase price of other stock awards, which for
nonstatutory stock options and stock purchase awards cannot be less than 50% of
the stock's fair market value at the time of grant. Stock bonuses, however, may
be awarded in consideration of past services without additional payment. Shares
that we sell or award under the 2000 plan may, but need not be, restricted and
subject to a repurchase option in our favor in accordance with a vesting
schedule. The board or committee, however, may accelerate the vesting of
restricted stock.
EFFECT ON STOCK AWARDS OF A CHANGE IN CONTROL. The 2000 plan provides that
in the event of a change in control in the beneficial ownership of us, the
surviving entity may assume all outstanding stock awards or substitute similar
stock awards for them. If the surviving entity determines not to assume or
substitute for these stock awards, the vesting in full of stock awards held by
persons whose service with us or our affiliates has not already terminated will
accelerate prior to this change in control. Awards not assumed or substituted
and not exercised prior to the effective date of the change in control shall
terminate and cease to be outstanding on the effective date of the change in
control.
OTHER PROVISIONS. If there is a transaction or event not involving our
receipt of consideration, including a merger, consolidation, reorganization,
stock dividend, or stock split, the board will appropriately adjust the class
and the maximum number of shares subject to the 2000 plan, the maximum number of
shares available for ISOs, and the Section 162(m) limit.
PLAN TERMINATION. The 2000 plan terminates on January 30, 2010.
OPTIONS ISSUED. As the 2000 plan is not effective until the effective date
of this offering, we have not granted any stock awards under the 2000 plan.
1999 EQUITY INCENTIVE PLAN
Our board of directors adopted and our stockholders approved our 1999 equity
incentive plan in June 1999. The 1999 plan was amended in December 1999, and our
stockholders approved such amendment. An aggregate of 2,000,000 shares of common
stock currently are authorized for issuance under the 1999 plan. On the
effective date of this offering stock awards will no longer be granted under the
1999 plan. Stock awards granted under the 1999 plan have substantially the same
terms as
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<PAGE>
will apply to grants under the 2000 plan. With respect to change in control
provisions, all outstanding options under the 1999 plan may be either assumed or
substituted by any surviving entity. If the surviving entity determines not to
assume or substitute such awards, the vesting schedule of all outstanding awards
held by persons whose service with us or our affiliates has not already
terminated shall accelerate, and all such outstanding awards will be immediately
exercisable. Awards not assumed or substituted and not exercised prior to the
effective date of the change in control shall terminate and cease to be
outstanding on the effective date of the change in control. As of March 6, 2000,
we had issued 765,000 shares upon the exercise of options under the 1999 plan
and options to purchase 1,170,500 shares at a weighted average exercise price of
$2.73 per share were outstanding. As of March 6, 2000, our board had not granted
any stock bonuses or restricted stock under the 1999 plan.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted our 2000 employee stock purchase plan in
January 2000, and our stockholders approved the purchase plan in February 2000.
SHARE RESERVE. A total of 200,000 shares of common stock have currently
been authorized for issuance under the purchase plan. On each January 1,
beginning with January 1, 2001, and including and ending on January 1, 2009, the
share reserve will increase by the least of the following:
- 1% of our total outstanding common stock, on a fully-diluted, as converted
basis;
- 400,000 shares; or
- a lesser amount as determined by our board at or prior to the date of an
increase.
The purchase plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. Under the purchase plan, eligible employees will be able to purchase
common stock at a discount price in periodic offerings. The purchase plan and
the first offering under the purchase plan will commence on the effective date
of this offering.
ELIGIBILITY. All employees are eligible to participate in the purchase plan
so long as they are employed by us, or a U.S. incorporated subsidiary designated
by the board of directors, for at least 20 hours per week and are customarily
employed by us, or a subsidiary designated by the board of directors, for at
least five months per calendar year. Any employee who is a 5% stockholder is not
eligible to participate in the purchase plan.
OFFERINGS. Under the purchase plan, the board may specify offerings of up
to 27 months. Unless our board determines otherwise, common stock will be
purchased for accounts of participating employees at a price per share equal to
the lower of:
- 85% of the fair market value of a share of our common stock on the first
day of the offering; or
- 85% of the fair market value of a share of our common stock on the
purchase date.
The first offering will begin on the effective date of this offering, and
the shares will be registered on a Form S-8 registration statement soon after
the effective date of this offering. The fair market value of the shares on the
first date of this offering will be the price per share at which our shares are
first sold to the public as specified in the final prospectus with respect to
this offering. Otherwise, fair market value generally means the closing sales
price (rounded up where necessary to the nearest whole cent) for these shares
(or the closing bid, if no sales were reported) as quoted on the Nasdaq National
Market on the last trading day prior to the relevant determination date, as
reported in THE WALL STREET JOURNAL.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
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<PAGE>
- 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 15% of
their compensation for the purchase of stock under the purchase plan. Employees
may end their participation in an offering before a purchase period ends.
Participation ends automatically on termination of employment.
OTHER PROVISIONS. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights together with any other
purchase rights granted under other employee stock purchase plans established by
us or by our affiliates, if any, do not permit the employee's rights to purchase
our stock to accrue at a rate which exceeds $25,000 worth of our stock (based on
its fair market value at the time the purchase right was granted) for each
calendar year in which the purchase rights are outstanding.
Upon a change in control, the successor corporation may either assume or
replace outstanding purchase rights. Alternatively, the time for exercise of
purchase rights under the ongoing offering period(s) will be accelerated and our
stock will be purchased for the participants immediately before the change in
control.
SHARES ISSUED. The purchase plan will not be effective until the effective
date of this offering. Therefore, as of the date hereof, no shares of common
stock have been purchased under the purchase plan.
PLAN TERMINATION. The purchase plan has no set termination date.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Our board adopted the 2000 non-employee directors' stock option plan in
January 2000 and our stockholders approved the plan in February 2000. The
directors' plan provides for the automatic grant to our non-employee directors
of options to purchase shares of our common stock.
SHARE RESERVE. We have reserved a total of 180,000 shares of our common
stock for issuance under the directors' plan. On January 1 of each year,
commencing with January 1, 2001, the share reserve will automatically be
increased by 180,000 shares. However, the automatic increase is subject to
reduction by the board. If an optionholder does not purchase the shares subject
to his or her option before the option expires or otherwise terminates, the
shares that are not purchased will again become available for issuance under the
directors' plan.
ADMINISTRATION. The board administers the directors' plan. The board has
the authority to construe, interpret and amend the directors' plan but the
directors' plan specifies the essential terms of the options, including:
- the option recipients;
- the grant dates;
- the number of shares subject to the option;
- the exercisability and vesting of the option;
- the exercise price; and
- the type of consideration.
ELIGIBILITY. Options will automatically be granted under the directors'
plan to our non-employee directors as follows:
- Each non-employee director who, on the later of the closing of this
offering or the date of initial election or appointment to our board as a
non-employee director, does not already hold at least one stock option
granted by us, will automatically be granted an option for 30,000 shares
and an option for 10,000 shares.
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<PAGE>
- On the date that a non-employee director's most recent stock option grant
for 10,000 shares becomes fully vested, each non-employee director who is
continuing as a non-employee director will be granted an additional option
for 10,000 shares under the directors' plan.
As long as the non-employee director continues to serve with us or with an
affiliate of ours (whether in the capacity of a director, consultant, or an
employee) each option granted under the directors' plan to such person will vest
commencing one month after the date of its grant, at the rate of 1/36th of the
total number of shares for 30,000 share grants and 1/12th of the total number of
shares for 10,000 share grants until fully vested and will remain exercisable
throughout its term.
OPTION TERMS. Options have an exercise price equal to 100% of the fair
market value of our common stock on the grant date. The option term is
ten years but it generally will terminate three months after the optionholder's
service terminates. If termination is due to the optionholder's disability,
however, the post-termination exercise period is extended to 12 months. If this
termination is due to the optionholder's death or if the optionholder dies
within three months after his or her service terminates, the post-termination
exercise period is extended to 18 months following death.
The optionholder may transfer the option by gift to immediate family or for
estate-planning purposes. The optionholder also may designate a beneficiary to
exercise the option following the optionholder's death. Otherwise, the option
exercise rights will pass by the optionholder's will or by the laws of descent
and distribution.
OTHER PROVISIONS. Transactions not involving our receipt of consideration,
including a merger, consolidation, reorganization, stock dividend, and stock
split, may change the class and number of shares subject to the directors' plan
and to outstanding options. In that event, the board will appropriately adjust
the directors' plan as to the class and the maximum number of shares subject to
the directors' plan and to the automatic option grants. The board will also
adjust outstanding options as to the class, number of shares and price per share
subject to the options.
In the event of a change in control, the surviving entity may either assume
or replace outstanding options under the directors' plan. If this does not
occur, then generally for options held by persons then performing services as an
employee or director of, or consultant to, us or our affiliates, the vesting of
their options will accelerate, and unexercised options will terminate
immediately prior to the event. Even if assumption or substitution does occur,
the vesting of options held by non-employee directors will accelerate and vest
in full. A change in control includes the following:
- a dissolution, liquidation or sale of all or substantially all of our
assets;
- a merger or consolidation in which we are not the surviving corporation;
or
- a reverse merger in which we are the surviving corporation but the shares
of our common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property.
OPTIONS ISSUED. The directors' plan will not be effective until the
effective date of this offering. Therefore, we have not issued any options under
the directors' plan.
PLAN TERMINATION. The directors' plan has no stated termination date.
401(k) PLAN
We sponsor a 401(k) plan, a defined contribution plan intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986. All employees are
eligible to participate. Participants may make pre-tax contributions to the
401(k) plan of up to 15% of their eligible earnings, subject to a statutorily
prescribed annual limit ($10,500 in calendar year 2000). Under the 401(k) plan,
each employee is fully vested in his or her deferred salary contributions.
Employee contributions are held and invested by the 401(k) plan's trustee.
48
<PAGE>
Each participant's contributions, and the corresponding investment earnings,
are generally not taxable to the participants until withdrawn. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which a director derives an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and officers, and may indemnify our employees and other agents, to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in such capacity and certain other capacities, such as
serving as a director of another corporation at the request of our board of
directors.
We intend to enter into agreements to indemnify our directors and officers
in addition to indemnification provided for in our certificate of incorporation
and our bylaws. These agreements, among other things, will provide for
indemnification of our directors and officers for expenses specified in the
agreements, including attorneys' fees, judgments, fines and settlement amounts
incurred by any of these persons in any action or proceeding arising out of
these persons' services as a director or officer for us, any of our subsidiaries
or any other entity to which the person provides services at our request. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and officers.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted.
49
<PAGE>
RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
dates shown below.
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
-----------------------------------
COMMON STOCK SERIES A-1 SERIES A-2 SERIES B
--------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
W. Scott Harkonen............................. 690,000 -- -- 4,472
Timothy P. Lynch.............................. 180,000 -- -- 4,472
Peter Van Vlassalaer.......................... 160,000 -- -- --
J. Woodruff Emlen............................. 110,000 -- -- 4,472
Nzeera Virani-Ketter(1)....................... 120,000 -- -- 894
Nicholas J. Simon............................. -- -- -- 4,472
John L. Higgins............................... -- -- -- 4,472
James I. Healy................................ -- -- -- 4,472
Edgar Engleman................................ -- -- -- 4,472
5% STOCKHOLDERS
Genentech, Inc.(2)............................ -- 875,000 -- 178,891
Connetics Corporation(3)...................... -- 960,000 -- 89,445
Entities affiliated with Sanderling
Ventures(4)................................. 600,000 -- 2,400,000 313,060
Entities affiliated with BioAsia Investments,
LLC(5)...................................... 312,500 -- 1,200,000 201,253
Veron International, Ltd...................... -- -- 800,000 67,084
Entities affiliated with E.M. Warburg, Pincus
& Co. LLC(6)................................ -- -- -- 3,130,590
Entities affiliated with Sofinnova Ventures... -- -- 1,200,000 183,363
Price Per Share............................... $0.001 to $.125 $1.25 $1.25 $5.59
Date(s) of Purchase........................... 4/99 to 1/00 4/99 4/99 1/00
</TABLE>
- ------------------------
(1) Nzeera Virani-Ketter has given notice to resign her employment with us as of
March 10, 2000.
(2) Nicholas J. Simon, one of our directors, is a vice president of
Genentech, Inc.
(3) John L. Higgins, one of our directors, is the chief financial officer of
Connetics Corporation.
(4) James I. Healy, one of our directors, is a former partner of Sanderling
Ventures.
(5) Edgar Engleman, one of our directors, is a managing member of BioAsia
Investments, LLC.
(6) Jonathan S. Leff, one of our directors, is a general partner of
E.M. Warburg, Pincus & Co. LLC.
We have entered into the following agreements with our executive officers,
directors and holders of more than five percent of our voting securities.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT. We and the preferred
stockholders described above have entered into an agreement, under which these
and other preferred stockholders will have registration rights with respect to
their shares of common stock following this offering. Upon the closing of this
offering, all shares of our outstanding Series A-1, Series A-2, and Series B
preferred stock will be automatically converted into common stock on a one for
one basis. See "Description of Capital Stock--Registration Rights" for a further
description of the terms of this agreement.
AGREEMENTS WITH CONNETICS CORPORATION. We entered into the following
agreements with Connetics in April 1999: an Amended and Restated Service
Agreement, dated April 7, 1999, Amended and Restated Exclusive Sublicense
Agreement, dated April 27, 1999, Collaboration Agreement, dated April 27, 1999,
and Transition Agreement, dated April 27, 1999.
Under the Amended and Restated Exclusive Sublicense Agreement, we obtained a
sublicense to the exclusive rights granted to Connetics by Genentech relating to
interferon gamma-1b. For a summary of the terms of this agreement, please see
"Business--License Agreements."
50
<PAGE>
Pursuant to the Collaboration Agreement, we made cash payments to Connetics
of approximately $500,000, committed to pay Connetics an additional $500,000 in
2001, committed to issue shares of Series B preferred stock to Connetics, which
shares have been issued, and committed to issue to Connetics shares of Series C
preferred stock, or in the event of our initial public offering or sale of us
prior to the issuance of Series C preferred stock to either pay Connetics
$1,000,000 cash or issue additional shares of Series B preferred stock. Under
the Transition Agreement, Connetics books the net sales for ACTIMMUNE, up to a
baseline amount through December 2001 less associated cost of goods sold and
marketing expenses. After December 31, 2001, the net sales for ACTIMMUNE will
fully revert to us. We further pay to Connetics gross margins on sales of
ACTIMMUNE for chronic granulomatous disease below the baseline units until
December 31, 2001.
Under the Amended and Restated Service Agreement, Connetics has provided to
us for a fee information services, payroll, facilities, human resources,
accounting, employee benefits, and administration services. As of the date of
this prospectus, we have discontinued most services under the Amended and
Restated Service Agreement.
SUPPLY AGREEMENT WITH GENENTECH, INC. Connetics and Genentech entered into
a Supply Agreement, dated May 5, 1998, for the supply of ACTIMMUNE for clinical
use and commercial sale. Connetics assigned all rights and obligations under the
Supply Agreement to us in April 1999. The agreement terminates upon the earlier
of May 5, 2001 or the date on which a mutually agreed upon third party
manufacturer, with whom we will have entered into a supply agreement to
manufacture ACTIMMUNE, receives an FDA license to manufacture ACTIMMUNE. Under
some circumstances in which we are unable to conclude an agreement with a third
party, Genentech may be required to supply ACTIMMUNE until May 5, 2003 or
longer. However, we recently entered into a supply agreement with Boehringer
Ingelheim for the supply of ACTIMMUNE, and upon their receipt of a license from
the FDA for the manufacture of ACTIMMUNE, the Genentech Supply Agreement would
terminate. See "Business--Strategy."
We have deferred payment of the royalties due to Genentech for 1999
(approximately $1.9 million) under a series of interest-bearing promissory notes
that will become due upon the closing date of this offering. The amounts due
under these notes may be converted, at Genentech's option, into shares of our
stock sold in our most recent financing prior to the conversion at the same
price per share.
INDEBTEDNESS OF MANAGEMENT. In connection with Dr. Harkonen's employment
transition from Connetics to us, we assumed an outstanding loan of $100,000 made
by Connetics to Dr. Harkonen pursuant to a secured loan agreement and promissory
note dated September 19, 1997. The interest rate on the promissory note is 7.5%
per annum. The principal and accrued interest are due on October 30, 2000.
STOCK OPTIONS. Stock option grants to our executive officers and directors
are described in this prospectus under the captions "Management--Director
Compensation" and "--Executive Compensation."
EXECUTIVE EMPLOYMENT AGREEMENTS. In April 1999, we entered into an
executive employment agreement with Dr. Harkonen, our Chief Executive Officer
and President. In October, November and December 1999, we entered into
employment offer letters with Dr. Van Vlassalaer, our Senior Vice President of
Technical Operations; Mr. Lynch, our Chief Financial Officer and Vice President
of Business Development; and Dr. Czarniecki, our Vice President of Regulatory
Affairs. In February and March of 2000, we entered into employment offer letters
with Mr. Cory, our Vice President of Sales and Marketing and Mr. Rosenfield, our
Senior Vice President of Legal Affairs and General Counsel. See
"Management--Employment Agreements."
INDEMNIFICATION AGREEMENTS. We have entered into indemnification agreements
with our directors and officers for the indemnification of these persons to the
full extent permitted by law. We also intend to execute these agreements with
our future directors and officers.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of January 31, 2000, and
as adjusted to reflect the sale of our common stock by this prospectus, by:
- our Chief Executive Officer and each of our four other most highly
compensated executive officers;
- each director;
- all directors and executive officers as a group; and
- each stockholder who is known by us to own beneficially 5% or more of our
common stock.
Percentage of ownership in the following table is calculated based on
15,397,194 shares of common stock outstanding as of January 31, 2000 and
20,897,194 shares of common stock outstanding after completion of this offering.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of January 31, 2000 are deemed
outstanding. Those shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of any other person. Except as indicated
in the footnotes to the table, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws, where
applicable. Unless otherwise indicated, the address of each of the individuals
named below is: 1710 Gilbreth Road, Suite 301, Burlingame, CA 94010.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED AS OF JANUARY 31, 2000
---------------------------------------------------------------------------------
PERCENT OF TOTAL
SHARES ISSUABLE OUTSTANDING SHARES
OUTSTANDING SHARES SUBJECT TO UNDER OPTIONS BENEFICIALLY OWNED
SHARES OF A RIGHT OF EXERCISABLE ------------------------
COMMON REPURCHASE AS OF WITHIN 60 DAYS OF BEFORE THIS AFTER THIS
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK(1) JANUARY 31, 2000(2) JANUARY 31, 2000 OFFERING OFFERING
- ------------------------------------ ----------- ------------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
W. Scott Harkonen, M.D.............. 245,972 448,500 -- 4.51% 3.32%
Timothy P. Lynch.................... 19,472 165,000 -- 1.20 *
Peter Van Vlassalaer, Ph.D.......... -- 160,000 -- 1.04 *
J. Woodruff Emlen, M.D.............. 24,805 69,667 20,000 * *
Stephen N. Rosenfield(3)............ -- -- 140,000 * *
David Cory, R.Ph.(3)................ -- -- 100,000 * *
Christine Czarniecki, Ph.D.......... -- 105,000 -- * *
James I. Healy, M.D., Ph.D.(4)...... 3,317,532 -- 110,000 22.05 16.28
Edgar Engleman M.D.(5).............. 1,715,169 -- 110,000 11.72 8.65
Jonathan S. Leff(6)................. 3,130,590 -- 40,000 20.49 15.10
John L. Higgins(7).................. 1,053,917 -- 40,000 7.03 5.18
Nicholas J. Simon(8)................ 4,472 -- 40,000 * *
Wayne Hockmeyer, Ph.D(9)............ -- -- 40,000 * *
Entities affiliated with Warburg,
Pincus Equity Partners,
L.P.(10).......................... 3,130,590 -- -- 20.33 14.98
Entities affiliated with Sanderling
Ventures(11)...................... 3,313,060 -- -- 21.52 15.85
Entities affiliated with BioAsia
Investments, LLC(12).............. 1,713,753 -- -- 11.13 8.20
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED AS OF JANUARY 31, 2000
---------------------------------------------------------------------------------
PERCENT OF TOTAL
SHARES ISSUABLE OUTSTANDING SHARES
OUTSTANDING SHARES SUBJECT TO UNDER OPTIONS BENEFICIALLY OWNED
SHARES OF A RIGHT OF EXERCISABLE ------------------------
COMMON REPURCHASE AS OF WITHIN 60 DAYS OF BEFORE THIS AFTER THIS
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK(1) JANUARY 31, 2000(2) JANUARY 31, 2000 OFFERING OFFERING
- ------------------------------------ ----------- ------------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with Sofinnova
Ventures(13)...................... 1,383,363 -- -- 8.98 6.62
Genentech, Inc.(14)................. 1,053,891 -- -- 6.84 5.04
Connetics Corporation(15)........... 1,049,445 -- -- 6.82 5.02
Veron International Ltd.(16)........ 867,084 -- -- 5.63 4.15
All directors and executive officers
as a group (13 persons)(17)....... 12,817,087 948,167 590,000 89.78 66.78
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Excludes shares of common stock subject to a right of repurchase within
60 days of January 31, 2000.
(2) The unvested portion of the shares of common stock is subject to a right of
repurchase, at the original option price, in the event the holder ceases to
provide services to us and its affiliates or upon a change of control of
us. The repurchase rights lapse at a rate of 20% at the end of the first
year of service, and at a rate of 1/48th of the remaining purchased shares
for each continuous month of service thereafter. The option exercise prices
range from $0.01 to $4.50.
(3) Became an employee of the Company after January 31, 2000.
(4) Includes 1,510,462 shares held by Sanderling Venture Partners IV, L.P.,
588,016 shares held by Sanderling IV Biomedical, L.P., 580,963 shares held
by Sanderling IV Limited Partnership, L.P., 189,394 shares held by
Sanderling IV Venture Management, 178,891 shares held by Sanderling IV
Biomedical Co-Investment Fund, L.P., 167,581 shares held by Sanderling
[Feri Trust] Venture Partners IV, L.P., 8,307 shares held by Sanderling IV
Limited, L.P. and 89,446 shares held by Sanderling IV Co-Investment Fund,
L.P. Until March 2000, Dr. Healy was a partner of Sanderling Ventures.
Sanderling Ventures is a general partner of Sanderling Venture Partners IV,
L.P., Sanderling IV Biomedical, L.P., Sanderling IV Limited Partnership,
L.P., Sanderling IV Venture Management, Sanderling IV Biomedical
Co-Investment Fund, L.P., Sanderling [Feri Trust] Venture Partners IV,
L.P., Sanderling IV Limited, L.P. and Sanderling IV Co-Investment Fund,
L.P. Dr. Healy disclaims beneficial ownership of these shares except to the
extent of his proportionate partnership interest in these shares.
(5) Includes 1,205,201 shares held by Biotechnology Development Fund, L.P.,
58,140 shares held by Biotechnology Development Fund II, L.P., and 450,412
shares held by Biotechnology Development Fund III, L.P. Dr. Engleman is a
managing member of BioAsia Investments, LLC. BioAsia Investments, LLC is a
general partner of Biotechnology Development Fund, L.P., Biotechnology
Development Fund II, L.P., and Biotechnology Development Fund III, L.P.
Dr. Engleman disclaims beneficial ownership of these shares except to the
extent of his proportionate partnership interest in these shares.
(6) Includes 2,958,407 shares held by Warburg, Pincus Equity Partners, L.P.,
93,918 shares held by Warburg, Pincus Netherlands Equity Partners I, C.V.,
62,612 shares held by Warburg, Pincus Netherlands Equity Partners II, C.V.,
and 15,653 shares held by Warburg, Pincus Netherlands Equity Partners III,
C.V. Warburg, Pincus Equity Partners, L.P. and its three Dutch affiliates
are referred to as the "WPEP Group." Warburg, Pincus & Co. ("WP") is the
sole general partner of each of the four partnerships in the WPEP Group. WP
is managed by E.M. Warburg, Pincus & Co., LLC "EMWP." Lionel I. Pincus is
the managing partner of WP and the managing member of EMWP, and may be
deemed to control both entities. Mr. Leff is a managing director and member
of EMWP and a general partner of WP. Mr. Leff may be deemed to have an
indirect
53
<PAGE>
pecuniary interest in an indeterminate portion of the shares beneficially
owned by the WPEP Group. All shares indicated as owned by Mr. Leff are
included because of his affiliation with the Warburg Pincus entities. Mr.
Leff disclaims beneficial ownership of all shares owned by the Warburg
Pincus entities.
(7) Includes 1,049,445 shares held by Connetics Corporation. Mr. Higgins is the
Chief Financial Officer of Connetics Corporation and disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest in
these shares.
(8) Although Mr. Simon is a Vice President of Genentech, Inc., he does not have
voting or investment power with respect to the shares owned by Genentech,
Inc.
(9) Became a director of the Company after January 31, 2000.
(10) Includes 2,958,407 shares held by Warburg, Pincus Equity Partners, L.P.,
93,918 shares held by Warburg, Pincus Netherlands Equity Partners I, C.V.,
62,612 shares held by Warburg, Pincus Netherlands Equity Partners II,
C.V., and 15,653 shares held by Warburg, Pincus Netherlands Equity
Partners III, C.V. Warburg, Pincus Equity Partners, L.P. and its three
Dutch affiliates are referred to as the "WPEP Group." Warburg, Pincus &
Co. ("WP") is the sole general partner of each of the four partnerships in
the WPEP Group. WP is managed by E.M. Warburg, Pincus & Co., LLC "EMWP."
Lionel I. Pincus is the managing partner of WP and the managing member of
EMWP, and may be deemed to control both entities. Each of the Warburg
Pincus entities is located at 466 Lexington Avenue, New York, NY 10017.
(11) Includes 1,510,462 shares held by Sanderling Venture Partners IV, L.P.,
588,016 shares held by Sanderling IV Biomedical, L.P., 580,963 shares held
by Sanderling IV Limited Partnership, L.P., 189,394 shares held by
Sanderling IV Venture Management, 178,891 shares held by Sanderling IV
Biomedical Co-Investment Fund, L.P., 167,581 shares held by Sanderling
[Feri Trust] Venture Partners IV, L.P., 8,307 shares held by Sanderling IV
Limited, L.P. and 89,446 shares held by Sanderling IV Co-Investment Fund,
L.P. Sanderling Ventures is located at 2730 Sand Hill Road, Suite 200,
Menlo Park, CA 94025.
(12) Includes 1,205,201 shares held by Biotechnology Development Fund, L.P.,
58,140 shares held by Biotechnology Development Fund II, L.P., and 450,412
shares held by Biotechnology Development Fund III, L.P. Dr. Engleman is a
managing member of BioAsia Investments, LLC. BioAsia Investments, LLC is a
general partner of Biotechnology Development Fund, L.P., Biotechnology
Development Fund II, L.P., and Biotechnology Development Fund III, L.P.
BioAsia Investments, LLC is located at 575 High St., Palo Alto, CA 94301.
(13) Includes 1,340,971 shares held by Sofinnova Venture Partners IV, L.P.,
4,472 shares held by Sofinnova Management IV, LLC and 37,920 shares held
by Sofinnova Venture Affiliates IV, L.P. Sofinnova Management IV, LLC is
the general partner of Sofinnova Venture Partners IV, LP and Sofinnova
Venture Affiliates IV, LP. Sofinnova Ventures is an administrative entity
of Sofinnova Management IV LLC. Sofinnova Ventures is located at 140 Geary
Street, 10(th) Floor, San Francisco, CA 94108.
(14) Genentech, Inc. is located at 1 DNA Way, South San Francisco, CA 94080.
(15) Connetics Corporation is located at 3400 West Bayshore Road, Palo Alto, CA
94303..
(16) Veron International, Ltd. is located at ChinaChem Golden Plaza, Top Floor,
77 Mody Road, Tsimshatsui East, Kowloon, Hong Kong. Joseph W. K. Leung
manages Veron International, Ltd.
(17) Total number of shares includes 12,511,186 shares of common stock held by
entities affiliated with directors and executive officers. See
footnotes 4 through 8 above.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
Upon completion of this offering, our authorized capital stock will consist
of 45,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. The following description of our
capital stock does not purport to be complete and is subject to, and qualified
in its entirety by, our certificate of incorporation and bylaws, which we have
included as exhibits to the registration statement of which this prospectus
forms a part.
COMMON STOCK
As of December 31, 1999, there were 9,725,833 shares of common stock and
preferred stock outstanding, held of record by 16 stockholders. These amounts
assume the conversion of all outstanding shares of preferred stock into common
stock, which is to occur upon the closing of this offering. In addition, as of
December 31, 1999, there were 990,000 shares of common stock subject to
outstanding options. In January 2000, we sold 4,966,361 shares of our Series B
preferred stock. Upon completion of this offering, there will be
20,192,194 shares of common stock outstanding, assuming no exercise of
outstanding stock options after December 31, 1999.
Each share of common stock entitles its holder to one vote on all matters to
be voted upon by stockholders. Subject to preferences that may apply to any
outstanding preferred stock, holders of common stock may receive ratably any
dividends that the board of directors may declare out of funds legally available
for that purpose. In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and any liquidation preference of
preferred stock that may be outstanding. The common stock has no preemptive
rights, conversion rights or other subscription rights or redemption or sinking
fund provisions. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock that we will issue upon
completion of this offering will be fully paid and non-assessable.
PREFERRED STOCK
According to our amended and restated certificate of incorporation, our
board of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series. Our board shall designate the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preference, sinking fund
terms and number of shares constituting any series or the designation of any
series. The issuance of preferred stock could have the effect of restricting
dividends on the common stock, diluting the voting power of the common stock,
impairing the liquidation rights of the common stock or delaying or preventing a
change in control without further action by the stockholders. We have no present
plans to issue any shares of preferred stock after the completion of this
offering.
REGISTRATION RIGHTS
The holders of 13,656,361 shares of the common stock that will be
outstanding after this offering are entitled to require us for a period of five
years following this offering to register the sales of their shares under the
Securities Act of 1933, under the terms of an agreement between us and the
holders of these securities. Subject to limitations specified in the agreement,
these registration rights include the following:
- two demand registration rights that holders may exercise no sooner than
180 days after our initial public offering, which require us to register
sales of a holder's shares, subject to the discretion of our board of
directors to delay the registration not more than twice in any twelve
month period;
55
<PAGE>
- an unlimited number of piggyback registration rights that require us to
register sales of a holder's shares when we undertake a public offering,
subject to the discretion of the managing underwriter of the offering to
decrease the amount that holders may register to not less than thirty
percent (30%) of the total offering; and
- an unlimited number of rights to require us to register sales of shares on
Form S-3, a short form of registration statement permitted to be used by
some companies, which holders may exercise if they request registration of
the sale of more than $1,000,000 of common stock provided that Form S-3 is
available for such offering and subject to the discretion of our board of
directors to delay the registration not more than twice in any
twelve-month period.
We will bear all registration expenses if these registration rights are
exercised, other than underwriting discounts and commissions. These registration
rights terminate as to a holder's shares when that holder may sell those shares
under Rule 144(k) of the Securities Act, which for most parties means two years
after the acquisition of the shares from us or when a holder owning less than
one percent of our outstanding common stock may sell such holder's shares under
Rule 144 during any ninety day period.
ANTI-TAKEOVER PROVISIONS
DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates acquisitions of Delaware corporations. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years following
the date the person becomes an interested stockholder, unless:
- our board of directors approved the business combination or the
transaction in which the person became an interested stockholder prior to
the date the person attained this status;
- upon consummation of the transaction that resulted in the person becoming
an interested stockholder, the person owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to the date the person became an interested stockholder,
our board of directors approved the business combination and the
stockholders other than the interested stockholder authorized the
transaction at an annual or special meeting of stockholders.
Section 203 defines a "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- in general, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested
stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any person
who, together with the person's affiliates and associates, owns, or within three
years prior to the determination of interested stockholder status did own, 15%
or more of a corporation's voting stock.
56
<PAGE>
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
Our amended and restated certificate of incorporation and bylaws, to be
effective upon the closing of this offering, divide our board into three classes
as nearly equal in size as possible, with each class serving a three-year term.
The terms are staggered, so that one-third of the board is to be elected each
year. The classification of our board could have the effect of making it more
difficult than otherwise for a third party to acquire control of us, because it
would typically take more than a year for a majority of the stockholders to
elect a majority of our board. In addition, our certificate of incorporation and
bylaws will provide that any action required or permitted to be taken by our
stockholders at an annual or special meeting may be taken only if it is properly
brought before the meeting, and may not be taken by written action in lieu of a
meeting. The bylaws will also limit who may call a special meeting of the
stockholders. Under our bylaws, stockholders wishing to propose business to be
brought before a meeting of stockholders will be required to comply with various
advance notice requirements. Finally, our certificate of incorporation and
bylaws will not permit stockholders to take any action without a meeting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services LLC. The transfer agent's address is 235 Montgomery Street,
23rd floor, San Francisco, CA 94104.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could reduce prevailing market prices. Furthermore, since no shares will
be available for sale shortly after this offering because of contractual and
legal restrictions on resale as described below. Sales of substantial amounts of
our common stock in the public market after any restrictions on sale lapse could
adversely affect the prevailing market price of the common stock and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have 20,192,194 outstanding shares
of common stock, assuming no exercise of the over-allotment option and no
exercises of outstanding options after December 31, 1999. Of these shares, all
of the shares sold in the public offering will be freely tradable without
restriction or further registration under the Securities Act, unless these
shares are purchased by affiliates. The remaining 14,692,194 shares of common
stock held by existing stockholders are restricted securities. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration described below under Rules 144,
144(k) or 701 promulgated under the Securities Act.
As a result of contractual restrictions described below and the provisions
of Rules 144, 144(k) and 701, the restricted shares will be available for sale
in the public market as follows:
- unless held by affiliates, the 5,500,000 shares sold in the public
offering will be freely tradable upon completion of the offering;
- 8,436,113 shares will be eligible for sale upon the expiration of the
lock-up agreements, described below, beginning 180 days after the date of
this prospectus; and
- 273,250 shares will be eligible for sale upon the exercise of vested
options 180 days after the date of this prospectus.
LOCK-UP AGREEMENTS
All of our directors, officers, employees and other stockholders, who
together hold all of our securities, have entered into lock-up agreements in
connection with this offering. These lock-up agreements generally provide that
these holders will not offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of our common stock or any securities exercisable
for or convertible into our common stock owned by them for a period of 180 days
after the date of this prospectus without the prior written consent of Warburg
Dillon Read LLC. Notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k) and 701, shares subject to lock-up agreements
may not be sold until these agreements expire or are waived by the
representatives of the underwriters of this offering.
RULE 144
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately 201,922 shares immediately after this
offering; and
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
58
<PAGE>
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
RULE 701
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144, but without compliance
with certain restrictions. Rule 701 provides that affiliates may sell their
Rule 701 shares under Rule 144 90 days after effectiveness without complying
with the holding period requirement and that non-affiliates may sell such shares
in reliance on Rule 144 90 days after effectiveness without complying with the
holding period, public information, volume limitation or notice requirements of
Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 13,656,361 shares of our
common stock, or their transferees, will be entitled to rights with respect to
the registration of their shares under the Securities Act. Registration of their
shares under the Securities Act would result in these shares becoming freely
tradeable without restriction under the Securities Act, except for shares
purchased by affiliates, immediately upon the effectiveness of such
registration.
STOCK OPTIONS
We intend to file a registration statement under the Securities Act after
the effective date of this offering to register shares to be issued pursuant to
our employee and director benefit plans. As a result, any options or rights
exercised under the 1999 equity incentive plan, the 2000 equity incentive plan,
the 2000 employee stock purchase plan and the 2000 non-employee directors' stock
option plan will also be freely tradable in the public market. However, shares
held by affiliates will still be subject to the volume limitation, manner of
sale, notice and public information requirements of Rule 144, unless otherwise
resalable under Rule 701. As of March 6, 2000, we had granted options to
purchase 1,170,500 shares of common stock that had not been exercised, of which
options to purchase 273,250 shares were both exercisable and not subject to a
right of repurchase in our favor. In addition, as of that date we had reserved
64,500 shares for possible future issuance under our 1999 equity incentive plan.
59
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
We have entered into an underwriting agreement with the underwriters named
below. Warburg Dillon Read LLC, Chase Securities Inc., and Prudential Securities
Incorporated are acting as representatives of the underwriters.
The underwriting agreement will provide for the purchase of a specific
number of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specific number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter will severally agree to purchase
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Warburg Dillon Read LLC.....................................
Chase Securities Inc........................................
Prudential Securities Incorporated..........................
-------
Total...................................................
=======
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a concession
of $ per share. The underwriters may also allow to dealers, and such dealers
may reallow, a concession not in excess of $ per share to certain other
dealers. After the shares are released for sale to the public, the
representatives may change the offering price and other selling terms at various
times.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 825,000 additional shares of
our common stock to cover over-allotments. If the underwriters exercise all or
part of this option, they will purchase shares covered by the option at the
public offering price that appears on the cover page of this prospectus, less
the underwriting discount. If this option is exercised in full, the underwriters
will purchase shares from us, the total price to the public will be
, and the total proceeds to us will be . The underwriters have
severally agreed that, to the extent the over-allotment option is exercised,
each of the underwriters will purchase a number of additional shares
proportionate to its initial amount reflected in the above table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us:
<TABLE>
<CAPTION>
PAID BY US
---------------------------------------------
NO EXERCISE OF FULL EXERCISE OF
OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------------------- ---------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
</TABLE>
We estimate that the total expenses of this offering, excluding the
underwriter discount, will be approximately $ .
60
<PAGE>
We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act.
We and our directors, executive officers, and all of the holders of our
common stock and securities convertible into or exercisable or exchangeable for
common stock issued prior to this offering, have agreed pursuant to certain
"lock-up" agreements with the underwriters that we and they will not offer,
sell, contract to sell, pledge, grant any option to sell, or otherwise dispose
of, directly or indirectly, any shares of common stock or securities convertible
into or exercisable or exchangeable for common stock for a period of 180 days
after the date of this prospectus without the prior written consent of Warburg
Dillon Read. Warburg Dillon Read, in its sole discretion, may release the shares
subject to the lock-up agreements in whole or in part at any time with or
without notice. However, Warburg Dillon Read has no current plan to do so.
At our request, the underwriters have reserved for offer and sale at the
initial public offering price up to 275,000 shares of our common stock for our
officers, directors, employees, clients, friends and related persons who express
an interest in purchasing these shares. The number of shares of our common stock
available for sale to the general public will be reduced to the extent these
persons purchase these reserved shares. The underwriters will offer any shares
not so purchased by these persons to the general public on the same basis as the
other shares in this initial public offering.
Warburg Dillon Read and Chase Securities intend to distribute and deliver
this Prospectus only by hand or by mail and intend to use only printed
prospectuses. Prudential Securities Incorporated facilitates the marketing of
new issues online through its PrudentialSecurities.com division. Clients of
Prudential Advisor(SM) may view offering terms and this prospectus online and
place orders through their financial advisors.
Prior to this offering, there has been no public market for our common
stock. Consequently, the offering price for our common stock will be determined
by negotiations between us and the underwriters and will not necessarily be
related to our asset value, net worth or other established criteria of value.
The factors to be considered in these negotiations, in addition to prevailing
market conditions, will include the history of and prospects for the industry in
which we compete, an assessment of our management, our prospects, our capital
structure and certain other factors as are deemed relevant.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of shares is
completed. However, the underwriters may engage in the following activities in
accordance with the rules:
- STABILIZING TRANSACTIONS--The representatives may make bids for or
purchases of the shares for the purpose of pegging, fixing or maintaining
the price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
- OVER-ALLOTMENTS AND SYNDICATE COVERING TRANSACTIONS--The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with this offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
- PENALTY BIDS--If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of these transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither us nor the underwriters make any representation or prediction as to
the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the
61
<PAGE>
Nasdaq National Market or otherwise. If these transactions are commenced, they
may be discontinued without notice at any time.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
In January 2000, we issued an aggregate of 4,966,361 shares of our Series B
preferred stock, including the shares issued to Chase Securities at a per share
price of $5.59. Chase Securities acted as the placement agent for this private
placement for which it received a customary cash fee for its services and
120,000 shares of Series B preferred stock.
LEGAL MATTERS
- --------------------------------------------------------------------------------
The validity of the shares of our common stock offered hereby will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. As of the date of this
prospectus, certain partners and associates of Cooley Godward LLP own an
aggregate of 17,889 shares of common stock through an investment partnership.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston,
Massachusetts.
EXPERTS
- --------------------------------------------------------------------------------
Our financial statements as of December 31, 1998 and 1999 and for the period
from February 25, 1998 (inception) to December 31, 1998, the year ended
December 31, 1999 and for the period from February 25, 1998 (inception) through
December 31, 1999 included in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as stated in their
report appearing in this prospectus and registration statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
- --------------------------------------------------------------------------------
We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus forms a part) on Form S-1 with respect to
the common stock being offered by this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedule thereto. For further information with respect to us and
the shares of common stock offered hereby, reference is made to the registration
statement, including the exhibits and schedules thereto. Statements contained in
this prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and, where any contract is an exhibit to the
registration statement, each statement with respect to the contract is qualified
in all respects by the provisions of the relevant exhibit, to which reference is
hereby made. You may read and copy any document we file at the Public Reference
Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and the Securities and Exchange Commission's
Regional Offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. You may call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information about the operation of the
public reference rooms.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission. Upon approval of the common stock
for quotation on the Nasdaq National Market, such reports, proxy and information
62
<PAGE>
statements and other information may also be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, NW, Washington, D.C.
20006.
The Securities and Exchange Commission maintains a World Wide Website that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission. The address of the Securities and Exchange Commission's website is
http://www.sec.gov.
63
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Ernst & Young LLP, independent auditors........... F-2
Balance sheets as of December 31, 1998 and 1999............. F-3
Statements of operations for the period from February 25,
1998 (inception) to December 31, 1998, the year ended
December 31, 1999, and for the period from February 25,
1998 (inception) to December 31, 1999..................... F-4
Statements of cash flows for the period from February 25,
1998 (inception) to December 31, 1998, the year ended
December 31, 1999, and for the period from February 25,
1998 (inception) to December 31, 1999..................... F-5
Statement of changes in redeemable convertible preferred
stock and stockholders' equity (deficit) for the period
from February 25, 1998 (inception) to December 31, 1999... F-6
Notes to financial statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
InterMune Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of InterMune
Pharmaceuticals, Inc. (a development stage company) as of December 31, 1998 and
1999 and the related statements of operations, redeemable convertible preferred
stock and stockholders' equity (deficit), and cash flows for the period from
February 25, 1998 (inception) to December 31, 1998, the year ended December 31,
1999, and for the period from February 25, 1998 (inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of InterMune
Pharmaceuticals, Inc. (a development stage company) at December 31, 1998 and
1999, and the results of its operations and its cash flows for the period from
February 25, 1998 (inception) to December 31, 1998, the year ended December 31,
1999, and for the period from February 25, 1998 (inception) to December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
ERNST & YOUNG LLP
Palo Alto, California
January 28, 2000, except for the last
paragraph
in note 6 to the financial
statements regarding
deferred compensation and the
paragraphs in
note 12 to the financial statements
regarding
stock option grants and stock plans
as to which
the date is February 29, 2000
F-2
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
DECEMBER 31, DECEMBER 31, 1999
1998 1999 (UNAUDITED)
------------ ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $2,314,781 $ 3,772,110
Short-term investments, available for sale......................... 2,405,050 442,184
Accounts receivable, net........................................... -- 409,392
Inventories........................................................ -- 831,145
Notes receivable from officer...................................... -- 103,750
Other current assets and prepaid expenses.......................... -- 18,696
---------- -------------
Total current assets................................................. 4,719,831 5,577,277
Office equipment, net.............................................. -- 27,901
Restricted cash balance............................................ -- 250,000
---------- -------------
Total assets......................................................... $4,719,831 $ 5,855,178
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses.............................. $ 120,626 $ 1,809,028
Accrued payroll.................................................... 70,073 93,652
Payable to Connetics............................................... 347,837 538,434
Royalty payable to Genentech....................................... -- 1,913,785
---------- -------------
Total current liabilities............................................ 538,536 4,354,899
Long-term obligations payable to Connetics........................... -- 1,624,343
Redeemable convertible preferred stock............................... -- 7,416,427 $ --
Commitments
Stockholders' equity (deficit):
Convertible preferred stock, no par value:
Authorized shares--14,870,000 at December 31, 1999
Issued and outstanding shares--11,200,000 at December 31, 1998
and 1,835,000 at December 31, 1999; no shares pro forma........ 10,253,000 4,506,804 --
Common stock, no par value;
Authorized shares--30,000,000 at December 31, 1999
Issued and outstanding shares--none at December 31, 1998 and
1,890,833 at December 31, 1999; 9,725,833 shares pro forma..... -- 5,659,164 16,582,395
Deferred compensation related to stock options..................... -- (5,285,860) (5,285,860)
Accumulated other comprehensive income............................. 16 41 41
Deficit accumulated during the development stage................... (6,071,721) (12,420,640) (12,420,640)
---------- ------------- -------------
Total stockholders' equity (deficit)................................. 4,181,295 (7,540,491) $ (1,124,064)
---------- ------------- =============
Total liabilities and stockholders' equity (deficit)................. $4,719,831 $ 5,855,178
========== =============
</TABLE>
See accompanying notes.
F-3
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM FOR THE
FEBRUARY 25, PERIOD FROM
1998 FEBRUARY 25,
(INCEPTION) 1998
TO YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1999
------------- ------------- --------------
<S> <C> <C> <C>
Product sales, net................................................. $ -- $556,401 $556,401
Costs and expenses:
Cost of goods sold, primarily to Genentech....................... -- 239,802 239,802
Research and development......................................... 1,234,957 2,969,474 4,204,431
General and administrative (includes $362,108 in 1998 and
$1,189,920 in 1999 to Connetics)............................... 892,295 2,656,130 3,548,425
Acquired pre-FDA approval rights (sublicense rights contributed
by Connetics in 1998 and stock issued to Genentech for
additional rights in 1999)..................................... 4,000,000 1,093,750 5,093,750
----------- ------------- --------------
Total costs and expenses........................................... 6,127,252 6,959,156 13,086,408
Loss from operations............................................... (6,127,252) (6,402,755) (12,530,007)
Other income (expense):
Interest income.................................................. 55,531 239,778 295,309
Interest expense (includes $110,674 of accretion of long-term
obligations to Connetics and $75,268 of interest on royalty
payable to Genentech).......................................... -- (185,942) (185,942)
----------- ------------- --------------
Net loss........................................................... (6,071,721) (6,348,919) (12,420,640)
Preferred stock accretion.......................................... -- (656,765) (656,765)
----------- ------------- --------------
Net loss applicable to common stockholders......................... $(6,071,721) $ (7,005,684) $ (13,077,405)
=========== ============= ==============
Historical basic and diluted net loss per share.................... $ (9.12)
=============
Weighted average shares outstanding, basic and diluted............. 768,333
=============
Pro forma basic and diluted net loss per share..................... $ (0.90)
=============
Pro forma basic and diluted weighted average shares outstanding.... 7,770,000
=============
</TABLE>
See accompanying notes.
F-4
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM FROM
FEBRUARY 25, FEBRUARY 25,
1998 (INCEPTION) YEAR ENDED 1998 (INCEPTION)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1998 1999 1999
---------------- -------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................................... $(6,071,721) $(6,348,919) $(12,420,640)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation....................... -- 345,011 345,011
Accretion of long-term obligations payable to Parent
Connetics................................................. -- 110,674 110,674
Stock issued for acquired pre-FDA approval rights........... 4,000,000 1,093,750 5,093,750
Forgiveness of related party obligation..................... 253,000 -- 253,000
Depreciation................................................ -- 2,564 2,564
Changes in operating assets and liabilities:
Accounts receivable....................................... -- (409,392) (409,392)
Inventories............................................... -- (831,145) (831,145)
Notes receivable from officer............................. -- (103,750) (103,750)
Restricted cash........................................... -- (250,000) (250,000)
Other assets.............................................. -- (18,696) (18,696)
Accounts payable and accrued expenses..................... 120,626 1,688,402 1,809,028
Accrued payroll........................................... 70,073 23,579 93,652
Payable to Connetics...................................... 347,837 (309,403) 38,434
Royalty payable to Genentech.............................. -- 1,913,785 1,913,785
-------------- -------------- --------------
Net cash used in operating activities......................... (1,280,185) (3,093,540) (4,373,725)
INVESTING ACTIVITIES
Purchase of office equipment................................ -- (30,465) (30,465)
Purchase of marketable securities........................... (11,408,960) (24,197,543) (35,606,503)
Maturities of marketable securities......................... 9,003,926 26,160,434 35,164,360
-------------- -------------- --------------
Net cash (used) provided in investing activities.............. (2,405,034) 1,932,426 (472,608)
FINANCING ACTIVITIES
Contributed capital for preferred stock..................... 6,000,000 395,600 6,395,600
Return of capital to Parent (Connetics)..................... -- (5,221,877) (5,221,877)
Proceeds from redeemable preferred stock.................... -- 6,759,662 6,759,662
Proceeds from issuance of common stock...................... -- 663,350 663,350
Proceeds from exercise of stock options..................... -- 22,500 22,500
Repurchase of restricted stock.............................. -- (792) (792)
-------------- -------------- --------------
Net cash provided by financing activities..................... 6,000,000 2,618,443 8,618,443
-------------- -------------- --------------
Net increase in cash and cash equivalents..................... 2,314,781 1,457,329 3,772,110
Cash and cash equivalents at beginning of period.............. -- 2,314,781 --
-------------- -------------- --------------
Cash and cash equivalents at end of period.................... $2,314,781 $3,772,110 $3,772,110
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Return of capital on obligation to Parent (Connetics)....... -- $(2,013,669) $(2,013,669)
Long-term obligation on return of capital................... -- $1,513,669 $1,513,669
Short-term obligation on return of capital.................. -- $500,000 $500,000
Deferred stock compensation................................. -- $5,630,871 $5,630,871
</TABLE>
See accompanying notes.
F-5
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM FEBRUARY 25, 1998 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------
REDEEMABLE
CONVERTIBLE CONVERTIBLE COMMON
PREFERRED STOCK PREFERRED STOCK STOCK
---------------------- ------------------------- -----------
SHARES AMOUNT SHARES AMOUNT SHARES
--------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock to founders for $0.001 per share on
March 4, 1998............................................. -- $ -- -- $ -- 1,600,000
Repurchase of common stock at $0.001 per share on
August 21, 1998........................................... -- -- -- -- (1,600,000)
Capital transactions with Parent (Connetics):
Issuance of Series A convertible
preferred stock for contributed capital at $0.915 per
share in August and October 1998:.......................
Intellectual capital contributed by Parent
(Connetics)......................................... -- -- 4,369,453 4,000,000 --
Cash.................................................. -- -- 6,830,547 6,253,000 --
Gain on investments......................................... -- -- -- -- --
Net loss.................................................... -- -- -- -- --
--------- ----------- ----------- ------------ -----------
BALANCE AT DECEMBER 31, 1998................................ -- -- 11,200,000 10,253,000 --
Issuance of restricted common stock to founders for cash at
$0.01 per share on June 1, 1999........................... -- -- -- -- 815,000
Capital transactions with Parent (Connetics):
Exchange of convertible preferred shares on April 27, 1999
Return of Series A...................................... -- -- (11,200,000) -- --
Issuance of Series A-1 at $1.25 per share............... -- -- 960,000 -- --
Contributed capital from Parent (Connetics) (cash)........ -- -- -- 395,600 --
Return of capital to Parent (Connetics) (cash)............ -- -- -- (4,721,877) --
Return of capital to Parent (Connetics) (cash and/or stock
on April 27, 1999....................................... -- -- -- (2,513,669) --
Issuance of Series A-1 convertible preferred stock for
license rights at $1.25 per share on April 27, 1999....... -- -- 875,000 1,093,750 --
Issuance of Series A-2 redeemable convertible preferred
stock for cash, net of issuance costs of $94,888 at $1.116
per share on April 27, 1999............................... 4,800,000 5,259,662 -- -- --
Issuance of common stock for cash at $0.672 per share on
April 27, 1999............................................ -- -- -- -- 975,000
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share on August 6, 1999....... 800,000 1,000,000 -- -- --
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share in September 1999....... 400,000 500,000 -- -- --
Repurchase of common stock at $0.01 per share on
December 15, 1999......................................... -- -- -- -- (79,167)
Exercise of stock options................................... -- -- -- -- 180,000
Gain on investments......................................... -- -- -- -- --
Deferred compensation....................................... -- -- -- -- --
Amortization of deferred compensation....................... -- -- -- -- --
Preferred stock accretion................................... -- 656,765 -- -- --
Net loss.................................................... -- -- -- -- --
--------- ----------- ----------- ------------ -----------
BALANCE AT DECEMBER 31, 1999................................ 6,000,000 $ 7,416,427 1,835,000 $ 4,506,804 1,890,833
========= =========== =========== ============ ===========
<CAPTION>
DEFICIT
DEFERRED ACCUMULATED ACCUMULATED
COMPENSATION OTHER DURING THE
RELATED TO COMPREHENSIVE DEVELOPMENT
AMOUNT STOCK OPTIONS INCOME STAGE
---------- ------------- ------------------- -------------
<S> <C>
Issuance of common stock to founders for $0.001 per share on
March 4, 1998............................................. $ 1,600 $ -- $ -- $ --
Repurchase of common stock at $0.001 per share on
August 21, 1998........................................... (1,600) -- -- --
Capital transactions with Parent (Connetics):
Issuance of Series A convertible
preferred stock for contributed capital at $0.915 per
share in August and October 1998:.......................
Intellectual capital contributed by Parent
(Connetics)......................................... -- -- -- --
Cash.................................................. -- -- -- --
Gain on investments......................................... -- -- 16 --
Net loss.................................................... -- -- -- (6,071,721)
---------- ----------- --------- -------------
BALANCE AT DECEMBER 31, 1998................................ -- -- 16 (6,071,721)
Issuance of restricted common stock to founders for cash at
$0.01 per share on June 1, 1999........................... 8,150 -- -- --
Capital transactions with Parent (Connetics):
Exchange of convertible preferred shares on April 27, 1999
Return of Series A...................................... -- -- -- --
Issuance of Series A-1 at $1.25 per share............... -- -- -- --
Contributed capital from Parent (Connetics) (cash)........ -- -- -- --
Return of capital to Parent (Connetics) (cash)............ -- -- -- --
Return of capital to Parent (Connetics) (cash and/or stock
on April 27, 1999....................................... -- -- -- --
Issuance of Series A-1 convertible preferred stock for
license rights at $1.25 per share on April 27, 1999....... -- -- -- --
Issuance of Series A-2 redeemable convertible preferred
stock for cash, net of issuance costs of $94,888 at $1.116
per share on April 27, 1999............................... -- -- -- --
Issuance of common stock for cash at $0.672 per share on
April 27, 1999............................................ 655,200 -- -- --
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share on August 6, 1999....... -- -- -- --
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share in September 1999....... -- -- -- --
Repurchase of common stock at $0.01 per share on
December 15, 1999......................................... (792) -- -- --
Exercise of stock options................................... 22,500 -- -- --
Gain on investments......................................... -- -- 25 --
Deferred compensation....................................... 5,630,871 (5,630,871) -- --
Amortization of deferred compensation....................... -- 345,011 -- --
Preferred stock accretion................................... (656,765) -- -- --
Net loss.................................................... -- -- -- (6,348,919)
---------- ----------- --------- -------------
BALANCE AT DECEMBER 31, 1999................................ $5,659,164 $(5,285,860) $ 41 $ (12,420,640)
========== =========== ========= =============
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
Issuance of common stock to founders for $0.001 per share on
March 4, 1998............................................. $ 1,600
Repurchase of common stock at $0.001 per share on
August 21, 1998........................................... (1,600)
Capital transactions with Parent (Connetics):
Issuance of Series A convertible
preferred stock for contributed capital at $0.915 per
share in August and October 1998:.......................
Intellectual capital contributed by Parent
(Connetics)......................................... 4,000,000
Cash.................................................. 6,253,000
Gain on investments......................................... 16
Net loss.................................................... (6,071,721)
-----------
BALANCE AT DECEMBER 31, 1998................................ 4,181,295
Issuance of restricted common stock to founders for cash at
$0.01 per share on June 1, 1999........................... 8,150
Capital transactions with Parent (Connetics):
Exchange of convertible preferred shares on April 27, 1999
Return of Series A...................................... --
Issuance of Series A-1 at $1.25 per share............... --
Contributed capital from Parent (Connetics) (cash)........ 395,600
Return of capital to Parent (Connetics) (cash)............ (4,721,877)
Return of capital to Parent (Connetics) (cash and/or stock
on April 27, 1999....................................... (2,513,669)
Issuance of Series A-1 convertible preferred stock for
license rights at $1.25 per share on April 27, 1999....... 1,093,750
Issuance of Series A-2 redeemable convertible preferred
stock for cash, net of issuance costs of $94,888 at $1.116
per share on April 27, 1999............................... --
Issuance of common stock for cash at $0.672 per share on
April 27, 1999............................................ 655,200
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share on August 6, 1999....... --
Issuance of Series A-2 redeemable convertible preferred
stock for cash at $1.25 per share in September 1999....... --
Repurchase of common stock at $0.01 per share on
December 15, 1999......................................... (792)
Exercise of stock options................................... 22,500
Gain on investments......................................... 25
Deferred compensation....................................... --
Amortization of deferred compensation....................... 345,011
Preferred stock accretion................................... (656,765)
Net loss.................................................... (6,348,919)
-----------
BALANCE AT DECEMBER 31, 1999................................ $(7,540,491)
===========
</TABLE>
F-6
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
OVERVIEW
InterMune Pharmaceuticals, Inc. ("InterMune" or the "Company") develops and
commercializes innovative products for the treatment of serious pulmonary and
infectious diseases and congenital disorders. The Company has the exclusive
sublicense rights in the United States to ACTIMMUNE (interferon gamma-1b
injection) for a range of indications, chronic granulomatous disease,
osteopetrosis, including idiopathic pulmonary fibrosis, mycobacterial
infections, systemic fungal infections and cystic fibrosis. The Company has
active development programs underway for these indications, several of which are
in mid- or advanced-stage human testing, or clinical trials. The FDA has
approved ACTIMMUNE for the treatment of chronic granulomatous disease, and the
Company currently markets and sells ACTIMMUNE in the United States for this
disease. In August 1999, the Company filed a supplement to its biologics license
application, or BLA, with the FDA for the expanded use of ACTIMMUNE for the
treatment of osteopetrosis.
The Company was incorporated on February 25, 1998 in the State of California
and commenced operations as a wholly-owned subsidiary of Connetics in May of
1998. Beginning in May 1998, Connetics contributed certain development rights
and intellectual property valued at $4 million, cash of $6 million and
unreimbursed operating costs of $0.3 million to InterMune, then its wholly-owned
subsidiary. The value of the development rights and intellectual property
contributed was determined by the amount Connetics had paid Genentech for those
same rights in May 1998. The entire value of these rights had been allocated to
in-process research and development by Connetics and has also been reflected in
InterMune's statement of operations for the period from February 25, 1998
(inception) through December 31, 1998, as acquired pre-FDA approval rights with
a corresponding increase to capital contributed by parent. The determination of
the portion of the value of the rights allocable to in-process research and
development was made based upon the discounted cash flows of the rights acquired
projected over a ten year period, and included the costs of research and
development efforts necessary to prove efficacy of the molecule to which the
rights pertain.
On April 27, 1999, the Company obtained venture capital funding and was
reorganized pursuant to the Series A-1 and A-2 Preferred Stock Purchase
Agreement (See note 3). At the time of the reorganization, approximately
$4.7 million of the $10.3 million of capital originally contributed by Connetics
to InterMune, its wholly owned subsidiary, was returned to Connetics in the form
of cash. The Company also recorded a liability for $3.0 million to be paid to
Connetics over the next several years in cash and stock (see note 3), the
present value of which was recorded as a return of capital to Connetics. The
Company cancelled all of the 11.2 million shares of Series A preferred stock it
had originally issued to Connetics. Connetics also received 960,000 shares of
InterMune's Series A-1 preferred stock and net sales of ACTIMMUNE (as well as
incurring associated costs and expenses) up to a baseline amount through
December 2001, both in exchange for the remaining $3.4 million of Connetics'
contributed capital. See note 3 for a more complete description of the
April 27, 1999 agreements. At that time, Connetics retained approximately 9.0%
ownership in the Company.
BASIS OF ACCOUNTING
The accompanying financial statements include the operations of InterMune
for the period from February 25, 1998 to April 27, 1999 as a wholly-owned
subsidiary of Connetics. The Company's financial statements include all costs of
doing business during the period it was a wholly owned subsidiary. Separate
accounting records for the Company were maintained during this period, but were
F-7
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION (CONTINUED)
included in the consolidated financial statements of Connetics. Connetics
provides InterMune with certain information services, accounting activities,
employee benefit administration and research and development services as
described in note 3. InterMune is charged the actual time incurred plus an
allocation of overhead costs based upon time incurred. The Company believes the
allocation methodology is reasonable.
Prior to the date of InterMune's incorporation, February 25, 1998, Connetics
had licensed certain rights to ACTIMMUNE for dermatological indications from
Genentech and has retained an option to such dermatological rights. In
April 1998, after the incorporation of InterMune, Connetics licensed the rights
to ACTIMMUNE from Genentech for different indications, including the treatment
of serious infectious and pulmonary diseases and congenital disorders, for
$4 million of Connetics stock. Those rights were subsequently sublicensed to
InterMune in exchange for InterMune convertible preferred stock. On April 27,
1999, InterMune issued to Genentech 875,000 shares of InterMune Series A
preferred stock valued at $1,093,750 in exchange for additional ACTIMMUNE
development rights in Japan and a reduction of future royalties on potential
ACTIMMUNE net product revenues through its sublicense agreement with Connetics.
Through the date of these financial statements, the Company is considered to
be a development stage company. Since inception, the Company has incurred
significant losses and, as of December 31, 1999, had deficit accumulated during
the development stage of $12,420,640.
LIQUIDITY AND FINANCIAL VIABILITY
In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue for at least the
next several years. The Company's future capital uses and requirements depend on
numerous factors, including the progress of its research and development
programs, the progress of clinical and advanced-stage clinical testing, the time
and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, and enforcing patent claims and other intellectual property rights,
competing technological and market developments, the ability of the Company to
establish collaborative arrangements, the level of product sales of ACTIMMUNE,
the possible acquisition of new products and technologies, and the initiation of
significant commercialization activities. Therefore, such capital uses and
requirements may increase in future periods. As a result, the Company may
require substantial additional funds prior to reaching profitability and plans
to continue to finance its operating activities with a combination of stock
sales, product revenue, bank loans and/or debt financing. The inability to
obtain sufficient funds may require the Company to delay, scale back or
eliminate some or all of its research and product development programs, limit
the marketing of its product, or license to third parties the rights to
commercialize products or technologies that the Company would otherwise seek to
develop and market itself.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents consist of highly liquid investments with original
maturities when purchased of less than three months. Investments with maturities
beyond three months at the date of acquisition and that mature within one year
from the balance sheet date are considered to be short-term investments. Cash
equivalents and short-term investments are carried at fair value, with
F-8
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity. The cost of securities sold is based on the specific
identification method.
Management of the Company believes it has established guidelines for
investment of its excess cash relative to diversification and maturities that
maintain safety and liquidity.
CONCENTRATION OF CREDIT RISK
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities, the
Company's investment securities are classified as available-for-sale and
unrealized holding gains or losses are included in comprehensive income (loss).
Realized gains or losses, calculated based on the specific identification
method, were not material for any period.
INVENTORIES
Inventories consist principally of finished good products and are stated at
the lower of cost or market. Cost is determined by the first-in, first-out
(FIFO) method.
OFFICE EQUIPMENT
Equipment is stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets, generally 3 to 5 years.
NOTES RECEIVABLE
In connection with Dr. Harkonen's transition from Connetics to InterMune,
the Company assumed his outstanding loan of $100,000 by Connetics to
Dr. Harkonen pursuant to a secured loan agreement and promissory note dated
July 1, 1999. The interest rate on the promissory note is 7.5% per annum. The
principal and accrued interest are due on October 30, 2000.
RESTRICTED CASH
On December 18, 1999, the Company entered into a facility-operating lease
requiring a letter of credit secured by a restricted cash balance with the
Company's bank. The amount of the letter of credit approximates 12 months of
operating rent payable to the landlord of the facility.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disposed of, if indicators of impairment
exist, the Company assesses the recoverability of the affected long-lived assets
by determining whether the carrying value of such assets can be recovered
through undiscounted future operating cash flows. If impairment is indicated,
the Company will measure the amount of such impairment by comparing the carrying
value of the asset to the present value of the expected future cash flows
associated with the use of the asset. To date, no such indicators of impairment
have been identified.
F-9
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities, and long-term royalty
payable, are carried at cost, which management believes approximates fair value
because of the short-term maturity of these instruments.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment, net of allowances
for estimated returns, rebates and chargebacks. The Company is obligated to
accept from customers the return of pharmaceuticals that have reached their
expiration date. The Company has not experienced any significant returns of
expired product.
Sales and related costs of sales and accounts receivable for sales below the
baseline amount are transacted for Connectics under the Transition Agreement
(see note 3). For sales below the baseline amount, any amounts in excess of net
revenues less costs to produce and market are paid to Connetics under the
Transition Agreement. These sales, costs of sales and amounts receivable are
recorded by the Company on a net basis, which is equivalent to zero in the
accompanying financial statements. Such sales, costs of sales and accounts
receivable are not subject to the risks and rewards of ownership by the Company.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed in the period incurred.
INCOME TAXES
In accordance with SFAS No. 109, Accounting for Income Taxes, a deferred tax
asset or liability is determined based on the difference between the financial
statement and tax basis of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse. The Company
provides a valuation allowance against net deferred tax assets unless, based
upon the available evidence, it is more likely than not that the deferred tax
assets will be realized.
PATENT COSTS
Costs related to patent prosecution are expensed as incurred as
recoverability of such expenditures is uncertain.
STOCK-BASED COMPENSATION
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the
Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, ("APB 25") and related Interpretations
in accounting for stock-based employee compensation. Under APB 25, if the
exercise price of the Company's employee and director stock options equals or
exceeds the deemed fair value of the underlying stock on the date of grant, no
compensation expense is recognized.
When the exercise price of the employee or director stock options is less
than the deemed fair value of the underlying stock on the grant date, the
Company records deferred compensation for the difference. Deferred compensation
is being amortized using the graded vesting method over the vesting period of
the original award, generally five years. Options or stock awards issued to
non-employees are recorded at their fair value as determined in accordance with
SFAS No. 123 and recognized over the related service period.
F-10
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME (LOSS)
As of July 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires unrealized gains or losses on the
Company's available-for-sale securities and foreign currency translation
adjustments, which prior to adoption were reported separately in stockholders'
equity, to be included in other comprehensive income (loss).
SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, during 1998. SFAS No. 131 requires the use
of a management approach in identifying segments of an enterprise. Management
has determined that the Company operates in one business segment.
NET LOSS PER SHARE
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff
Accounting Bulletin (or SAB) No. 98, basic net income (loss) per share is
computed by dividing the net income (loss) for the period by the weighted
average number of common shares outstanding during the period. Diluted net
income (loss) per share is computed by dividing the net income (loss) for the
period by the weighted average number of common and common equivalent shares
outstanding during the period. Potentially dilutive securities composed of
incremental common shares issuable upon the exercise of stock options and common
shares issuable on conversion of preferred stock, were excluded from historical
diluted loss per share because of their anti-dilutive effect.
The Company's capital structure during 1998 was that of a wholly owned
subsidiary. Earnings per share data for 1998 has not been presented as the
capital structure changes that took place in 1999 made such presentation less
meaningful.
Under the provisions of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. Founders shares of 735,833 were
issued for nominal consideration but are subject to repurchase by the Company.
Shares for which repurchase rights have lapsed have been included in the per
share calculations.
Pro forma net loss per share has been computed as described above and also
gives effect to common equivalent shares arising from preferred stock that will
automatically convert upon the closing of the initial public offering
contemplated by this prospectus (using the as-if converted method from the
original date of issuance). For the year ended December 31, 1999, the pro forma
shares also reflect the common equivalent shares of preferred and common stock
issued on April 27, 1999 in connection with the reorganization as though they
had been outstanding for the entire year.
F-11
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The calculation of historical and pro forma basic and diluted net loss per
share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
-------------
<S> <C>
Historical:
Net loss..................................................................... $ (7,005,684)
=============
Weighted average shares of common stock outstanding.......................... 1,201,736
Less: weighted average shares of common stock that may be repurchased........ (433,403)
-------------
Weighted average shares of common stock outstanding used in computing basic
and diluted net loss per share............................................. 768,333
=============
Basic and diluted net loss per share......................................... $ (9.12)
=============
Pro forma:
Net loss (before preferred stock accretion).................................. $ (6,348,919)
=============
Weighted average shares used in computing basic and diluted net loss per
share (from above)......................................................... 768,333
Adjustment to reflect the effect of the assumed conversion of preferred stock
to common stock from the date of issuance.................................. 4,790,000
Adjustment to reflect the effect of the stock issued on April 27, 1999 and
the assumed conversion of the related preferred stock to common stock from
the beginning of the period through the date of issuance................... 2,211,667
-------------
Weighted average shares used in computing pro forma basic and diluted net
loss per share............................................................. 7,770,000
=============
Pro forma basic and diluted net loss per share............................... $ (0.90)
=============
</TABLE>
F-12
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
If the Company had reported net income, the calculation of historical and
pro forma diluted earnings per share would have included approximately an
additional 260,612 common equivalent shares related to the outstanding stock
options not included above (determined using the treasury method) for the period
ended December 31, 1999.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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.
NEW ACCOUNTING PRONOUNCEMENTS
The Company expects to adopt SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective January 1, 2001. SFAS No. 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. The Company does not anticipate that the adoption of the SFAS No. 133
will have a significant effect on its results of operations or financial
position.
3. COLLABORATION, LICENSE AND SERVICE AGREEMENTS WITH RELATED PARTIES
SUBLICENSE AND COLLABORATION AGREEMENTS
On August 21, 1998, the Company and Connetics entered into an exclusive
sublicense agreement (the sublicense agreement), pursuant to which:
(a) Connetics granted an exclusive sublicense to InterMune under the Genentech
License for ACTIMMUNE for specific indications; (b) InterMune granted to
Connetics the exclusive option to practice such sublicensed rights in the
dermatology field and; (c) InterMune agreed to pay all amounts owed by Connetics
to Genentech related to ACTIMMUNE net sales except with respect to sales made by
Connetics in the event Connetics exercises its option. Under the sublicense
agreement, InterMune agreed to be responsible for all costs of development and
commercialization of ACTIMMUNE in the specified indications, to pay specified
payments to Genentech upon completion of certain development and
commercialization milestones, and to pay future royalties on net annual
ACTIMMUNE sales annually.
On April 27, 1999, Connetics amended the terms of its license agreement with
Genentech and obtained additional rights to ACTIMMUNE which it simultaneously
sublicensed to InterMune.
On April 27, 1999, InterMune and Connetics also signed a Collaboration
Agreement. As a result of the sublicense, transition, service, and collaboration
agreements between InterMune and Connetics, Connetics received 960,000 shares of
InterMune's Series A-1 preferred stock, rights to net sales of ACTIMMUNE up to a
baseline amount through December 2001, less associated cost of goods sold and
marketing expenses, a nominal royalty on ACTIMMUNE net sales, and the following
payments of cash and stock, all of which represent the return of a portion of
Connetics' invested capital: $4.7 million of cash on April 27, 1999; an
additional $500,000 cash payment on April 27, 1999; $500,000 cash due on
March 31, 2001; $1.5 million payable in installments of cash or stock beginning
on March 31, 2002 and due in full by March 31, 2004; and an additional
$1.5 million payable in stock and cash. The $500,000 due on March 31, 2001 and
the $1.5 million payable in installments of cash and stock due through
F-13
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. COLLABORATION, LICENSE AND SERVICE AGREEMENTS WITH RELATED PARTIES
(CONTINUED)
March 31, 2004 have been recorded at their net present value of $1,624,343 as
long-term obligations payable to Connetics as of December 31, 1999. Of the
additional $1.5 million, $500,000 has been accrued in "payable to Connetics" as
of December 31, 1999, in the accompanying financial statements as a reduction of
capital contributed by parent. This amount was paid to Connetics in Series B
preferred stock on January 7, 2000. The remaining additional $1 million
obligation payable in cash or InterMune stock is contingent upon a subsequent
closing of a round of financing, an initial public offering or the acquisition
of the Company. This $1 million contingent return of capital has only been
reflected in the accompanying pro forma, December 31, 1999 (unaudited) balance
sheet.
SERVICE AGREEMENT
On October 12, 1998, the Company entered into a five year agreement, as
amended, whereby Connetics will provide to the Company certain information
services, accounting activities, facilities, employee benefit administration and
research and development services. The agreement may be terminated by either
party with 90 days prior written notice. The Company has paid Connetics a total
of $362,108 and $1,189,920 for the period from February 25, 1998 (inception) to
December 31, 1998 and for the year ended December 31, 1999, respectively, under
this agreement.
TRANSITION AGREEMENT
On April 27, 1999, the Company and Connetics entered into a 3-year
Transition Agreement. This agreement effectively transferred certain ACTIMMUNE
distribution, sales and marketing responsibilities from Connetics to InterMune.
Under the terms of the agreement InterMune will:
- Provide to Connetics certain order entry, packaging, shipping, invoicing
and credit and collection activities related to the sales of ACTIMMUNE
units. Total costs reimbursed from Connetics totaled $73,056 and $347,731
for the period from February 25, 1998 (inception) to December 31, 1998 and
for the year ended December 31, 1999, respectively.
- Pay Connetics each month the net sales of ACTIMMUNE up to a predetermined
baseline for the period from January 15, 1999 through December 31, 2001
less associated cost of goods sold and marketing expenses. The
predetermined baseline is preset for each calendar year under the
agreement. The Company paid to Connetics $1,357,436 under this arrangement
for the year ended December 31, 1999. After December 31, 2001, the net
sales for ACTIMMUNE will fully revert to the Company.
- Transition manufacturing of ACTIMMUNE from Genentech to a third-party
alternative manufacturer. In order to expedite and effect this transfer of
manufacturing, Connetics will pay a percentage of all actual costs, up to
a pre-determined cap, to complete the transfer of manufacturing of
ACTIMMUNE to a third party alternative manufacturer. Approximately
$100,000 has been incurred by InterMune from inception through
December 31, 1999.
ACQUIRED PRE-FDA APPROVAL RIGHTS
InterMune sublicenses its development and marketing rights for ACTIMMUNE
from Connetics. Connetics obtained these rights for ACTIMMUNE through its
License Agreement with Genentech in May 1998 as amended in April 1999.
Connetics' associated rights to ACTIMMUNE include uses in
F-14
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. COLLABORATION, LICENSE AND SERVICE AGREEMENTS WITH RELATED PARTIES
(CONTINUED)
chronic granulomatous disease, osteopetrosis, pulmonary fibrosis, infectious
diseases, and cystic fibrosis, (see Transition Agreement). Connetics sublicensed
the rights to all of these disease indications, except for net sales of
ACTIMMUNE up to a baseline amount through December 2001, to InterMune. ACTIMMUNE
has been approved by the FDA for use in the treatment of CGD. For other
indications ACTIMMUNE is in development. The Company will incur significant
costs to develop and prove efficacy in each of the other indications.
Connetics paid Genentech $4 million for these rights in May 1998. The
Company has valued its sublicensed rights at $4 million based on this amount
paid by the Company's then parent company, Connetics. A discounted cash flow
analysis of the projected revenues and costs based on the potential market, the
estimated costs to obtain the required approvals and costs to manufacture and
market ACTIMMUNE for each indication shows a negative cash flow for the chronic
granulomatous disease indication and positive cash flows for several of the
other indications with larger patient populations. Negative cash flows from
chronic granulomatous disease result from a small U.S. market of only
400 patients, high costs of manufacturing due to small quantities, a royalty
payable to Genentech and significant costs to market the product. In addition,
InterMune does not capture revenues associated with chronic granulomatous
disease for the first three years of the sublicense, which has further adverse
impact on the discounted cash flow analysis of the projected revenues for
chronic granulomatous disease as it relates to InterMune specifically. Because
realization of the non-chronic granulomatous disease indications' revenue
streams is uncertain, due to the early stages of development and the high costs
to develop, the Company has expensed the $4 million acquisition cost.
On April 27, 1999, InterMune acquired additional ACTIMMUNE development
rights in Japan as well as reduction of future royalties of potential ACTIMMUNE
annual net sales above a certain threshold. For these rights, InterMune issued
Genentech 875,000 shares of Series A-1 convertible preferred stock. The acquired
rights were valued at $1.1 million, the purchase price of the stock issued, as
paid by new investors in the then most recent round of financing. The acquired
development rights were estimated to have no immediate realizable value, as no
approvals for ACTIMMUNE have been obtained in Japan and significant costs will
be incurred to obtain such approvals. The reduction of the royalty rate was
similarly deemed to have no current realizable value because sales of ACTIMMUNE
for chronic granulomatous disease (the only FDA approved use of ACTIMMUNE) were
not likely to exceed the annual sales threshold due to the small U.S. market
size of 400 patients. Accordingly, a $1.1 million charge to acquired pre-FDA
approval rights was recorded.
Also see Note 9, Actimmune Product Sales and Long-Term Royalty Payable to
Genentech.
4. SHORT--TERM INVESTMENTS AVAILABLE FOR SALE
At December 31, 1999, short-term investments consisted of the following:
<TABLE>
<CAPTION>
AMORTIZED MARKET UNREALIZED
COST VALUE GAIN
---------- ---------- -------------
<S> <C> <C> <C>
Obligations of U.S. government agencies.................. $ -- $ -- $ --
Corporate debt securities................................ 442,143 442,184 41
---------- ---------- ---------
Total short-term investments............................. $ 442,143 $ 442,184 $ 41
========== ========== =========
</TABLE>
F-15
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. SHORT--TERM INVESTMENTS AVAILABLE FOR SALE (CONTINUED)
At December 31, 1998, short-term investments consisted of the following:
<TABLE>
<CAPTION>
AMORTIZED MARKET UNREALIZED
COST VALUE GAIN
------------ ------------ -------------
<S> <C> <C> <C>
Obligations of U.S. government agencies............... $ -- $ -- $ --
Corporate debt securities............................. 2,405,034 2,405,050 16
------------ ------------ ---------
Total short-term investments.......................... $ 2,405,034 $ 2,405,050 $ 16
============ ============ =========
</TABLE>
The net unrealized holding gain (loss) on available-for-sale investments
included as a separate component of stockholders' equity at December 31, 1998
and 1999, totaled $16 and $41, respectively. The gross realized losses on sales
of available-for-sale investments for the period from February 25, 1998
(inception) to December 31, 1998, and for the year ended December 31, 1999,
totaled $400 and $910, respectively. Realized gains and losses were calculated
based on the specific identification method.
5. OFFICE EQUIPMENT
Office equipment and related accumulated depreciation is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Computer equipment............................................... $ -- $ 5,657
Office furniture and fixtures.................................... -- 24,808
---------- ----------
-- 30,465
---------- ----------
Less accumulated depreciation.................................... -- (2,564)
---------- ----------
$ -- $ 27,901
========== ==========
</TABLE>
Total depreciation expense amounted to $2,564 for the year ended
December 31, 1999.
F-16
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Redeemable convertible preferred stock and convertible preferred stock are
issuable in series, with rights and preferences designated by series. As of
December 31, 1999, the shares designated and outstanding are as follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
NUMBER OF ----------------------------------------
SHARES CUMULATIVE
-------------------------- AGGREGATE UNDECLARED
ISSUED AND LIQUIDATION CARRYING PREFERRED
DESIGNATED OUTSTANDING PREFERENCE AMOUNT DIVIDENDS
------------ ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Redeemable convertible preferred stock:
Series A-2................................... 6,000,000 6,000,000 $ 7,500,000 $ 6,759,662 $ 364,603
Series B..................................... 5,200,000 -- -- -- --
------------ ------------ ------------ ------------- ---------
11,200,000 6,000,000 7,500,000 6,759,662 364,603
Accretion of preferred stock................. -- -- -- 656,765 --
------------ ------------ ------------ ------------- ---------
11,200,000 6,000,000 7,500,000 7,416,427 364,603
Convertible preferred stock:
Series A-1................................... 1,835,000 1,835,000 2,293,750 4,506,804 125,182
Series A-3................................... 6,000,000 -- -- -- --
Series A-4................................... 1,835,000 -- -- -- --
Series B-1................................... 5,200,000 -- -- -- --
------------ ------------ ------------ ------------- ---------
14,870,000 1,835,000 2,293,750 4,506,804 125,182
------------ ------------ ------------ ------------- ---------
Total........................................ 26,070,000 7,835,000 $ 9,793,750 $ 11,623,916 $ 489,785
============ ============ ============ ============= =========
</TABLE>
CONVERSION
Redeemable convertible preferred stock and convertible preferred stock are
collectively referred to as "preferred stock." Each share of preferred stock
automatically converts into one share of common stock in the event of an initial
public offering of the Company's common stock in which gross offering proceeds
exceed $15,000,000 and the offering price is at least $7.50 per share or: for
Series B and B-1 preferred stock upon affirmative vote of each of the holders of
not less than a majority of the outstanding shares of Series B and B-1 preferred
stock voting as a separate class; for Series A-2 and A-3 upon affirmative vote
of each of the holders of not less than 65% of the outstanding shares of
Series A-2 and A-3 preferred stock, voting together as a separate class; and for
Series A-1 and A-4 preferred stock, upon affirmative vote of the holders of not
less than 55% of the outstanding shares of Series A-1 and A-4 preferred stock,
voting together as a separate class.
No dividends will be declared or paid to the holders of Series A-1 or A-2
preferred stock or common stock unless the holders of Series B, Series B-1,
Series A-2, and Series A-3 preferred stock have been paid in full for all of the
dividends to which they are entitled. After full cumulative dividends have been
declared and paid to holders of preferred stock, the board of directors may
declare additional dividends to be prorated to all holders of the Company stock
based on the number of common shares held assuming full conversion of preferred
stock.
F-17
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
LIQUIDATION
Upon any liquidation, dissolution, or winding up of the Company, the holders
of Series B and B-1 preferred and Series A-2 and A-3 preferred stock shall be
entitled to be paid out of any assets of the Company legally available, an
amount per share of $5.59 and $1.25, respectively, plus all declared and unpaid
dividends on such shares of Series B and B-1 preferred and Series A-2 and A-3
preferred (subject to certain adjustments) held. If the assets of the Company
are insufficient to permit payment in full, the entire assets of the Company
available for distribution will be distributed ratably among the holders of the
Series B and B-1 preferred and Series A-2 and A-3 preferred in proportion to the
full amount to which they would otherwise be respectively entitled.
After full payment of the holders of Series B, B-1, A-2 and A-3 as described
above, upon liquidation, dissolution or winding up of the Company, holders of
Series A-1 and A-4 are entitled to $1.25 per share plus all declared and unpaid
dividends. If the assets and funds are insufficient for a full $1.25 per share
payment, the entire assets and funds legally available shall be distributed
ratably among the holders of Series A-1 and A-4 in proportion to the full amount
to which they would otherwise be entitled. After full payment of preferred
shareholders, the remaining assets of the Company shall be distributed ratably
among the holders of the common stock.
REDEMPTION
Series A-1, A-3, A-4 and B-1 preferred shares are not redeemable. After
April 15, 2004, any outstanding shares of Series A-2 and Series B may be
redeemed upon vote or written consent of at least 75% of the outstanding shares
of Series A-2 and B, provided that the Company had revenues of at least
$20 million for twelve full months immediately preceding the redemption.
Redemption will be completed in four annual installments of cash for a total of
$11.18 per share of Series B and $2.50 per share of Series A-2, plus declared
and unpaid dividends. Accretion of redemption value from the date of issuance of
the Series A-2 redeemable convertible preferred stock (April 27, 1999) through
December 31, 1999 was $656,765.
COMMON STOCK SUBJECT TO REPURCHASE
In connection with the issuance of common stock to founders and the exercise
of options pursuant to the Company's 1999 Stock Option/Stock Issuance Plan,
employees entered into restricted stock purchase agreements with the Company.
Under the terms of these agreements, the Company has a right to repurchase any
unvested shares at the original exercise price of the shares. With continuous
employment with the company, the repurchase rights lapse at a rate of 20% at the
end of the first year and at a rate of 1/48th of the remaining purchased shares
for each continuous month of service thereafter. As of December 31, 1999,
663,000 shares were subject to repurchase by the Company.
STOCK COMPENSATION PLANS
In May 1999, the Company adopted the 1999 Stock Option/Stock Issuance Plan
("1999 Plan"). The 1999 Plan provides for the granting of options to purchase
common stock and the issuance of shares of common stock, subject to Company
repurchase rights, to directors, employees and consultants. Certain options are
immediately exercisable, at the discretion of the board of directors. Shares
issued pursuant to the exercise of an unvested option are subject to the
Company's right of
F-18
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
repurchase which lapses over periods specified by the board of directors,
generally five years from the date of grant. At December 31, 1999 the number of
shares issuable under the 1999 Plan was 2,000,000.
The stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
---------- -----------
<S> <C> <C>
Balance at February 25, 1998........................................... -- --
---------- ---------
Granted.............................................................. -- --
Cancelled............................................................ -- --
Exercised............................................................ -- --
---------- ---------
Balance at December 31, 1998........................................... -- --
---------- ---------
Granted.............................................................. 1,170,000 $ 0.125
Cancelled............................................................ -- --
Exercised............................................................ (180,000) $ 0.125
---------- ---------
Balance at December 31, 1999........................................... 990,000 $ 0.125
========== =========
</TABLE>
At December 31, 1999, 830,000 shares were available for future option
grants. The weighted average grant-date fair value of options granted in 1999
was $0.125.
In December 1999, the Company repurchased 79,167 shares of common stock at
$0.01 per share from one of its founders pursuant to a stock repurchase
agreement.
The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ -----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OF SHARES LIFE PRICE OF SHARES PRICE
- ----------- ---------- ----------- ----------- ---------- -----------
<C> <C> <S> <C> <C> <C>
0$.125..... 990,000 9.5 years $ 0.125 990,000 $ 0.125
</TABLE>
The fair value of these options was estimated at the date of grant using the
Black-Scholes option valuation model with the following weighted average
assumptions for 1999: risk-free interest rate of 6%; dividend yield of 0%;
volatility of 70% and a weighted-average life of the options of five years. The
Company recorded deferred stock compensation based upon deemed fair value of the
options which exceeded the Black-Scholes valuation. Therefore, pro forma
disclosure of earnings (loss) per share is not required under SFAS 123.
COMMON STOCK
InterMune's Articles of Incorporation provide for the issuance of up to
30,000,000 shares of common stock. The holder of each share of common stock
shall have one right to one vote.
F-19
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
At December 31, 1999, common stock subject to future issuance is as follows:
<TABLE>
<S> <C>
Conversion of convertible redeemable preferred stock............. 7,835,000
Outstanding common stock options................................. 990,000
Common stock available for grant under stock option plan......... 830,000
---------
9,655,000
=========
</TABLE>
DEFERRED COMPENSATION
In November 1999 and January 2000, the Company issued 133,000 options to
purchase shares of common stock at a weighted average exercise price of $0.37
per share to consultants in exchange for research and development consulting
services. Compensation expense is recorded as services are provided each quarter
and as the options vest based upon the fair value of the option, determined
quarterly using the Black-Scholes pricing model.
In connection with the grant of certain stock options to employees for the
year ended December 31, 1999, the Company recorded deferred stock compensation
within stockholders' deficit of approximately $5.6 million, representing the
difference between the deemed fair value of the common stock for accounting
purposes and the option exercise price of these options at the date of grant.
The Company recorded amortization of deferred compensation of approximately
$345,000, for the year ended December 31, 1999.
In connection with the grant of options to employees through
February 29, 2000, the Company will record an additional $7.1 million of
deferred stock compensation during the first quarter of 2000. The deferred stock
compensation expense is being amortized using the graded vesting method over the
vesting period of the individual award, generally five years. This method is in
accordance with Financial Accounting Standards Board Interpretation No. 28.
Accordingly, at February 29, 2000, the remaining deferred compensation of
approximately $12.4 million will be amortized as follows: $5.9 million during
fiscal 2000, $3.4 million during fiscal 2001, $1.8 million during fiscal 2002,
$0.9 million during fiscal 2003 and $0.4 million during fiscal 2004. The
amortization expense relates to options awarded to employees in all operating
expense categories. The amortization of deferred stock compensation has not been
separately allocated to these categories. The amount of deferred compensation
expense to be recorded in future periods could decrease if options for which
accrued but unvested compensation has been recorded are forfeited. The deemed
fair value of common stock ranges between $0.67 and $16.20, and was calculated
by management of the Company based on an analysis of significant events which
have occurred since inception of the Company.
7. INCOME TAXES
At December 31, 1999, the Company has federal and state tax net operating
loss carryforwards of approximately $7,500,000. The Company also had state
research and development tax credit carryforwards of approximately $100,000. The
federal net operating loss and credit carryforwards will expire at various dates
beginning in the year 2018 through 2019 if not utilized. The state of California
net operating losses will expire in the year 2006, if not utilized.
Utilization of the federal and state net operating loss and credit
carryforwards may be subject to a substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue
F-20
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Code of 1986. The annual limitation may result in the expiration of net
operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the Company's deferred
tax assets for federal and state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............................. $ 900,000 $ 3,000,000
Research and development credits.............................. -- 100,000
In-process research........................................... 1,500,000 1,800,000
------------- -------------
Total deferred tax assets....................................... 2,400,000 4,900,000
------------- -------------
Valuation allowance........................................... (2,400,000) (4,900,000)
------------- -------------
Net deferred tax assets......................................... $ -- $ --
============= =============
</TABLE>
Due to the Company's lack of earnings history, the net deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $2,400,000 and $2,500,000 during the period from February 25, 1998
(inception) to December 31, 1998, and for the year ended December 31, 1999,
respectively.
8. COMMITMENTS
LEASES
In December 1999, the Company entered into a facility lease of office space
that extends through December 2004. Total rent expense under this lease was
approximately $18,609 in 1999.
The following is a schedule by year of future minimum lease payments at
December 31, 1999:
<TABLE>
<CAPTION>
OPERATING
YEAR LEASES
- ------------------------------------------------------------------------------------ ------------
<S> <C>
2000................................................................................ $ 223,988
2001................................................................................ 232,108
2002................................................................................ 240,229
2003................................................................................ 248,349
2004................................................................................ 234,477
------------
$ 1,179,151
============
</TABLE>
CONSULTING AGREEMENTS
Beginning in January 2000 the Company has entered into consulting agreements
with a number of individuals for scientific advisory services. Each individual
receives a certain number of nonqualified stock options. In certain cases, the
options vest ratably over the duration of the contract. In other cases, the
options vest ratably over a specified period, generally two years. Compensation
expense is measured and recorded as the service is completed in accordance with
EITF 96-18.
F-21
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. ACTIMMUNE PRODUCT SALES AND LONG-TERM ROYALTY PAYABLE TO GENENTECH
Product sales consist of ACTIMMUNE unit sales in excess of the annual
predetermined baseline for the year ended December 31, 1999. In connection with
the Genentech License and the Sublicense with Connetics, InterMune is obligated
to pay royalties on ACTIMMUNE sales to Genentech beginning January 15, 1999.
Under the terms of the Genentech License, the accrued royalties are payable the
earlier of March 31, 2002 or upon the completion of an initial public offering
in cash or common stock. Interest accrues on unpaid quarterly royalties at the
then prevailing prime plus 2% at the end of each quarter. Interest rates ranged
from 9.75% to 10.50%, as of December 31, 1999. Genentech may, at their option,
convert any or all unpaid royalties plus accrued interest into InterMune equity
securities at a per share price equal to the Company's last equity financing. As
of December 31, 1999, accrued royalties and related interest of $1,913,785 are
classified as current, due to the authorization of the Board of Directors for
the Company to proceed with an initial public offering of its common stock.
10. SPONSORED RESEARCH AND LICENSE AGREEMENTS
LICENSE AGREEMENT WITH MCW RESEARCH FOUNDATION
Under an agreement with MCW Research Foundation, Inc. dated March 25, 1999,
the Company acquired an exclusive worldwide license to develop, manufacture and
sell the Pseudomonas V Antigen in the field of human disease therapy. The
Company paid a license fee of $50,000, agreed to make future milestone payments
upon the completion of specified developmental milestones and to pay a royalty
on net sales of licensed product. The Company can terminate the agreement at any
time upon giving at least 90 days written notice.
SPONSORED RESEARCH AND LICENSE AGREEMENT
Under a three year agreement with Panorama Research, Inc. dated January 1,
2000, the Company acquired an exclusive worldwide license to develop and
commercialize peptides that block staphylococcus aureus infections. The Company
agreed to fund research as incurred, make future milestone payments upon
completion of specified developmental milestones and to pay a royalty on net
sales of licensed product. The Company can terminate the agreement at any time
upon giving at least 30 days written notice.
11. SAVINGS PLAN
On May 1, 1999, the Company adopted a 401(k) defined contribution plan that
covers all full time employees, as defined, who meet certain length-of-service
requirements. Employees may contribute up to a maximum of 15% of their annual
compensation (subject to a maximum limit imposed by federal tax law). The
Company makes no matching contributions.
12. SUBSEQUENT EVENTS
On January 7 and January 27, 2000, the Company issued 4,876,916 aggregate
shares of Series B redeemable convertible preferred stock at $5.59 per share for
aggregate proceeds of $27,262,000. The Company incurred approximately
$1.5 million of issuance costs, including 120,000 shares of Series B redeemable
convertible preferred stock valued at $5.59 per share.
On January 7, 2000, pursuant to the terms of the collaboration agreement
with Connetics, the Company also issued to Connetics 89,445 shares of
series B-1 convertible preferred stock. This stock issuance has been reflected
as a return of capital to Connetics in the accompanying December 31, 1999
F-22
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (CONTINUED)
financial statements as the Company had concluded that the event triggering the
issuance (the closure of the Series B financing) was probable at December 31,
1999.
At the dates of issuance of Series B redeemable convertible preferred stock
in January 2000, the Company believed the per share price of $5.59 represented
the fair value of the preferred stock and was in excess of the deemed fair value
of its common stock. Subsequent to the commencement of the Company's initial
public offering process, the Company re-evaluated the deemed fair market value
of its common stock as of January 2000 and determined it to be $12.60 to $14.40
per share. Accordingly, the entire proceeds of $27,762,000 is deemed to be the
equivalent of a redeemable preferred stock "dividend". The Company will reflect
that beneficial conversion feature as a deemed dividend on its redeemable
convertible preferred stock in its first quarter 2000 financial statements.
PROPOSED PUBLIC OFFERING OF COMMON STOCK AND PRO FORMA DECEMBER 31, 1999
STOCKHOLDERS' EQUITY (DEFICIT)
In January 2000, the Board of Directors authorized the Company to proceed
with an initial public offering of its common stock. If the offering is
consummated as presently anticipated, each share of outstanding convertible
preferred stock will automatically convert into one share of common stock and
the Company's $1 million contingent payable to Connetics will be due (see
note 3). The effects of the conversion of preferred stock and the payment to
Connectics of the $1 million are reflected in the unaudited pro forma balance
sheet at December 31, 1999. The Company plans to reincorporate in Delaware prior
to the closing of the initial public offering.
SUPPLY AGREEMENT
In January 2000, the Company entered into a supply agreement with Boehringer
Ingelheim under which it will manufacture both clinical and commercial supplies
of of ACTIMMUNE. As security for payments due Boehringer Ingelheim under this
agreement, a standby letter of credit is required with a term through April 30,
2001 in the amount equal to approximately $530,000. The amount of the standby
letter of credit approximates 20% of the total payment obligation under this
agreement with respect to Boehringer Ingelheim's establishment of comparability
between its product and Genentech's.
STOCK OPTION GRANTS
In January 2000, the Board of Directors granted options to purchase 443,500
common shares at a weighted average exercise price of $2.82 per share. In
February 2000, the Board of Directors granted options to purchase 295,000 common
shares at a weighted average exercise price of $4.50 per share.
STOCK PLANS
The Board of Directors adopted the 2000 Equity Incentive Plan in
January 2000. A total of 2,000,000 shares of common stock have been reserved for
issuance under the 2000 Equity Incentive Plan.
The Board of Directors adopted the 2000 Employee Stock Purchase Plan in
January 2000. A total of 200,000 shares of common stock have currently been
authorized for issuance under the 2000 Employee Stock Purchase Plan.
F-23
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (CONTINUED)
The Board of Directors adopted the 2000 Non-Employee Directors' Stock Option
Plan in January 2000. A total of 180,000 shares of common stock have been
reserved for issuance under the 2000 Non-Employee Directors' Stock Option Plan.
F-24
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY
SHARES OF INTERMUNE PHARMACEUTICALS, INC. COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE INTERMUNE COMMON
STOCK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 7
Forward-Looking Statements........... 15
Use of Proceeds...................... 15
Dividend Policy...................... 15
Dilution............................. 16
Capitalization....................... 17
Selected Financial Data.............. 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 19
Business............................. 23
Management........................... 37
Related Party Transactions........... 50
Principal Stockholders............... 52
Description of Capital Stock......... 55
Shares Eligible for Future Sale...... 58
Underwriting......................... 60
Legal Matters........................ 62
Experts.............................. 62
Where You Can Find More Information.. 62
Index to Financial Statements........ F-1
</TABLE>
PRELIMINARY PROSPECTUS
5,500,000 Shares
[LOGO]
Common Stock
Warburg Dillon Read LLC
Chase H&Q
Prudential Vector Healthcare
a unit of Prudential Securities
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts shown are estimates except
for the registration fee, the Nasdaq National Market listing fee and the NASD
filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 26,717
Nasdaq National Market listing fee.......................... 17,500
NASD filing fee............................................. 10,620
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 425,000
Accounting fees and expenses................................ 375,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... $ 30,163
Total..................................................... $1,025,000
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of duty of loyalty to us or to our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify its
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer for some expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any of these persons in any action or
proceeding, including any action by or in the right of InterMune, arising out of
person's services as our director or officer, any subsidiary of ours or any
other company or enterprise to which the person provides services at our
request.
The underwriting agreement will provide for indemnification by the
underwriters of InterMune, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the Securities Act.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since inception in February 1998, we have sold and issued the following
unregistered securities:
(1) From June 1999 through January 2000, we have granted stock options to
purchase 1,613,500 shares of the our common stock to employees, consultants
and directors pursuant to our 1999 equity incentive plan. Of these stock
options, 885,000 shares have been exercised, none have been repurchased and
728,500 shares remain outstanding.
(2) In March 1998, we issued an aggregate of 1,600,000 shares of common stock to
two purchasers at a purchase price of $0.001 per share for an aggregate
purchase price of $1,600.00.
(3) In October 1998, we issued 11,200,000 shares of Series A preferred stock to
a single purchaser at a purchase price of $1.00 per share for an aggregate
purchase price of $11,200,000.00.
(4) In April 1999, we issued an aggregate of 1,790,000 shares of common stock to
ten purchasers at a purchase price of $0.01 per share for an aggregate
purchase price of $17,900.00.
(5) In April 1999, we issued an aggregate of 4,800,000 shares of Series A-2
preferred stock to nine purchasers at a purchase price of $1.25 per share
for an aggregate purchase price of $6,000,000.00. We simultaneously issued
an aggregate of 1,835,000 shares of Series A-1 preferred stock to two
purchasers at a purchase price of $1.25 per share for an aggregate purchase
price of $2,293,750.00. Shares of Series A-1 and A-2 preferred stock are
convertible into shares of common stock at the rate of one share of common
stock for each share of Series A-1 and A-2 preferred stock owned.
(6) In August 1999, we issued an aggregate of 800,000 shares of Series A-2
preferred stock to two purchasers at a purchase price of $1.25 per share for
an aggregate purchase price of $1,000,000.00.
(7) In September 1999, we issued an aggregate of 400,000 shares of Series A-2
preferred stock to two purchasers at a purchase price of $1.25 per share for
an aggregate purchase price of $500,000.00.
(8) In January 2000, we issued an aggregate of 4,846,361 shares of Series B
preferred stock to 50 purchasers at a purchase price of $5.59 per share for
an aggregate purchase price of $27,091,157.99. Shares of Series B preferred
stock are convertible into shares of common stock at the rate of one share
of common stock for each share of Series B preferred stock owned.
(9) In January 2000, we issued 120,000 shares of Series B preferred stock to a
placement agent as partial consideration for services rendered.
The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of
Rule 701 of the Securities Act in that they were offered and sold either
pursuant to a written compensatory benefit plan or pursuant to a written
contract relating to compensation, as provided by Rule 701. The sales and
issuances of securities described in paragraphs (2) through (9) above were
deemed to be exempt from registration under the Securities Act by virtue of
Rule 4(2), Regulation D or Regulation S promulgated thereunder.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation of Registrant.
3.2** Amended and Restated Certificate of Incorporation of
Registrant to be effective upon the closing of the offering
made pursuant to this Registration Statement.
3.3** Bylaws of Registrant to be effective upon Registrant's
reincorporation in Delaware and upon the closing of the
offering made pursuant to this Registration Statement.
4.1** Specimen Common Stock Certificate.
4.2** Amended and Restated Investor Rights Agreement, dated
January 7, 2000, between Registrant and holders of the
Registrant's Series A-1 Preferred Stock, Series A-2
Preferred Stock and Series B Preferred Stock.
5.1 Opinion of Cooley Godward LLP.
10.1** Form of Indemnity Agreement.
10.2** 1999 Equity Incentive Plan and related documents.
10.3** 2000 Equity Incentive Plan and related documents.
10.4** 2000 Employee Stock Purchase Plan and related documents.
10.5 2000 Non-Employee Directors' Stock Option Plan and related
documents.
10.6** Lease Agreement, dated November 9, 1999, between Registrant
and American Heart Association, Western States Affiliate.
10.7** Employment Agreement, dated April 27, 1999, between
Registrant and W. Scott Harkonen.
10.8** Employment Offer Letter, dated October 28, 1999, between
Registrant and Timothy P. Lynch.
10.9** Employment Offer Letter, dated October 22, 1999, between
Registrant and Peter Van Vlasselaer.
10.10** Employment Offer Letter, dated December 19, 1999, between
Registrant and Christine Czarniecki.
10.11** Secured Loan Agreement, Secured Promissory Note, and
Security Agreement, dated July 1, 1999, between Registrant
and W. Scott Harkonen.
10.12+ Amended and Restated Exclusive Sublicense Agreement, dated
April 27, 1999, between Registrant and Connetics
Corporation.
10.13** Collaboration Agreement, dated April 27, 1999, between
Registrant and Connetics Corporation.
10.14+** Transition Agreement, dated April 27, 1999, between
Registrant and Connetics Corporation.
10.15** Amended and Restated Service Agreement, dated April 7, 1999,
between the Registrant and Connetics Corporation.
10.16+** Supply Agreement, dated May 5, 1998, between Registrant (as
successor in interest to Connetics Corporation by
assignment) and Genentech, Inc.
10.17+ Sponsored Research and License Agreement, dated January 1,
2000, between Registrant and Panorama Research, Inc.
10.18+ License Agreement, dated March 25, 1999, between Registrant
and MCW Research Foundation, Inc.
10.19+ Data Transfer, Clinical Trial, and Market Supply Agreement,
dated January 27, 1999, between the Registrant and
Boehringer Ingleheim.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
23.2* Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1** Power of Attorney. Reference is made to the signature page.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential treatment requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
** Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted because they are not applicable, or because the
information is included in the Financial Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities Act, the
information omitted from the form of this prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That for purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 15 of this
Registration Statement or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission this indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against these liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by a director, officer, or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether the
indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of
this issue.
(4) To provide to the Underwriters at the closing specified in the Underwriting
Agreement certificates in the denomination and registered in the names
required by the Underwriters to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Santa Clara, State of
California, on the 23rd day of March, 2000.
<TABLE>
<S> <C>
INTERMUNE PHARMACEUTICALS, INC.
By: /s/ TIMOTHY P. LYNCH
--------------------------------------------
Timothy P. Lynch
PRESIDENT AND CHIEF FINANCIAL OFFICER
</TABLE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
President and Chief
* Executive Officer and
------------------------------------------- Director (principal March 23, 2000
W. Scott Harkonen executive officer)
Vice President and Chief
/s/ TIMOTHY P. LYNCH Financial Officer
------------------------------------------- (principal financial and March 23, 2000
Timothy P. Lynch accounting officer)
*
------------------------------------------- Director March 23, 2000
James I. Healy
*
------------------------------------------- Director March 23, 2000
Edgar Engleman
*
------------------------------------------- Director March 23, 2000
John L. Higgins
*
------------------------------------------- Director March 23, 2000
Wayne Hockmeyer
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director March 23, 2000
Jonathan S. Leff
*
------------------------------------------- Director March 23, 2000
Nicholas J. Simon
</TABLE>
<TABLE>
<S> <C> <C> <C>
* /s/ TIMOTHY P. LYNCH
-----------------------------------------
Timothy P. Lynch
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation of Registrant, to be effective
upon Registrant's reincorporation in Delaware.
3.2** Amended and Restated Certificate of Incorporation of
Registrant to be effective upon the closing of the offering
made pursuant to this Registration Statement.
3.3** Bylaws of Registrant to be effective upon Registrant's
reincorporation in Delaware and upon the closing of the
offering made pursuant to this Registration Statement.
4.1** Specimen Common Stock Certificate.
4.2** Amended and Restated Investor Rights Agreement, dated
January 7, 2000, between Registrant and holders of the
Registrant's Series A-1 Preferred Stock, Series A-2
Preferred Stock and Series B Preferred Stock.
5.1 Opinion of Cooley Godward LLP.
10.1** Form of Indemnity Agreement.
10.2** 1999 Equity Incentive Plan and related documents.
10.3** 2000 Equity Incentive Plan and related documents.
10.4** 2000 Employee Stock Purchase Plan and related documents.
10.5 2000 Non-Employee Directors' Stock Option Plan and related
documents.
10.6** Lease Agreement, dated November 9, 1999, between Registrant
and American Heart Association, Western States Affiliate.
10.7** Employment Agreement, dated April 27, 1999, between
Registrant and W. Scott Harkonen.
10.8** Employment Offer Letter, dated October 28, 1999, between
Registrant and Timothy P. Lynch.
10.9** Employment Offer Letter, dated October 22, 1999, between
Registrant and Peter Van Vlasselaer.
10.10** Employment Offer Letter, dated December 19, 1999, between
Registrant and Christine Czarniecki.
10.11** Secured Loan Agreement, Secured Promissory Note, and
Security Agreement, dated July 1, 1999, between Registrant
and W. Scott Harkonen.
10.12+ Amended and Restated Exclusive Sublicense Agreement, dated
April 27, 1999, between Registrant and Connetics
Corporation.
10.13** Collaboration Agreement, dated April 27, 1999, between
Registrant and Connetics Corporation.
10.14+** Transition Agreement, dated April 27, 1999, between
Registrant and Connetics Corporation.
10.15** Amended and Restated Service Agreement, dated April 7, 1999,
between the Registrant and Connetics Corporation.
10.16+** Supply Agreement, dated May 5, 1998, between Registrant (as
successor in interest to Connetics Corporation by
assignment) and Genentech, Inc.
10.17+ Sponsored Research and License Agreement, dated January 1,
2000, between Registrant and Panorama Research, Inc.
10.18+ License Agreement, dated March 25, 1999, between Registrant
and MCW Research Foundation, Inc.
10.19+ Data Transfer, Clinical Trial and Market Supply Agreement,
dated January 27, 1999, between Registrant and Boehringer
Ingleheim.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1** Power of Attorney. Reference is made to the signature page.
27.1** Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential treatment requested with respect to certain portions of the
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
** Previously filed.
<PAGE>
EXHIBIT 5.1
[LOGO]
<TABLE>
<S> <C> <C>
ATTORNEYS AT LAW Boulder, CO
Five Palo Alto Square 303 546-4000
3000 El Camino Real
Palo Alto, CA Denver, CO
94306-2155 303 606-4800
Main 650 843-5000
Fax 650 849-7400 Kirkland, WA
425 893-7700
Menlo Park, CA
650 843-5100
March 23, 2000
Reston, VA
703 262-8000
www.cooley.com San Diego, CA
858 550-6000
San Francisco, CA
415 693-2000
InterMune Pharmaceuticals, Inc. MATTHEW W. SONSINI
1710 Gilbreth Street, Suite 301 650 843-5148
Palo Alto, CA 94301 [email protected]
</TABLE>
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by InterMune Pharmceuticals, Inc. (the "Company") of a
Registration Statement on Form S-1 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") covering an underwritten
public offering of up to six million three hundred twenty-five thousand
(6,325,000) shares of Common Stock (the "Common Stock").
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Articles of Incorporation and Bylaws, as currently in effect, and the
originals or copies certified to our satisfaction of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below; (ii) assumed
that the shares of Common Stock will be sold by the Underwriters at a price
established by the Pricing Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Common Stock, when sold and issued in accordance with the
Registration Statement and related Prospectus, will be validly issued, fully
paid and non-assessable.
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/_MATTHEW W. SONSINI__
Matthew W. Sonsini
<PAGE>
Exhibit 10.5
INTERMUNE PHARMACEUTICALS, INC.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED FEBRUARY 8, 2000
APPROVED BY STOCKHOLDERS _______________, 2000
EFFECTIVE DATE: _______________, 2000
1. Purposes.
(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "ANNUAL GRANT" means an Option granted annually to all Non-Employee
Directors who meet the criteria specified in subsection 6(b) of the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means InterMune Pharmaceuticals, Inc.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.
1.
<PAGE>
(h) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's service. For example, a change in status without interruption
from a Non-Employee Director of the Company to a Consultant of an Affiliate or
an Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(i) "DIRECTOR" means a member of the Board of Directors of the Company.
(j) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INITIAL GRANT" means an Option granted to a Non-Employee Director
who meets the criteria specified in subsection 6(a) of the Plan.
(o) "IPO DATE" means the effective date of the initial public offering
of the Common Stock.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.
2.
<PAGE>
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(u) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(v) "PLAN" means this InterMune Pharmaceuticals, Inc. 2000 Non-Employee
Directors' Stock Option Plan.
(w) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. Administration.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent
not specified in the Plan.
(ii) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in Section
(iv) To terminate or suspend the Plan as provided in Section
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company that are not in conflict with the provisions of the Plan.
3.
<PAGE>
(c) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate one hundred eighty
thousand (180,000) shares of Common Stock plus an annual increase to be added
each January 1, commencing with January 1, 2001, equal to one hundred eighty
thousand (180,000) shares of Common Stock. Notwithstanding the foregoing, the
Board may designate a smaller number of shares of Common Stock to be added to
the share reserve as of a particular January 1.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
The Options as set forth in section 6 automatically shall be granted
under the Plan to all Non-Employee Directors.
6. Non-Discretionary Grants.
(a) INITIAL GRANTS. Without any further action of the Board, each
person who is a Non-Employee Director on the IPO Date, or is elected or
appointed for the first time to be a Non-Employee Director after the IPO
Date, and who has not already been granted a stock option by the Company,
automatically shall, upon the later of the IPO Date or the date of such
person's initial election or appointment to be a Non-Employee Director by the
Board or the Company's stockholders, be granted a grant to purchase thirty
thousand (30,000) shares of Common Stock (an "Initial Grant") and a grant to
purchase ten thousand (10,000) shares of Common Stock (an "Annual Grant") on
the terms and conditions set forth herein. The term "Annual Grant" shall also
include 10,000 share option grants that a Non-Employee director received
independent of an Initial Grant.
(b) ANNUAL GRANTS. Without any further action of the Board, a
Non-Employee Director who is still a Non-Employee Director on the date his
or her Annual Grant fully vests shall automatically be granted another
Annual Grant.
4.
<PAGE>
7. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) EXERCISE PRICE. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of the following methods:
(i) By cash or check.
(ii) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, by delivery of
already-owned shares of Common Stock either that the Optionholder has held for
the period required to avoid a charge to the Company's reported earnings
(generally six months) or that the Optionholder did not acquire, directly or
indirectly from the Company, that are owned free and clear of any liens, claims,
encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise. "Delivery" for these purposes shall include delivery to
the Company of the Optionholder's attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
the Optionholder may not exercise the Option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
(iii) Provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in THE WALL STREET JOURNAL, pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt
of cash (or check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales proceeds.
(d) TRANSFERABILITY. An Option is transferable by will or by the laws
of descent and distribution. An Option also is transferable (i) by instrument to
an inter vivos or testamentary trust, in a form accepted by the Company, in
which the Option is to be passed to beneficiaries upon the death of the trustor
(settlor) and (ii) by gift, in a form accepted by the Company, to a member of
the "immediate family" of the Optionholder as that term is defined in the
general
5.
<PAGE>
instructions to Form S-8 (promulgated under the Securities Act). An Option
shall be exercisable during the lifetime of the Optionholder only by the
Optionholder and a permitted transferee as provided herein. However, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e) EXERCISE SCHEDULE. An Option shall be exercisable only for whole
shares and then only as the shares of Common Stock subject to the Option vest.
(f) VESTING SCHEDULE. Options shall vest as follows:
(i) An Initial Grant shall vest in consecutive monthly
installments at a rate of one thirty-sixth (1/36th) of the total number of
shares subject to such Option. The first such installment shall vest one month
from the date of grant of such Option and shall continue until such Option has
fully vested, provided however, that vesting shall cease on termination of the
Optionholder's Continuous Service.
(ii) An Annual Grant shall vest in consecutive monthly
installments at a rate of one twelfth (1/12th) of the total number of
shares subject to such Option. The first such installment shall vest one month
from the date of grant of such Option and shall continue until such Option has
fully vested, provided however, that vesting shall cease on termination of the
Optionholder's Continuous Service.
(g) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than due to the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date that is
three (3) months after the date of such termination, or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(h) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates due to the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date that is twelve (12) months
after the date of such termination, or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(i) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the
6.
<PAGE>
earlier of (1) the date that is eighteen (18) months following the date of
death or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the
time specified herein, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. If exercise of the Option following
the termination of the Optionholder's Continuous Service would be prohibited at
any time solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of: (i) the expiration of the term of the Option set forth in subsection
7(a), or (ii) the expiration of the applicable period of time after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.
8. Covenants of the Company.
(a) AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Options unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. Miscellaneous.
(a) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.
(b) NO SERVICE RIGHTS. Nothing in the Plan or any instrument executed
or Option granted pursuant thereto shall confer upon any Optionholder any right
to continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
7.
<PAGE>
(c) INVESTMENT ASSURANCES. The Company may require an Optionholder, as
a condition of exercising or acquiring stock under any Option, (i) to give
written assurances satisfactory to the Company as to the Optionholder's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon the
exercise or acquisition of stock under the Option has been registered under a
then currently effective registration statement under the Securities Act or (iv)
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(d) WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. Adjustments upon Changes in Stock.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 5, and in the classes and maximum number of securities added to the
Plan each January 1 pursuant to subsection 4(a), and the outstanding Options
will be appropriately adjusted in the class(es) and number of securities and
price per share of stock subject to such outstanding Options. The Board shall
make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
8.
<PAGE>
(b) DISSOLUTION OR LIQUIDATION. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate
immediately prior to such event.
(c) CHANGE IN CONTROL. In the event of (i) a sale, lease or other
disposition of all or substantially all of the securities or assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then any surviving
corporation or acquiring corporation may assume any Options outstanding under
the Plan or may substitute similar Options (including an option to acquire the
same consideration paid to the stockholders in the transaction described in this
subsection 11(c)) for those outstanding under the Plan, and the vesting of
Options held by Non-Employee Directors shall accelerate in full on the date
immediately preceding the date of such event. In the event no surviving
corporation or acquiring corporation assumes such Options or substitutes similar
Options for those outstanding under the Plan, then with respect to Options held
by Optionholders whose Continuous Service has not terminated, the vesting of
such Options (and the time during which such Options may be exercised) shall
accelerate in full on the date immediately preceding the date of such event, and
the Options shall terminate if not exercised at or prior to such event. With
respect to any other Options outstanding under the Plan, such Options shall
terminate if not exercised prior to such event.
12. Amendment of the Plan and Options.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(c) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
No Options may be granted under the Plan while the Plan is suspended or after it
is terminated.
9.
<PAGE>
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
15. Choice of Law.
All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of Delaware, without
regard to such state's conflict of laws rules.
10.
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION
(ANNUAL GRANT)
[NAME], Optionholder:
INTERMUNE PHARMACEUTICALS, INC. (the "Company"), pursuant to its 2000
Non-Employee Directors' Stock Option Plan (the "Plan") has on _______________,
20___ granted to you, the optionholder named above, an option to purchase shares
of the common stock of the Company ("Common Stock").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
Non-Employee Directors (as defined in the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
ten thousand (10,000). Subject to the limitations contained herein, this option
shall be exercisable in accordance with the Plan.
2. The exercise price of this option is ____________________
($__________) per share, being the Fair Market Value (as defined in the Plan) of
the Common Stock on the date of grant of this option.
3. This option may be exercised, to the extent specified in the Plan,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require. This
option may not be exercised for any number of shares that would require the
issuance of anything other than whole shares.
4. By exercising this option you agree that the Company may require you
to enter an arrangement providing for the cash payment by you to the Company of
any tax withholding obligation of the Company arising by reason of the exercise
of this option or the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise.
5. Any notices provided for in this option or the Plan shall be given
in writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
1.
<PAGE>
6. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 7 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the __________ day of ____, 20___.
Very truly yours,
INTERMUNE PHARMACEUTICALS, INC.
By:
--------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
2000 Non-Employee Directors' Stock Option Plan
2.
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan;
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionholder and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:
NONE
----------------------------------------
(Initial)
OTHER
----------------------------------------
----------------------------------------
----------------------------------------
---------------------------------------
OPTIONHOLDER
---------------------------------------
Address
---------------------------------------
---------------------------------------
3.
<PAGE>
INTERMUNE PHARMACEUTICALS, INC.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION
(INITIAL GRANT)
[NAME], Optionholder:
INTERMUNE PHARMACEUTICALS, INC. (the "Company"), pursuant to its 2000
Non-Employee Directors' Stock Option Plan (the "Plan") has on _______________,
20___ granted to you, the optionholder named above, an option to purchase shares
of the common stock of the Company ("Common Stock").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
Non-Employee Directors (as defined in the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
thirty thousand (30,000). Subject to the limitations contained herein, this
option shall be exercisable in accordance with the Plan.
2. The exercise price of this option is ____________________
($__________) per share, being the Fair Market Value (as defined in the Plan) of
the Common Stock on the date of grant of this option.
3. This option may be exercised, to the extent specified in the Plan,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require. This
option may not be exercised for any number of shares that would require the
issuance of anything other than whole shares.
4. By exercising this option you agree that the Company may require you
to enter an arrangement providing for the cash payment by you to the Company of
any tax withholding obligation of the Company arising by reason of the exercise
of this option or the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise.
5. Any notices provided for in this option or the Plan shall be given
in writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
1.
<PAGE>
6. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 7 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the __________ day of ____, 20___.
Very truly yours,
INTERMUNE PHARMACEUTICALS, INC.
By:
-------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
2000 Non-Employee Directors' Stock Option Plan
2.
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan;
(b) Acknowledges that as of the date of grant of this option,
it sets forth the entire understanding between the undersigned optionholder and
the Company and its affiliates regarding the acquisition of stock in the Company
and supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:
NONE
----------------------------------------
(Initial)
OTHER
----------------------------------------
----------------------------------------
----------------------------------------
--------------------------------------
OPTIONHOLDER
--------------------------------------
Address
--------------------------------------
--------------------------------------
3.
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.12
AMENDED AND RESTATED EXCLUSIVE SUBLICENSE AGREEMENT
BY AND BETWEEN
INTERMUNE PHARMACEUTICALS, INC.
AND
CONNETICS CORPORATION
APRIL 27, 1999
<PAGE>
AMENDED AND RESTATED EXCLUSIVE SUBLICENSE AGREEMENT
THIS AMENDED AND RESTATED EXCLUSIVE SUBLICENSE AGREEMENT (the
"Agreement") is made and entered into as of April 27, 1999 (the "Effective
Date") by and between CONNETICS CORPORATION, a Delaware corporation with a
principal place of business at 3400 West Bayshore Road, Palo Alto, CA 94303
("Connetics"), and INTERMUNE PHARMACEUTICALS, INC., a California corporation
with a principal place of business at 3294 West Bayshore Road, Palo Alto, CA
94303 ("InterMune"). InterMune and Connetics may be referred to herein as a
"Party" or, collectively, as the "Parties."
RECITALS
A. WHEREAS, InterMune is a corporation formed for the purpose of research
and development of biopharmaceutical products for the treatment of infectious
and autoimmune diseases; and
B. WHEREAS, Connetics has licensed the rights to certain immunology-based
products and to the technology relating thereto from Genentech, Inc.
("Genentech") pursuant to that certain License Agreement for Interferon Gamma by
and between Connetics and Genentech dated May 5, 1998 (the "Genentech License");
and
C. WHEREAS, InterMune and Connetics have entered into that certain Exclusive
Sublicense Agreement dated August 21, 1998 (the "Original Agreement") pursuant
to which (a) Connetics granted an exclusive sublicense to InterMune under the
Genentech License to develop, make, have made, import, offer for sale and sell
therapeutic products containing or derived from such immunology-based products
and technology for use for certain specific indications, and (b) InterMune
granted to Connetics the exclusive option to practice such sublicensed rights in
the dermatology field;
D. WHEREAS, Connetics and Genentech have amended the Genentech License
through Amendment No. 1 to License Agreement effective December 28, 1998,
Amendment No. 2 to License Agreement effective January 15, 1999 and Amendment
No. 3 to the License Agreement effective April 27, 1999, pursuant to which
Connetics acquired from Genentech certain additional rights to the
aforementioned immunology-based products and technology, with the intent of
sublicensing such additional rights to InterMune;
E. WHEREAS, Connetics is participating in that certain financing transaction
for InterMune Series A Preferred Shares (the "Series A Transaction") and, as
partial consideration to Connetics for its participation in the Series A
Transaction, InterMune has agreed to pay to Connetics, (i) pursuant to that
certain Collaboration Agreement between the Parties effective as of even date
herewith (the "Collaboration Agreement"), five hundred thousand dollars
($500,000) on the effective date of the Collaboration Agreement and five hundred
thousand dollars ($500,000) on March 31, 2001, and (ii) pursuant to this
Agreement, a milestone payment of one million five hundred thousand dollars
($1,500,000) as further described herein;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
F. WHEREAS, as further consideration to Connetics for its participation in
the Series A Transaction, InterMune has agreed to issue to Connetics pursuant to
the Collaboration Agreement, (i) nine hundred sixty thousand (960,000) shares of
Series A-1 Preferred Stock, (ii) shares of Series B Preferred Stock of an
aggregate value of five hundred thousand dollars ($500,000), and (iii) shares of
Series C Preferred Stock of an aggregate value of one million dollars
($1,000,000); and
G. WHEREAS, InterMune and Connetics now desire to replace and supersede the
Original Agreement with this Agreement;
NOW, THEREFORE, the Parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" means any company or entity controlled by, controlling or
under common control with a Party. As used in this Section, "control"
means (a) that an entity or company owns, directly or indirectly, fifty
percent (50%) or more of the voting stock of another entity, or (b) that
an entity, person or group has the actual ability to control and direct
the management of the entity, whether by contract or otherwise, but
excluding, for all purposes of this Agreement, Connetics, as to
InterMune, and InterMune, as to Connetics.
1.2 "AMENDMENT NO. 3" means that certain Amendment No. Three to License
Agreement entered into between Connetics and Genentech effective April
27, 1999. For clarity, the phrase "as amended by Amendment No. 3" as used
herein is intended only for ease of reference and not as a limitation.
1.3 "BEST EFFORTS" means every necessary and prudent effort of a Party
applied in a prompt, commercially reasonable manner, to the maximum
extent reasonably allowed by such Party's available financial resources,
taking into account all of such Party's business commitments for such
financial resources.
1.4 "BLA" means a Biologics License Application.
1.5 "CONNETICS KNOW-HOW" means all Know-How in the areas of quality
assurance/ quality control (QA/QC), pharmaceutical science, process
development or regulatory affairs that (a) is Controlled by Connetics
during the term of this Agreement, and (b) is necessary or useful to the
discovery, development, use or manufacture of Products, but excluding all
Know-How that is part of the Genentech License Rights.
1.6 "CONTROLLED" means with respect to any material, Know-How or intellectual
property right, that the Party owns or has a license to such material,
Know-How or intellectual property right and has the ability to grant
access, a license, or a sublicense to such material, Know-How or
intellectual property right to the other Party as provided for herein
without violating an agreement with a Third Party as of the time the
Party would be first required hereunder to grant the other Party such
access, license or sublicense.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.7 "DERMATOLOGY FIELD" means the administration to humans of therapeutic
products for the treatment, prevention or diagnosis of any dermatological
disease or condition, including, without limitation, atopic dermatitis,
keloids/hypertrophic scars, pustular psoriasis and scleroderma, but
excluding (i) any cancer disease or condition, (ii) any infectious
disease or condition, and (iii) any indication outside of the IG Field.
1.8 "DERMATOLOGY SUBLICENSEE" means a Third Party to which Connetics has
granted a sublicense under the sublicense rights granted by InterMune to
Connetics pursuant to Section 4.1.
1.9 "FDA" means the U.S. Food and Drug Administration, or any successor
agency.
1.10 "GENE THERAPY" means the therapeutic or prophylactic treatment of a human
being with: (a) one or more oligonucleotides or nucleotide sequences, in
native form or chemically modified, which are introduced into the body in
free form, bound to a carrier molecule, contained in any molecular
vesicle (e.g. a liposome), incorporated into or attached to a vector of
any type, contained in any cellular construct and/or contained in any
mechanical device or (b) cells which have been manipulated EX VIVO using
one or more oligonucleotides or nucleotide sequences.
1.11 "GENE THERAPY FIELD" means the administration to humans of Licensed Gene
Product for Gene Therapy for the treatment or prevention of any human
disease or condition, provided however, that "Gene Therapy Field" shall
not include any treatment or prevention of any type of cardiac or
cardiovascular disease or condition.
1.12 "GENENTECH" means Genentech, Inc., a Delaware corporation with its
principal office at 1 DNA Way, South San Francisco, CA 94080.
1.13 "GENENTECH LICENSE" means the License Agreement for Interferon Gamma
between Genentech and Connetics dated May 4, 1998, as amended by
Amendment No. 1 to License Agreement effective December 28, 1998,
Amendment No. 2 to License Agreement effective January 15, 1999, and
Amendment No. 3, all of which are attached hereto as Exhibit 1.13.
1.14 "GENENTECH LICENSE RIGHTS" means all rights under Patents, Know-How and
trademarks granted to Connetics by Genentech under the Genentech License,
but only to the extent the Genentech License permits the practice of such
rights for the uses set forth in Article 3 herein. "Genentech License
Rights" shall not include any Third Party Product Rights.
1.15 "GENENTECH PATENTS" means all the Patent rights which are granted to
Connetics under the Genentech License.
1.16 "GENENTECH SUPPLY AGREEMENT" means the Supply Agreement entered into
between Genentech and Connetics dated May 4, 1998, a copy of which is
attached hereto as Exhibit 1.16.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.17 "IG FIELD" means the administration to humans of Licensed Protein Product
for the treatment or prevention of any human disease or condition,
provided however, that "IG Field" shall not include: (i) the
administration to humans of Licensed Protein Product for the treatment or
prevention of any type of arthritis or cardiac or cardiovascular disease
or condition or (ii) use of Licensed Protein Product for Gene Therapy.
1.18 "INTERFERON GAMMA" OR "IG" means the polypeptide described as "Interferon
Gamma" in Section 1.20 of the Genentech License.
1.19 "INTERMUNE NET SALES" means "Net Sales" of Licensed Protein Products in
the Territory for use in the IG Field by InterMune and its sublicensees
hereunder other than Connetics and its Affiliates and Dermatology
Sublicensees.
1.20 "KNOW-HOW" means all information, data, know-how, trade secrets,
inventions, developments, results, techniques and materials, whether or
not patentable.
1.21 "LICENSED PRODUCT," "LICENSED GENE PRODUCT" AND "LICENSED PROTEIN
PRODUCT" shall each have the same meaning as defined in Section 1.22 of
the Genentech License (as amended by Amendment No. 3).
1.22 "LICENSED TECHNOLOGY" means the Genentech License Rights and the
Connetics Know-How.
1.23 "NET SALES" means "Net Sales" (as defined in Section 1.25 of the
Genentech License) of Licensed Protein Products in the Territory for use
in the IG Field by InterMune and any of its sublicensees hereunder.
1.24 "PATENTS" means any and all issued or pending patents and patent
applications, both foreign and domestic, and including without limitation
(a) all divisionals, continuations and continuations-in-part of any such
applications, (b) any patents that issue from any of the foregoing, and
(c) all substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates with respect to any
of the foregoing issued patents.
1.25 "TERRITORY" means the United States and Japan.
1.26 "THIRD PARTY" means any party besides the Parties and their respective
Affiliates.
1.27 "THIRD PARTY PRODUCT RIGHTS" shall have the meaning set forth in Section
1.37 of the Genentech License (as amended by Amendment No. 3).
1.28 "UNITED STATES" means the United States and its territories and
possessions.
2. ORIGINAL AGREEMENT SUPERSEDED
The Parties agree that the Original Agreement is hereby replaced and
superseded in all respects by this Agreement as of the Effective Date.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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3. LICENSES AND COVENANTS
3.1 GENENTECH LICENSE RIGHTS.
(a) Connetics hereby grants to InterMune the exclusive sublicense, even as to
Connetics, under the Genentech License Rights to develop, use, sell,
offer for sale, import, make and have made:
(i) Licensed Protein Products in the IG Field in the Territory, subject to
any rights Connetics obtains under Section 4.1 below, and
(ii) Licensed Gene Products in the Gene Therapy Field in the United States.
(b) InterMune may sublicense any or all the foregoing rights to the extent
that Connetics is permitted to do so under the Genentech License.
3.2 THIRD PARTY PRODUCT RIGHTS.
(a) Connetics hereby grants to InterMune the exclusive sublicense, even as to
Connetics, under any Third Party Product Rights Connetics acquires in
Japan pursuant to Section 2.1(g)(iii) of the Genentech License (as
amended by Amendment No. 3), which sublicense may be further sublicensed
by InterMune to the extent that Connetics is permitted to do so under the
Genentech License.
(b) Connetics hereby assigns to InterMune its entire right, title and
interest to Connetics' rights of negotiation to Third Party Product
Rights pursuant to Section 2.1(h) of the Genentech License (as amended by
Amendment No. 3). In the event that Genentech notifies Connetics of the
availability of any such Third Party Product Rights, Connetics shall
promptly notify InterMune thereof.
3.3 CONNETICS KNOW-HOW. Connetics hereby grants to InterMune a non-exclusive
license under the Connetics Know-How to develop, use, make, have made,
import, offer for sale and sell (a) Licensed Products in the Territory,
and (b) any products covered by Third Party Patent Rights to which
Connetics or InterMune acquires rights under the Genentech License in the
applicable territory.
3.4 GENENTECH SUPPLY AGREEMENT. Connetics hereby assigns to InterMune its
entire right, title and interest under the Genentech Supply Agreement and
agrees to notify Genentech of such assignment in accordance with Section
5.4 thereof. As of the Effective Date, InterMune shall be deemed to be the
successor in interest of Connetics under the Genentech Supply Agreement and
shall assume all obligations and be entitled to all rights of Connetics
under such agreement. InterMune hereby covenants that it shall maintain the
Genentech Supply Agreement effective and in good standing. To the extent
Connetics exercises its option pursuant to Section 4.1 below, InterMune
shall procure for and supply to Connetics (and its Dermatology
Sublicensees, if any) its requirements for Bulk Product and Finished
Product (as such terms are defined in the Genentech Supply Agreement) for
use in the Dermatology
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Field from Genentech pursuant to the Genentech Supply Agreement or from
any Third Party manufacturer(s) contracted by InterMune to manufacture
Finished Product and Bulk Product, provided that Connetics shall pay to
InterMune InterMune's cost, without markup, for procuring and supplying
such Finished Product and Bulk Product to Connetics.
3.5 TRANSFER OF DATA AND MATERIALS. Promptly following the Effective Date,
Connetics and InterMune shall work cooperatively together to transfer to
InterMune all documents or materials in Connetics' possession comprising
or containing the Licensed Technology, including without limitation,
biological and chemical materials, regulatory filings, and data, and
Connetics shall transfer any and all additions or improvements to the
Licensed Technology to InterMune as soon as is reasonably practicable
after the creation, development or acquisition of such addition or
improvements.
3.6 CONNETICS COVENANT. Connetics hereby covenants that it shall maintain the
Genentech License effective and in good standing subject to InterMune's
performance under Section 3.7 below.
3.7 INTERMUNE PERFORMANCE UNDER GENENTECH LICENSE.
(a) InterMune shall perform in lieu and instead of Connetics in carrying out
the rights and obligations of Connetics under the Genentech License to
the extent permitted in Section 2.3(c) of the Genentech License
(including without limitation the insurance obligations set forth in
Section 10.4 of the License Agreement (as amended by Amendment No. 3)),
and except as set forth in Article 4 below. Connetics agrees to use
commercially reasonable diligent efforts to cooperate with InterMune to
enable it to exercise such rights and to perform such obligations
thereunder.
(b) In the event that InterMune reasonably anticipates that it is likely to
materially default under any obligation under the Genentech License that
it is obligated to perform pursuant to subsection (a) above, InterMune
shall notify Connetics as promptly as reasonably practicable of such
default. At Connetics' request, InterMune shall cooperate fully with
Connetics in order to prevent, mitigate or cure such default.
4. OPTION TO DERMATOLOGY RIGHTS
4.1 OPTION GRANT. InterMune hereby grants to Connetics the exclusive option
to obtain the exclusive sublicense under the Genentech License Rights to
develop, use, make, have made, import, offer for sale and sell Licensed
Protein Products for use solely in the Dermatology Field in the United
States, subject to Genentech's rights under the Genentech License.
Connetics may exercise such option at any time prior to the fifth
anniversary of the Effective Date by providing InterMune written notice
of its desire to exercise such option. Upon InterMune's receipt of such
notice, InterMune shall be deemed to have granted to Connetics the
exclusive, royalty-free (with respect to InterMune only), sublicense
under the Genentech License Rights to use, make, have made, import, offer
for sale and sell Licensed Protein Products in the Dermatology Field in
the United States for the term of this Agreement, subject to the terms of
the Genentech License, and Connetics shall undertake all obligations
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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under the Genentech License relating to its development and
commercialization of Licensed Protein Products in the Dermatology Field
in the United States, including without limitation those obligations
described in Sections 4.2 and 4.4 below. Such sublicense shall be further
sublicenseable by Connetics to the extent permitted by the Genentech
License. If not exercised by the fifth anniversary of the Effective Date,
the option granted in this Section 4.1 shall expire.
4.2 PAYMENTS AND OTHER OBLIGATIONS UNDER GENENTECH LICENSE. If Connetics
exercises such option as set forth in Section 4.1 above:
(i) In the event that Connetics or a Dermatology Sublicensee achieves one of
the milestones set forth in Sections 8.2(a) or (b) of the Genentech
License with respect to its Licensed Protein Product, Connetics or such
Dermatology Sublicensee shall inform InterMune thereof and provide such
milestone payment due under the Genentech License to InterMune, and
InterMune agrees to render such payment to Genentech on behalf of
Connetics.
(ii) In the event that milestone payments to Genentech as set forth in
Sections 8.1 (c) and (d) of the Genentech License are triggered by the
sale of Licensed Protein Product by both Connetics and InterMune (and/or
their sublicensees) in the Territory, the Parties shall promptly meet and
in good faith determine a fair apportionment between the Parties of the
payment to be made to Genentech for such milestone based upon the
relative Net Sales of each Party for such calendar year or other agreed
upon method of apportionment. Connetics shall then submit to InterMune
its portion of such milestone payment in accordance with the terms of the
Genentech License, and InterMune agrees to render such payment to
Genentech on behalf of Connetics.
(b) ROYALTIES. Connetics shall be responsible for making all payments due (i)
to Genentech under Section 8.3 of the Genentech License, and (ii) to
Genentech or any other Third Party under Section 8.4 of the Genentech
License, in each case on Net Sales of Licensed Protein Products by
Connetics, its Affiliates and its Dermatology Sublicensees, in accordance
with the Genentech License.
(c) DEFAULT. In the event that Connetics reasonably anticipates that it is
likely to materially default under any obligation under the Genentech
License that it is obligated to perform under Section 4.1, including
without limitation the obligations described in subsections (a) and (b)
above, Connetics shall notify InterMune as promptly as reasonably
practicable of the nature of such default. At InterMune's request,
Connetics shall cooperate fully with InterMune in order to prevent,
mitigate or cure such default.
4.3 OFF-LABEL SALES. If Connetics exercises the option set forth in Section
4.1 then:
(a) Each Party agrees and shall require its sublicensees, if any, to use
commercially reasonable efforts to formulate all Licensed Protein
Products developed by such Party or sublicensee thereof in a manner to
reduce, to the extent reasonably practicable, the possibility that such
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Licensed Protein Product can be used in the other Party's field of use as
provided hereunder. If a Party cannot so formulate a particular Licensed
Protein Product, then such Party agrees to use its Best Efforts to
prevent sales of such Licensed Protein Product for use in the other
Party's field of use, including without limitation instructing its sales
forces, and requiring all sublicensees to instruct their sales forces,
that such Licensed Protein Product is not to be promoted, marketed or
sold for use in the other Party's field of use.
(b) In the event that either Party determines that a Licensed Protein Product
is being used in a field of use other than for which it was intended,
such Party shall immediately inform the other Party. The Parties shall
then promptly meet and diligently and in good faith determine a fair and
reasonable mechanism for equitable allocation of the sales of such
Licensed Protein Product that are used outside the field of use for which
they are intended.
4.4 PATENT COSTS. If Connetics exercises the option set forth in Section 4.1,
then Connetics agrees to reimburse InterMune all costs paid by InterMune
to Genentech under Section 5.2 of the Genentech License which relate to
any patent or patent application the claims of which: (a) are
specifically directed to a Licensed Protein Product for use in the
Dermatology Field and (b) do not relate to a Licensed Protein Product for
use in any area of the IG Field other than the Dermatology Field.
4.5 MILESTONE PAYMENTS. If Connetics exercises its options under Section 4.1,
then Connetics shall make the following cash milestone payments to
InterMune:
(a) One million two hundred thousand dollars ($1,200,000) within thirty (30)
days following the date on which the first NDA or BLA for a
Licensed Protein Product is filed with the FDA by Connetics for an
indication in the Dermatology Field.
(b) Two million dollars ($2,000,000) within thirty (30) days following
the date Connetics receives FDA clearance for each new indication
in the Dermatology Field of a Licensed Protein Product for commercial
sale in the United States.
4.6 DERMATOLOGICAL INDICATIONS OUTSIDE OF THE DERMATOLOGY FIELD.
(a) It is the intention of the Parties that Connetics shall be InterMune's
preferred marketing partner for sales of Licensed Protein Product to
dermatologists in the United States during the term of this Agreement.
Therefore, during the term of this Agreement, if either Party desires to
sell Licensed Protein Product to dermatologists in the United States for
use for indications that are outside of the Dermatology Field but within
the IG Field (an "Outside Indication"), the provisions of this Section
4.6 shall apply.
(b) In the event that either Party desires to sell a Licensed Protein Product
for an Outside Indication to dermatologists in the United States during
the term of this Agreement, such Party shall give the other Party written
notice of such interest, which notice shall specify the indication of
interest. If InterMune notifies Connetics that InterMune itself desires
to sell such Licensed Protein Product for an Outside Indication directly
to dermatologists in the United States, then the procedures of subsection
(d) shall apply. Otherwise, for ninety (90)
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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days following receipt of such notice, the Parties shall exclusively
negotiate in good faith for the reasonable commercial terms under which
Connetics shall exclusively sell such Licensed Protein Product for such
Outside Indication to dermatologists in the United States. In the event
that, at the end of such ninety (90) day period, the Parties have failed
to enter into a written agreement on such commercially reasonable terms,
Connetics' rights with respect to the sale of such Licensed Protein
Product for such Outside Indication shall terminate and InterMune shall
have no further obligations to Connetics under this Section 4.6 with
respect to such Licensed Protein Product for such Outside Indication
except as set forth is subsections (c) and (d) below.
(c) If the Parties have failed to enter into an agreement by the end of such
ninety (90) day period, as described in subsection (b) above, InterMune
shall then have the right during the following one hundred eighty (180)
day period to enter into an agreement with a Third Party for the sale to
dermatologists of such Licensed Protein Product for such Outside
Indication on economic terms that, taken as a whole, are substantially
the same as, or more favorable to InterMune than, those last offered in
writing by Connetics for such rights pursuant to subsection (b) above. If
at the end of such one hundred eighty (180) day period InterMune has not
entered into an agreement with a Third Party to sell such Licensed
Protein Product for such Outside Indication to dermatologists in the
United States, then the procedures set forth in subsection (b) above
shall again apply, provided that InterMune may proceed alternatively
under subsection (d) below.
(d) If InterMune itself desires to sell such Licensed Protein Product to
dermatologists in the United States for Outside Indications, then upon
written notice from InterMune, Connetics and InterMune shall enter into
good faith negotiations, for a period of ninety (90) days from Connetics'
receipt of such notice, for the reasonable commercial terms upon which
InterMune shall grant to Connetics the rights to co-promote such Licensed
Protein Product for such Outside Indication to dermatologists in the
United States. InterMune agrees that it shall not unreasonably withhold
its agreement to such commercially reasonable terms. In the event that,
at the end of such ninety (90) day period, the Parties have failed to
enter into a written agreement for such co-promotion rights, InterMune
shall have no further obligations to Connetics under this Section 4.6
with respect to such Licensed Protein Product for such Outside
Indication, PROVIDED THAT InterMune may not enter into an agreement with
a Third Party for the rights to co-promote Licensed Protein Product for
such Outside Indication to dermatologists in the United States on
economic terms that, taken as a whole, are less favorable to InterMune
than those last offered in writing by Connetics for such rights. In the
event that InterMune does not enter into such a co-promotion agreement
with a third party and instead solely promotes and sells such Licensed
Protein Product for such Outside Indication to dermatologists in the
United States itself, if at any time following such sole promotion and
sale InterMune determines in its sole discretion that it desires to grant
a license to the rights to promote and sell the rights to co-promote such
Licensed Protein Product for such Outside Indication to dermatologists in
the United States to another party (other than an Affiliate), then the
procedures set forth in subsection (b) above shall apply.
5. CONSIDERATION
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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5.1 ROYALTIES.
(a) Beginning on January 1, 2002, InterMune shall pay to Connetics a royalty
of one-quarter of one percent (0.25%) of InterMune Net Sales in the
United States. InterMune shall continue to pay such royalties to
Connetics until such time as the cumulative InterMune Net Sales in United
States, beginning on January 1, 2000, are equal to one billion dollars
($1,000,000,000). Thereafter, InterMune shall pay to Connetics a royalty
of one-half of one percent (0.5%) in the United States for the
remainder of the term of the Agreement.
(b) All royalties due under this Section 5.1 shall be due and payable
quarterly within thirty (30) days following the last day of each quarter
in which royalties are incurred beginning with first calendar quarter of
2002.
5.2 MILESTONE PAYMENT. InterMune shall pay to Connetics a milestone payment
of one million five hundred thousand dollars ($1,500,000), as follows
(the "Milestone Payment"), payable in a lump sum or in installments based
on the level of InterMune Net Sales as follows:
(a) If annualized InterMune Net Sales in the United States for 2001, based on
InterMune Net Sales in the United States for the third and fourth
calendar quarters of 2001, ("2001 Net Sales") are equal to or greater
than [ * ], then on March 31, 2002, InterMune shall, at its election,
either (i) pay the full Milestone Payment to Connetics, or (ii) pay to
Connetics [ * ] of the Milestone Payment and furnish to Connetics a
promissory note for the balance of the Milestone Payment, which
promissory note shall provide for three (3) principal payments to
Connetics of [ * ] each due upon June 30, 2002, September 30, 2002 and
December 31, 2002, respectively.
(b) If 2001 Net Sales are equal to or greater than [ * ] but less than [ * ],
then on March 31, 2002, InterMune shall pay to Connetics [ * ] of the
Milestone Payment, and furnish to Connetics a promissory note for the
balance of the Milestone Payment (the "Remaining Payment"), which
promissory note shall provide for full payment of the balance of such
note to Connetics on the earlier to occur of (i) March 31, 2004, or (ii)
the last day of the month following the consecutive twelve (12) month
period that InterMune Net Sales in the United States are equal to or
greater than [ * ], subject to subsection (d) below.
(c) If 2001 Net Sales are less than [ * ], then on March 31, 2002, InterMune
shall pay to Connetics a portion of the Milestone Payment equal to [ * ]
multiplied by a fraction, the numerator of which is 2001 Net Sales and
the denominator of which is [ * ]. InterMune shall furnish to Connetics a
promissory note for the balance of the Milestone Payment (the "Remaining
Payment"), which promissory note shall provide for full payment of the
balance of such note to Connetics on the earlier to occur of (i) March
31, 2004, or (ii) the last day of the month following the consecutive
twelve (12) month period that InterMune Net Sales in the United States
are equal to or greater than [ * ], subject to subsection (d) below.
(d) With respect to the promissory note for the Remaining Payment described
in subsection (b) or (c) above, if InterMune is to pay the balance of
such note on March 31, 2004, and
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InterMune Net Sales in the United States for the twelve (12) month period
preceding March 31, 2004 are equal to or greater than [ * ] but less than
[ * ], then:
(i) InterMune may, at its election, pay fifty percent (50%) of the Remaining
Payment either in cash or in Preferred Shares of InterMune stock at the
fair market value of such shares, determined as the average closing price
of such shares over the previous thirty (30) day period; and
(ii) With respect to the other fifty percent (50%) of the Remaining Payment,
Connetics may, at its election, receive such fifty percent either in
cash or in Preferred Shares of InterMune stock at the fair market value
of such shares, determined as the average closing price of such shares
over the previous thirty (30) day period, provided that Connetics shall
notify InterMune of its election in writing at least thirty (30) days
prior to the date that such payment is due; and
(e) With respect to the Remaining Payment described in subsection (b) or (c)
above, if InterMune is to pay the balance of such note on March 31, 2004,
and InterMune Net Sales in the United States for the twelve (12) month
period preceding March 31, 2004 are less than [ * ], then InterMune may,
at its election, either:
(1) Pay such Remaining Payment in cash or in Preferred Shares of InterMune
stock at the fair market value of such shares, determined as the average
closing price of such shares over the previous thirty (30) day period; or
(2) Grant to Connetics the license to the Accounting and Revenue Rights to
CGD Units (as defined below), on commercially reasonable terms to be
agreed upon by the Parties, in which event InterMune shall thereafter
have no further obligation to Connetics with respect to such Remaining
Payment. Such license shall be fully paid-up solely with respect to
InterMune but not with respect to Genentech or any other Third Party,
and shall expire upon the date of expiration of the last to expire
Genentech Patent covering the manufacture, use or sale of Licensed
Products for the treatment of CGD in the United States and its
territories and possessions. As used herein, "Accounting and
Revenue Rights to CGD Units" means the right to book net revenues,
expenses and net profits for the sales of Licensed Product for the
treatment of chronic granulomatous disease by InterMune and its
sublicensees in the United States.
(f) All promissory notes referred to in this Section 5.2 shall bear interest
at the rate of the prime rate plus two percentage points (2%).
5.3 REPORTS; AUDIT RIGHTS. InterMune shall provide to Connetics a copy of all
reports submitted to Genentech by InterMune pursuant to Section 8.8 of
the Genentech License when InterMune submits such report to Genentech.
Connetics shall furthermore have the same audit rights as Genentech
pursuant to Section 8.8.
5.4 PAYMENTS UNDER GENENTECH LICENSE. InterMune shall make, on behalf of
Connetics, all payments owed by Connetics to Genentech under Sections 8.2
and 8.3 of the Genentech License with respect to InterMune's activities
hereunder, except as set forth in Section 4.2 above. Each Party shall be
responsible for paying all royalties due to Third Parties other than
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Genentech under Section 8.4 of the Genentech License with respect to such
Party's and/or sublicensee thereof activities hereunder.
6. INTELLECTUAL PROPERTY
6.1 OWNERSHIP OF INVENTIONS. Each Party shall remain the sole owner of its
respective technology and other intellectual property that it owned as of
the Effective Date. A Party shall not have or acquire any rights in any
inventions, Know-How or intellectual property rights of the other Party,
except as specifically granted herein.
6.2 PATENT PROSECUTION. InterMune shall have all the rights of Connetics
under the Genentech License to participate in the prosecution of the
Genentech Patents, and shall pay all patent costs due under the Genentech
License, except as set forth in Section 4.4 above.
6.3 INFRINGEMENT OF THIRD PARTY PATENTS. In the event that a Third Party
files an action against a Party alleging that such Party's activities
under this Agreement infringe such Third Party's patent rights, such
Party shall give written notice to the other Party, and the Parties will
consult and cooperate on the best course of action. The Party that was
sued shall have the right to defend itself against such action, and the
other Party shall provide all reasonable assistance in such defense.
6.4 INFRINGEMENT OF LICENSED PATENTS. In the event that either Party becomes
aware that a Third Party is infringing any rights in the Genentech
Patents, such Party shall promptly notify the other. InterMune shall have
the right, in Connetics' stead, to enforce the Genentech Patents to the
full extent Connetics has such rights under the Genentech License, and
Connetics will reasonably cooperate with InterMune in such enforcement
actions and take all reasonably necessary steps to facilitate InterMune's
enforcement of the Genentech Patents.
6.5 COOPERATION. Each Party agrees to cooperate with the other and take all
reasonable additional actions as may be reasonably required to achieve
the intent of this Article 5, including, without limitation, the
execution of all necessary and appropriate instruments and documents.
7. REPRESENTATIONS AND WARRANTIES
7.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and
warrants to the other Party as follows:
(a) Such Party (i) is duly organized, validly existing and in good standing
under the laws of the state in which it is organized; (ii) has the power
and authority and the legal right to own and operate its property and
assets, to lease the property and assets it operates under lease, and to
carry on its business as it is now being conducted; and (iii) is in
compliance with all requirements of applicable law, except to the extent
that any noncompliance would not materially adversely affect such Party's
ability to perform its obligations under the Agreement.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) Such Party (i) has the power and authority and the legal right to enter
into the Agreement and to perform its obligations hereunder, and (ii) has
taken all necessary action on its part to authorize the execution and
delivery of the Agreement and the performance of its obligations
hereunder. The Agreement has been duly executed and delivered on behalf
of such Party, and constitutes a legal, valid, binding obligation,
enforceable against such Party in accordance with its terms.
(c) All necessary consents, approvals and authorizations of all governmental
authorities and other persons required to be obtained by such Party in
connection with the Agreement have been obtained.
(d) The execution and delivery of the Agreement and the performance of such
Party's obligations hereunder (i) do not conflict with or violate any
requirement of applicable laws or regulations or any material contractual
obligation of such Party, and (ii) do not materially conflict with, or
constitute a material default or require any consent under any material
contractual obligation of such Party.
7.2 CONNETICS REPRESENTATIONS AND WARRANTIES. Connetics hereby represents and
warrants that:
(a) To Connetics' knowledge as of the Effective Date, the Licensed Technology
practiced as permitted herein does not infringe on any intellectual
property rights owned by any Third Party.
(b) Connetics possesses the necessary interest, title and right to the
Licensed Technology to grant the licenses and to make the assignments to
InterMune hereunder.
8. INDEMNIFICATION
8.1 INDEMNIFICATION BY CONNETICS. Connetics agrees to indemnify, hold
harmless and defend InterMune and InterMune's directors, officers,
employees and agents, and the directors, officers, employees and agents
of any InterMune Affiliate from and against any and all claims, suits,
losses, damages, costs, fees and expenses resulting from or arising out
of any negligent or wrongful act or omission by Connetics or its
Affiliates, or any breach by Connetics of its obligations under this
Agreement or under the Genentech License, except to the extent that such
claims, suits, losses, damages, costs, fees or expenses arises or results
from any negligent or wrongful act or omission of InterMune or its
Affiliates.
8.2 INDEMNIFICATION BY INTERMUNE. InterMune agrees to indemnify, hold
harmless and defend Connetics and its directors, officers, employees and
agents, and the directors, officers, employees and agents of any
Connetics Affiliates from and against any and all claims, suits, losses,
damages, costs, fees and expenses resulting from or arising out of damage
or injury caused by a negligent or wrongful act or omission of InterMune
or its Affiliates, or any breach by InterMune of its obligations under
this Agreement, except to the extent that such claims, suits, losses,
damages, costs, fees or expenses arises or results from any negligent or
wrongful act or omission of Connetics or its Affiliates.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.3 INDEMNIFICATION PROCEDURE. In all cases where one Party seeks
indemnification by the other under this Article 8, the Party seeking
indemnification shall promptly notify the indemnifying Party of receipt
of any claim or lawsuit covered by such indemnification obligation and
shall cooperate fully with the indemnifying Party in connection with the
investigation and defense of such claim or lawsuit. The indemnifying
Party shall have the right to control the defense, with counsel of its
choice, provided that the non-indemnifying Party shall have the right to
be represented by advisory counsel at its own expense. The indemnifying
Party shall not settle or dispose of the matter in any manner which could
negatively and materially affect the rights or liability of the
non-indemnifying Party without the non-indemnifying Party's prior written
consent, which shall not be unreasonably withheld.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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9. CONFIDENTIALITY
9.1 CONFIDENTIAL INFORMATION OBLIGATIONS. As used herein, "Confidential
Information" means all information that a Party discloses to the other
Party under this Agreement or had disclosed to the other Party under the
Original Agreement, provided that Confidential Information shall not
include such information excluded under Section 9.2. Except to the extent
expressly authorized by this Agreement or otherwise agreed in writing by
the Parties, each Party agrees that, during the term of this Agreement
and for five (5) years after the expiration or termination of this
Agreement, it shall keep confidential and shall not publish or otherwise
disclose and shall not use for any purpose other than as provided for in
this Agreement any Confidential Information furnished to it by the other
Party pursuant to this Agreement.
9.2 EXCEPTIONS. The obligations set forth in Section 9.1 shall not apply to
any Information that the receiving Party can demonstrate by competent
evidence:
(a) was already known to the receiving Party, other than under an obligation
of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving Party by the other
Party;
(c) became generally available to the public or otherwise part of the public
domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving Party, other than under an obligation of
confidentiality to a third Party, by a third Party who had no obligation
to the disclosing Party not to disclose such information to others; or
(e) is independently developed by the receiving Party without using any of
the other Party's Confidential Information.
9.3 TERMS OF THE AGREEMENT. The Parties agree that the terms of the Agreement
will be considered Confidential Information of both Parties.
Notwithstanding the foregoing, a Party shall have the right to disclose
the material financial terms of the Agreement to any bona fide potential
investor, investment banker, acquiror, merger partner or other potential
financial partner, subject to such Party obtaining the agreement of such
party receiving such Confidential Information to keep such information
confidential.
9.4 PERMITTED DISCLOSURE. Notwithstanding the limitations in this Article 9,
each Party may disclose Confidential Information belonging to the other
Party (or otherwise subject to this Article 9), to the extent such
disclosure is reasonably necessary in the following instances, but solely
for the limited purpose of such necessity:
(a) filing or prosecuting Patents;
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) regulatory and tax filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental laws or regulations or valid court
orders;
(e) conducting preclinical or clinical trials of Licensed Products; and
(f) disclosure to Affiliates, licensees, sublicensees, employees, consultants
or agents who agree to be bound by similar terms of confidentiality and
non-use at least equivalent in scope to those set forth in this Article
9.
Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to Section
9.4, it will give reasonable advance notice to the other Party of such
disclosure and endeavor in good faith to secure confidential treatment of such
information. In any event, the Parties agree to take all reasonable action to
avoid disclosure of Confidential Information hereunder. Further, the Parties
agree to consult with one another on the provisions of this Agreement to be
redacted in any filings made by a Party with the United States Securities and
Exchange Commission or as otherwise required by law.
10. TERMINATION
10.1 TERM OF AGREEMENT. The term of this Agreement shall expire, unless
earlier terminated as provided by Section 10.2 below, upon expiration or
termination of the Genentech License.
10.2 TERMINATION FOR MATERIAL BREACH. If either Party shall default in a
material manner with respect to any material provision of this Agreement
and the other Party shall have given the defaulting Party written notice
of such default, the defaulting Party shall have thirty (30) days to cure
such default. If such default is not cured within such thirty (30) day
period, the non-defaulting Party shall have the right, upon notice to the
defaulting Party and without prejudice to any other rights the
non-defaulting Party may have, to terminate this Agreement unless the
defaulting Party is in the process of attempting in good faith to remedy
such default, in which case, the thirty (30) day cure period shall be
extended by an additional thirty (30) days. Any material default by
InterMune in the performance of any material obligation under the
Genentech License assumed by InterMune pursuant to Section 3.7 of this
Agreement shall be deemed a material default of this Agreement and shall
entitle Connetics to terminate this Agreement in accordance with this
Section 10.2.
10.3 EFFECT OF TERMINATION. Upon termination or expiration of the Agreement,
(a) all licenses granted by Connetics to InterMune under Article 2 will
terminate; (b) any and all claims and payment obligations that accrued
prior to the date of such termination or expiration shall survive such
termination; (c) each Party shall return all of the other Party's
Confidential Information; and (d) all right, title and interest of
InterMune under the Genentech Supply Agreement shall revert to Connetics,
and Connetics shall be deemed to be the successor in
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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interest of InterMune under the Genentech Supply Agreement and shall
assume all obligations and be entitled to all rights of InterMune under
such agreement.
10.4 SURVIVING RIGHTS. The obligations and rights of the Parties under Section
5.3, 6.1, and Articles 8, 9, 10 and 11 shall survive termination or
expiration of the Agreement.
10.5 ACCRUED RIGHTS AND SURVIVING OBLIGATIONS. The termination or expiration
of the Agreement for any reason shall be without prejudice to any rights,
which shall have accrued to the benefit of either Party prior to such
termination or expiration, including any damages arising from any breach
hereunder. Such termination or expiration shall not relieve either Party
from obligations which are expressly indicated to survive termination or
expiration of the Agreement.
10.6 BANKRUPTCY RIGHTS. In the event that this Agreement is terminated or
rejected by a Party or its receiver or trustee under applicable
bankruptcy laws due to such Party's bankruptcy, then all rights and
licenses granted under or pursuant to this Agreement by such Party to the
other Party are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code and any similar law or regulation
in any other country, licenses of rights to "intellectual property" as
defined under Section 101(52) of the Bankruptcy Code. The Parties agree
that all intellectual property rights licensed hereunder, including
without limitation any patents or patent applications in any country of a
Party covered by the license grants under this Agreement, are part of the
"intellectual property" as defined under Section 101(52) of the
Bankruptcy Code subject to the protections afforded the non-terminating
Party under Section 365(n) of the Bankruptcy Code, and any similar law or
regulation in any other country.
11. MISCELLANEOUS
11.1 WAIVER. No waiver by either Party hereto of any breach or default of any
of the covenants or agreements herein set forth shall be deemed a waiver
as to any subsequent or similar breach or default.
11.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder without the prior written consent of the other
Party, except as incident to the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets
or actual voting control of the assigning Party. Any assignment or
attempted assignment by either Party in violation of the terms of this
Section 10.2 shall be null and void and of no legal effect.
11.3 NOTICES. Any notice or other communication required or permitted to be
given to either Party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person or by facsimile or five (5) days after mailing by
registered or certified mail, postage paid, to the other Party at the
following address:
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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In the case of InterMune: InterMune, Inc.
3294 West Bayshore Road
Palo Alto, CA 94303
Fax: (650) 858-2937
Attention: President
with a copy to: Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306
Fax: (650) 857-0663
Attention: Barclay James Kamb, Esq.
In the case of Connetics: Connetics Corporation
3400 West Bayshore Road
Palo Alto, CA 94303
Fax: (650) 843-2899
Attention: Chief Executive Officer
Either Party may change its address for communications by a notice to the other
Party in accordance with this Section.
11.4 HEADINGS. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
11.5 AMENDMENT. No amendment or modification hereof shall be valid or binding
upon the Parties unless made in writing and signed by both Parties.
11.6 GOVERNING LAW. This Agreement shall be governed exclusively by the laws
of the State of California, U.S.A., as such law applies to contracts
entered into between and to be performed by California residents entirely
in the State of California.
11.7 DISPUTE RESOLUTION.
(a) In the event of any controversy or claim arising out of, relating to or
in connection with any provision of this Agreement, or the rights or
obligations of the Parties hereunder, the Parties shall try to settle
their differences amicably between themselves by referring the disputed
matter to the President of InterMune and the Chief Executive Officer of
Connetics for discussion and resolution. Either Party may initiate such
informal dispute resolution by sending written notice of the dispute to
the other Party, and within ten (10) days after such notice such
representatives of the Parties shall meet for attempted resolution by
good faith negotiations. If such personnel are unable to resolve such
dispute within thirty (30) days of initiating such negotiations, either
Party may seek to have such dispute resolved by binding arbitration under
this Section 11.7. The arbitration shall be held in Palo Alto, California
according to the Commercial Arbitration Rules of the American Arbitration
Association (the
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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"Rules"). The arbitration will be conducted by a panel of three (3)
arbitrators who are knowledgeable in the subject matter that is at issue
in the dispute, are not affiliated directly or indirectly with either
Party, and are selected by mutual agreement of the Parties. Failing such
agreement, the arbitrators shall be selected appointed as provided in the
Rules. During the arbitration, the Parties shall have such discovery
rights as the arbitrators may allow, consistent with the discovery
permitted by the Federal Code of Civil Procedure. In conducting the
arbitration, the arbitrators shall apply the rules of evidence applicable
in California, and shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction, or
replevin of property, as well as specific performance. The arbitrators
shall also be able to award direct and indirect damages, but shall not
award any other form of damage (e.g., punitive or exemplary damages). The
reasonable fees and expenses, of the arbitrators, along with the
reasonable legal fees and expenses of the prevailing Party (including all
expert witness fees and expenses), the fees and expenses of a court
reporter, and any expenses for a hearing room, shall be paid as follows:
If the arbitrators rule in favor of one Party on all disputed issues in
the arbitration, the losing Party shall pay one hundred percent (100%) of
such fees and expenses; if the arbitrators rule in favor of one Party on
some issues and the other Party on other issues, the arbitrators shall
issue with the rulings a written determination as to how such fees and
expenses shall be allocated between the Parties. The arbitrators shall
allocate fees and expenses in a way that bears a reasonable relationship
to the outcome of the arbitration, with the Party prevailing on more
issues, or on issues of greater value or gravity, recovering a relatively
larger share of its legal fees and expenses. The decision of the
arbitrators shall be final and may be entered, sued on or enforced by the
Party in whose favor it runs in any court of competent jurisdiction at
the option of such Party. Whether a claim, dispute or other matter in
question would be barred by the applicable statute of limitations, which
statute of limitations also shall apply to any claim or disputes subject
to arbitration under this Section, shall be determined by binding
arbitration pursuant to this Section.
(b) Notwithstanding anything to the contrary in this Agreement, either Party
may seek immediate injunctive or other interim relief without resort to
arbitration from any court of competent jurisdiction with respect to any
breach of Article 9 hereof, or as necessary to enforce and prevent
infringement of the patent rights, copyright rights, trademarks, trade
secrets, or other intellectual property rights owned or controlled by a
Party or its Affiliates.
11.8 FORCE MAJEURE. Any delays in performance by any Party under this
Agreement shall not be considered a breach of this Agreement if and to
the extent caused by occurrences beyond the reasonable control of the
Party affected, including but not limited to acts of God, embargoes,
governmental restrictions, fire, flood, explosion, riots, wars, civil
disorder, rebellion or sabotage. The Party suffering such occurrence
shall immediately notify the other Party as soon as practicable, and any
time for performance hereunder shall be extended by the actual time of
delay caused by the occurrence.
11.9 INDEPENDENT CONTRACTORS. In making and performing this Agreement,
InterMune and Connetics act and shall act at all times as independent
contractors and nothing contained in
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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this Agreement shall be construed or implied to create an agency,
partnership or employer and employee relationship between InterMune and
Connetics. At no time shall one Party make commitments or incur any
charges or expenses for or in the name of the other Party.
11.10 SEVERABILITY. If any part of this Agreement is declared invalid by any
legally governing authority having jurisdiction over either Party, then
such declaration shall not affect the remainder of the Agreement and the
Parties shall revise the invalidated part in a manner that will render
such provision valid without impairing the Parties' original interest.
11.11 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder shall be in
addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the
Parties. All of such rights, powers and remedies shall be cumulative, and
may be exercised successively or cumulatively.
11.12 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which shall constitute
together the same document.
11.13 ENTIRE AGREEMENT. This Agreement and any and all Exhibits referred to
herein, in conjunction with the other "Intercompany Agreements" (as that
term is described in the Collaboration Agreement), embodies the entire
understanding of the Parties with respect to the subject matter of the
Intercompany Agreements, and supersedes and terminates all previous
communications, representations or understandings, either oral or
written, between the Parties relating to the subject matter of the
Intercompany Agreements.
THIS SPACE INTENTIONALLY LEFT BLANK
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, both InterMune and Connetics have executed this
Agreement, as of the day and year first written above.
INTERMUNE PHARMACEUTICALS, INC. CONNETICS CORPORATION
By: /s/ W. Scott Harkonen By: /s/ T. Wiggans
--------------------------------- ---------------------------------
Name: W. SCOTT HARKONEN Name: THOMAS WIGGANS
------------------------------- -------------------------------
Title: PRESIDENT Title: PRESIDENT
------------------------------ ------------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<S> <C>
1..........................................................................Definitions 2
1.1..................................................................."Affiliate" 2
1.2............................................................."Amendment No. 3" 2
1.3................................................................"Best Efforts" 2
1.4........................................................................."BLA" 2
1.5.........................................................."Connetics Know-How" 2
1.6.................................................................."Controlled" 2
1.7..........................................................."Dermatology Field" 2
1.9........................................................................."FDA" 3
1.10..............................................................."Gene Therapy" 3
1.11........................................................."Gene Therapy Field" 3
1.12.................................................................."Genentech" 3
1.13.........................................................."Genentech License" 3
1.14..................................................."Genentech License Rights" 3
1.15.........................................................."Genentech Patents" 3
1.16................................................."Genentech Supply Agreement" 3
1.17..................................................................."IG Field" 3
1.18..................................................."Interferon Gamma" or "IG" 3
1.19........................................................"InterMune Net Sales" 4
1.20..................................................................."Know-How" 4
1.21..."Licensed Product," "Licensed Gene Product" and "Licensed Protein Product" 4
1.22........................................................"Licensed Technology" 4
1.23.................................................................."Net Sales" 4
1.24...................................................................."Patents" 4
1.25.................................................................."Territory" 4
1.26................................................................"Third Party" 4
1.27................................................."Third Party Product Rights" 4
1.28.............................................................."United States" 4
2........................................................Original Agreement Superseded 4
3...............................................................Licenses and Covenants 4
3.1......................................................Genentech License Rights 4
3.2....................................................Third Party Product Rights 5
3.3............................................................Connetics Know-How 5
3.4....................................................Genentech Supply Agreement 5
3.5................................................Transfer of Data and Materials 5
3.6............................................................Connetics Covenant 6
3.7.................................InterMune Performance under Genentech License 6
4.........................................................Option to Dermatology Rights 6
4.1..................................................................Option Grant 6
4.2........................Payments and Other Obligations under Genentech License 6
4.3...............................................................Off-Label Sales 7
4.4..................................................................Patent Costs 7
4.5............................................................Milestone Payments 8
4.6...................Dermatological Indications Outside of the Dermatology Field 8
5........................................................................Consideration 9
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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5.1.....................................................................Royalties 9
5.2.............................................................Milestone Payment 9
5.3.........................................................Reports; Audit Rights 11
5.4..............................................Payments under Genentech License 11
6................................................................Intellectual Property 11
6.1.......................................................Ownership of Inventions 11
6.2............................................................Patent Prosecution 12
6.3...........................................Infringement of Third Party Patents 12
6.4..............................................Infringement of Licensed Patents 12
6.5...................................................................Cooperation 12
7.......................................................Representations and Warranties 12
7.1.........................................Mutual Representations and Warranties 12
7.2......................................Connetics Representations and Warranties 13
8......................................................................Indemnification 13
8.1..................................................Indemnification by Connetics 13
8.2..................................................Indemnification by InterMune 13
8.3.....................................................Indemnification Procedure 13
9......................................................................Confidentiality 14
9.1..........................................Confidential Information Obligations 14
9.2....................................................................Exceptions 14
9.3........................................................Terms of the Agreement 14
9.4..........................................................Permitted Disclosure 14
10.........................................................................Termination 15
10.1............................................................Term of Agreement 15
10.2..............................................Termination for Material Breach 15
10.3........................................................Effect of Termination 15
10.4.............................................................Surviving Rights 16
10.5.....................................Accrued Rights and Surviving Obligations 16
10.6............................................................Bankruptcy Rights 16
11.......................................................................Miscellaneous 16
11.1.......................................................................Waiver 16
11.2...................................................................Assignment 16
11.3......................................................................Notices 16
11.4.....................................................................Headings 17
11.5....................................................................Amendment 17
11.6................................................................Governing Law 17
11.7...........................................................Dispute Resolution 17
11.8................................................................Force Majeure 18
11.9......................................................Independent Contractors 18
11.10................................................................Severability 18
11.11...........................................................Cumulative Rights 19
11.12................................................................Counterparts 19
11.13............................................................Entire Agreement 19
</TABLE>
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
EXHIBIT 1.13
GENENTECH LICENSE (AS AMENDED)
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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LICENSE AGREEMENT FOR
INTERFERON GAMMA
BETWEEN
CONNETICS CORPORATION
AND
GENENTECH, INC.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1.0 Definitions.......................................................................2
1.1 Best Efforts.............................................................2
1.2 Biogen License...........................................................2
1.3 Biogen License Rights....................................................2
1.4 BLA......................................................................2
1.5 Bulk Product.............................................................2
1.6 C.F.R....................................................................2
1.7 CGD......................................................................2
1.8 Connetics Knowhow........................................................2
1.9 Connetics Patent Rights..................................................3
1.10 ELA......................................................................3
1.11 FDA......................................................................3
1.12 Field of Use.............................................................3
1.13 Finished Product.........................................................4
1.14 Fully Burdened Manufacturing Cost........................................4
1.15 Gene Therapy.............................................................4
1.16 Genentech Knowhow........................................................5
1.17 Genentech Manufacturing Knowhow..........................................5
1.18 Genentech Patent Rights..................................................5
1.19 IND......................................................................6
1.20 Interferon Gamma.........................................................6
1.21 Interferon Gamma-1B......................................................6
1.22 Licensed Product.........................................................6
1.23 NDA......................................................................7
1.24 NDC......................................................................7
1.25 Net Sales................................................................7
1.26 Party....................................................................8
1.27 PLA......................................................................8
1.28 Territory................................................................8
1.29 Transfer Date............................................................8
2.0 License Grant.....................................................................8
2.1 Patent and Knowhow License Grant.........................................8
2.2 Trademark License Grant.................................................10
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.3 Sublicenses.............................................................11
2.4 Grant Back License. ...................................................14
2.5 Data Transfer and Cooperation...........................................14
3.0 Product Development and Milestones...............................................19
3.1 Commercialization Milestones............................................19
3.2 Diligence...............................................................22
3.3 Review of Clinical Development Plan and Marketing Programs..............24
3.4 New Delivery Forms......................................................25
3.5 Costs of Development....................................................25
3.6 Joint Development and Marketing Activities..............................25
3.7 Compliance with Law and Safety and Adverse Event Reporting..............26
3.8 Clinical Development Reports ...........................................26
3.9 Technology Outside the Field of Use.....................................26
4.0 Supply of Interferon Gamma-1B....................................................29
4.1 Bulk Product and Finished Product.......................................29
4.2 Supply of Non-human Interferon Gamma....................................29
5.0 Intellectual Property Rights.....................................................29
5.1 Ownership...............................................................29
5.2 Patent Prosecution and License Fees.....................................30
5.3 Patent Infringement.....................................................31
5.4 Third Party Rights......................................................32
5.5 Trademark Infringement..................................................32
5.6 CMCC License ...........................................................32
6.0 Product Promotion................................................................33
6.1 Promotion...............................................................33
6.2 Encroachment............................................................33
7.0 Confidentiality..................................................................33
8.0 Up-front Payment, Milestone Payments and Royalties...............................35
8.1 Up-front Payment........................................................35
8.2 Milestone Payments for Licensed Products ...............................37
8.3 Royalties...............................................................38
8.4 Third-Party Royalties...................................................38
8.5 Royalty Payments........................................................39
8.6 Taxes...................................................................39
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.7 Termination.............................................................39
8.8 Records and Reporting...................................................40
9.0 Representations and Warranties...................................................41
9.1 Disclaimer..............................................................41
9.2 Representations and Warranties..........................................41
10.0 Liability........................................................................43
10.1 Limitation of Liability.................................................43
10.2 Connetics Indemnification...............................................43
10.3 Genentech Indemnification...............................................43
11.0 Term and Termination.............................................................44
11.1 Term....................................................................44
11.2 Termination for Default.................................................45
11.3 Genentech's Rights on Termination.......................................46
11.4 Connetics' Rights on Termination........................................47
11.5 Bankruptcy..............................................................48
11.6 Unilateral Termination. ................................................49
11.7 Survival of Certain Provisions..........................................49
12.0 General Provisions...............................................................50
12.1 Notices.................................................................50
12.2 Governing Law...........................................................50
12.3 Entire Agreement........................................................50
12.4 Binding Effect and Assignment...........................................51
12.5 Waiver..................................................................51
12.6 Severability............................................................51
12.7 Publicity...............................................................52
12.8 Counterparts............................................................52
12.9 Force Majeure...........................................................53
12.10 Headings................................................................53
12.11 No Partnership..........................................................53
Exhibit A Patent Applications and Patents Included in Genentech Patent Rights.............55
Exhibit B Interferon Gamma................................................................56
Exhibit C Interferon Gamma-1B.............................................................57
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Exhibit D Third Party Sponsored Studies...................................................58
Exhibit E Clinical Development Milestones.................................................59
Exhibit F Clinical Reports................................................................60
Exhibit G Third Party Royalties...........................................................61
Exhibit H Transfer Date Activities for Commercial Sales of Actimmune for CGD .............62
</TABLE>
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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LICENSE AGREEMENT FOR
INTERFERON GAMMA
This Agreement is entered into effective as of May 5, 1998, ("Effective
Date") by and between Connetics Corporation, a Delaware corporation with its
principal office at 3400 West Bayshore Road, Palo Alto, California 94303
("Connetics"), and Genentech, Inc., a Delaware corporation with its principal
office at 1 DNA Way, South San Francisco, California 94080 ("Genentech").
WHEREAS, Connetics wishes to obtain a non-exclusive license to
manufacture and an exclusive license to use, sell, offer for sale and import
Interferon Gamma (as defined herein) in the United States for the treatment of
certain medical disorders;
WHEREAS, in consideration for the foregoing, Connetics will issue to
Genentech shares of Connetics Common Stock on the terms and conditions set forth
in that certain stock purchase agreement between Genentech and Connetics of even
date herewith (the "Stock Agreement");
WHEREAS, Genentech will manufacture and supply Connetics with
Interferon Gamma-1B (as defined herein) under the terms and conditions set forth
in that certain supply agreement between Genentech and Connetics of even date
herewith (the "Supply Agreement");
WHEREAS, Connetics and Genentech are parties to that certain Agreement
on Interferon Gamma-1B dated December 8, 1995 (the "Prior Agreement") and desire
to terminate the Prior Agreement effective as of the date hereof and to accept
the rights and obligations created
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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pursuant hereto in lieu of the rights and obligations under the Prior Agreement;
and
WHEREAS, Genentech and Connetics therefore agree to undertake the
foregoing, all under the terms and conditions set forth in this Agreement and
for the consideration set forth herein and in the Stock Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Parties agree as follows:
1.0 DEFINITIONS
1.1 "Best Efforts" shall mean every necessary and prudent effort of
a Party applied in a prompt, commercially reasonable manner, to the maximum
extent reasonably allowed by such Party's available financial resources, taking
into account all of such Party's business commitments for such financial
resources.
1.2 "Biogen License" shall mean that certain license agreement
between Genentech and Biogen, Inc. ("Biogen") dated January 5, 1990, as amended
on November 23, 1992.
1.3 "Biogen License Rights" shall mean all sublicenseable rights
granted to Genentech by Biogen under the Biogen License.
1.4 "BLA" shall mean Biologics License Application.
1.5 "Bulk Product" shall mean Interferon Gamma-1B provided as bulk
protein manufactured in compliance with Good Manufacturing Practices, pursuant
to applicable FDA regulatory approvals and supplied to Connetics in such a form
and in such containers as shall be
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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mutually determined by Genentech and Connetics and as described in the Supply
Agreement.
1.6 "C.F.R." shall mean Code of Federal Regulations.
1.7 "CGD" shall mean chronic granulomatous disease.
1.8 "Connetics Knowhow" shall mean all proprietary information,
methods, processes, techniques and data that have not been publicly disclosed,
that relate to Interferon Gamma and that arise out of Connetics' and its
sublicensees' efforts in the development of Interferon Gamma (including
Interferon Gamma as part of a Licensed Product) hereunder and that on the
Effective Date and hereafter during the term of this Agreement are owned or
controlled by Connetics or its sublicensees or under which Connetics or its
sublicensees otherwise has the right to grant licenses or sublicenses.
1.9 "Connetics Patent Rights" shall mean all patents, patent
applications and any patents issuing therefrom, together with any substitutions,
extensions, reexaminations, reissues, renewals, divisions, continuations and
continuations-in-part thereof, that (a) claim inventions constituting Interferon
Gamma or its manufacture or use that arise out of Connetics' or its
sublicensee's efforts in the development of Interferon Gamma (including
Interferon Gamma as part of a Licensed Product) hereunder during the term of
this Agreement, and (b) are owned by Connetics or its sublicensees or under
which Connetics or its sublicensees otherwise has the right to grant licenses or
sublicenses as provided herein.
1.10 "ELA" shall mean Establishment License Application.
1.11 "FDA" shall mean the United States Food and Drug
Administration.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.12 "Field of Use" shall mean the administration to humans of
Licensed Product for the treatment or prevention of: (a) any dermatological
disease or condition including, without limitation, atopic dermatitis,
keloids/hypertrophic scars, pustular psoriasis and scleroderma, but excluding
any cancer disease or condition, (b) any infectious disease or condition
including, without limitation, fungal, viral and bacterial infections, (c)
osteopetrosis, (d) chronic granulomatous disease, (e) pulmonary fibrosis, and
(f) asthma. Notwithstanding the foregoing, the Field of Use shall not include
the administration to humans of Licensed Product for the treatment or prevention
of any type of arthritis or cardiac or cardiovascular disease or condition, or
use of Licensed Product for any indication or use in the field of oncology or
endocrinology. Each of Subsections 1.12 (a) through (f) inclusive shall
hereinafter each be referred to individually as an "Area of the Field of Use"
and together as the "Areas of the Field of Use."
1.13 "Finished Product" shall mean Interferon Gamma-1B supplied in
vialed form as 100 micrograms of Interferon Gamma-1B protein in a 0.5 ml fill
volume and as described in the Supply Agreement, manufactured in compliance with
Good Manufacturing Practices and intended for commercial sale to treat CGD and
osteopetrosis and for clinical studies.
1.14 "Fully Burdened Non-human Interferon Gamma Manufacturing Cost"
shall mean the cost of Genentech's production and testing of Non-human
Interferon Gamma, which shall be comprised of the sum of: [ * ]
1.15 "Gene Therapy" shall mean the therapeutic or prophylactic
treatment of a human being with: (a) one or more oligonucleotides or nucleotide
sequences, in native form or
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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chemically modified, which are introduced into the body in free form, bound to a
carrier molecule, contained in any molecular vesicle (e.g. a liposome),
incorporated into or attached to a vector of any type, contained in any cellular
construct and/or contained in any mechanical device or (b) cells which have been
manipulated ex vivo using one or more oligonucleotides or nucleotide sequences.
1.16 "Genentech Knowhow" shall mean all proprietary information,
methods, processes, techniques and data that are in the possession or control of
Genentech on the Effective Date or thereafter during the term of this Agreement,
that Genentech is free to license or sublicense, that have not been publicly
disclosed, and that are specific and reasonably necessary for the use, sale,
offer for sale or importation of Interferon Gamma in the Field of Use in the
Territory, but shall not include information regarding the manufacture of
Interferon Gamma.
1.17 "Genentech Manufacturing Knowhow" shall mean all proprietary
information, methods, processes, techniques and data that are in the possession
of Genentech at such time as Genentech determines or is required pursuant to the
terms of the Supply Agreement to make a manufacturing technology transfer to
Connetics, that are not generally known, and that are specific and reasonably
necessary for the manufacture of Interferon Gamma in the Field of Use in the
Territory.
1.18 "Genentech Patent Rights" shall mean all patents and patent
applications and any patents issuing therefrom, together with any extensions,
reissues, reexaminations, substitutions, renewals, divisions, continuations and
continuations-in-part thereof (a) that are owned or
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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controlled by Genentech presently or hereafter, during the term of this
Agreement, and under which Genentech is free to license or sublicense, and (b)
to the extent they claim or directly relate to Interferon Gamma or its
manufacture or use in the Field of Use, including, without limitation, the
patent rights granted under that certain license agreement between Genentech and
Children's Medical Center Corporation, dated July 16, 1990 (the "CMCC License"),
but specifically excluding any rights granted to Genentech under the Biogen
License. Genentech Patent Rights shall include, without limitation, the patents
and patent applications listed in EXHIBIT A attached hereto. Notwithstanding the
foregoing, Genentech Patent Rights shall exclude any rights Genentech acquires
after the Effective Date of this Agreement under third-party license agreements,
with the exception of those acquired under the CMCC License, unless and until
the Parties mutually agree on terms and conditions for the sublicense of such
rights from Genentech to Connetics.
1.19 "IND" shall mean Investigational New Drug Application.
1.20 "Interferon Gamma" shall mean a polypeptide having the 126
amino acid sequence set forth on EXHIBIT B or a variant of such sequence having
at least 70% homology thereto, or such polypeptide with one or more additional
amino acid residue(s) extending from the N-terminus thereof AND/OR one or more
additional amino acid residue(s) extending from the C-terminus thereof, such
polypeptides including, without limitation, Interferon Gamma-1B.
1.21 "Interferon Gamma-1B" shall mean a single chain polypeptide
containing the 140 amino acid sequence set forth on EXHIBIT C hereto, i.e., the
active ingredient in the
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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ACTIMMUNE7 (Interferon Gamma-1B) Injection product.
1.22 "Licensed Product" shall mean any pharmaceutical formulation
containing Interferon Gamma whether alone or together with or incorporated into
any other substance or product or material or device, whether active or not, and
which (i) but for the licenses granted hereunder, the manufacture, use, sale,
offer for sale or importation of which in the Territory would infringe or
contribute to the infringement of Genentech Patent Rights in the Territory, or
(ii) is based upon or incorporates or utilizes Genentech Knowhow. For purposes
of clarification, it is understood that this definition shall not include any
pharmaceutical formulation which induces the presence or activity of Interferon
Gamma IN VIVO, or the DNA encoding Interferon Gamma for Gene Therapy, or other
biological techniques aimed at establishing or modulating endogenous Interferon
Gamma IN VIvo.
1.23 "NDA" shall mean New Drug Application.
1.24 "NDC" shall mean National Drug Code.
1.25 "Net Sales" shall mean, as to each calendar quarter, the gross
invoiced sales prices charged for all Licensed Products sold by Connetics and
its sublicensees in arm's length transactions to independent third parties
during such quarter, after deduction of the following items paid by Connetics
and its sublicensees during such calendar quarter with respect to sales of
Licensed Products regardless of the calendar quarter in which such sales were
made, provided and to the extent that such items are incurred or allowed and do
not exceed reasonable and customary amounts in the market in which such sales
occurred:
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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[ * ]
Notwithstanding the foregoing, no deduction shall be made for
bad debt expense.
1.26 "Party" shall mean Genentech or Connetics, and, when used in
the plural, shall mean both of them.
1.27 "PLA" shall mean Product License Application.
1.28 "Territory" shall mean the United States of America and its
territories and possessions.
1.29 "Transfer Date" shall mean, unless otherwise mutually agreed to
by the Parties, the last day of the second full calendar month following the
first delivery by Connetics to Genentech of Connetics' labeling and packaging
materials for Genentech's use in labeling and packaging Finished Product,
pursuant to a purchase order submitted by Connetics and accepted by Genentech,
to be sold commercially by Connetics for treatment of CGD, provided that the
activities set forth on Exhibit H have been completed.
2.0 LICENSE GRANT
2.1 Patent and Knowhow License Grant
(a) Genentech grants to Connetics an exclusive license,
even as to Genentech, under Genentech Patent Rights and under Genentech Knowhow
to use, sell, offer for sale and import (but not to make or have made) Licensed
Products in the Field of Use in the Territory,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(excluding, with respect to the fields of (i) scleroderma and (ii) infectious
disease or condition caused by human papillomavirus, Licensed Products
containing any form of Interferon Gamma other than Genentech Gamma Interferon
TRIANGLE3, as that term is defined in the Biogen License). Notwithstanding the
foregoing, Genentech reserves the right to use (but not to import, offer for
sale or sell) Licensed Products within the Field of Use for research purposes.
(b) Genentech grants to Connetics a non-exclusive license
under Genentech Patent Rights and under Genentech Knowhow to use, sell, offer
for sale and import (but not to make or have made) Licensed Products containing
any form of Interferon Gamma other than Genentech Gamma Interferon TRIANGLE3 (as
that term is defined in the Biogen License) in the Territory in the fields of:
(i) scleroderma and (ii) infectious disease or condition caused by human
papillomavirus.
(c) Genentech grants to Connetics a non-exclusive
sublicense under the Biogen License Rights to use, sell, offer for sale and
import Licensed Products (excluding Licensed Products containing Biogen Gamma
Interferon TRIANGLE0 as that term is defined in the Biogen License) in the
Territory in the fields of scleroderma and infectious disease or condition
caused by human papillomavirus.
(d) Genentech grants to Connetics a non-exclusive license
under Genentech Patent Rights to make or have made Licensed Products in the
Field of Use for use and sale in the Territory.
(e) Genentech grants to Connetics a non-exclusive license
under Genentech
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Patent Rights and Genentech Knowhow to use non-human animal species derived
homologues of Interferon Gamma (Non-human Interferon Gamma) for non-commercial
research purposes to support the Field of Use in the Territory.
Except as expressly granted herein, there are no implied licenses under
the Genentech Patent Rights or any other intellectual property rights owned or
controlled by Genentech.
2.2 Trademark License Grant
(a) Genentech hereby grants to Connetics a non-exclusive,
royalty-free license to use the trademark, ACTIMMUNE, for the advertising,
promotion, marketing, distribution and sale of Licensed Products in the
Territory. Connetics shall have the right to grant sublicenses to such
non-exclusive license, subject, however, to the prior written consent of
Genentech, which consent shall not be unreasonably withheld. Genentech agrees
not to grant any other licenses to use the ACTIMMUNE trademark without the
consent of Connetics, which consent shall not be unreasonably withheld.
(b) Use of the Mark. In using the ACTIMMUNE mark,
Connetics shall display said mark in upper case letters or otherwise display
it in a style or size of print distinguishing the mark from any accompanying
wording or text. Where feasible, Connetics shall display the registration
symbol -Registered Trademark- to the right of and slightly above or below
the last letter of the word, ACTIMMUNE. Prior to any new use by Connetics of
the ACTIMMUNE mark on product packaging or package inserts for the Licensed
Products, Connetics shall notify and
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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provide Genentech with an example of the proposed use for approval by
Genentech, which approval shall not be unreasonably withheld or delayed. Such
additional use, with respect to the ACTIMMUNE mark, shall automatically become
a part of the license grant under Section 2.2(a) above.
(c) Quality Control. If Connetics uses the ACTIMMUNE mark
for Licensed Products, such products shall be of at least the quality described
in the Specifications therefor as defined in the Supply Agreement.
(d) Ownership. Connetics hereby acknowledges Genentech's
exclusive right, title and interest in and to the ACTIMMUNE mark and agrees that
it will not at any time do, or cause to be done, any act or thing contesting or
in any way impairing or intending to impair the validity of and/or Genentech's
exclusive right, title and interest in and to the ACTIMMUNE mark. Connetics will
not in any manner represent that it owns the ACTIMMUNE mark and hereby
acknowledges that its use of the ACTIMMUNE mark as set forth in Section 2.2(b)
above shall not create any rights, title or interest in or to the ACTIMMUNE mark
in its favor, but that all use of the ACTIMMUNE mark by Connetics shall inure to
the benefit of Genentech.
2.3 Sublicenses.
(a) Connetics may grant sublicenses under the rights
granted in Section 2.1(d) on thirty (30) days prior written notice to Genentech,
subject to Genentech's prior written approval, which approval shall be at
Genentech's sole discretion. Genentech agrees that Boehringer Ingelheim
International GmbH is acceptable to Genentech as a Connetics'
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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sublicensee under the rights granted in Section 2.1(d) for the purpose of
manufacturing and supplying Bulk Product and/or Finished Product to Connetics,
and/or to its sublicensees under Sections 2.1(a), (b) and (c). In the event that
Genentech approves the grant of a sublicense under Section 2.1(d), Genentech may
in its sole discretion, or as agreed by the Parties in the Supply Agreement,
agree to grant to Connetics and such approved sublicensee a non-exclusive
license under Genentech Manufacturing Knowhow solely to make or have made
Licensed Products for use and sale by Connetics and its sublicensees in the
Field of Use in the Territory, and Genentech shall thereafter disclose to
Connetics and such sublicensee such Genentech Manufacturing Knowhow as soon as
reasonably possible.
(b) Connetics may grant one or more sublicenses under the
rights granted in Sections 2.1(a), (b), (c) and (e) in any applicable Area of
the Field of Use, on thirty (30) days prior written notice to Genentech, subject
to Genentech's prior written approval, which approval shall not be unreasonably
withheld.
(c) Notwithstanding the above, Connetics may grant one
sublicense to InterMune (as defined in Section 3.1) under any or all of the
rights granted in Sections 2.1 and 2.2(a) above without Genentech's prior
written approval. InterMune (but no other sublicensee of Connetics) may grant
further sublicenses under Sections 2.1 and 2.2(a) to the extent that Connetics
has the right to do so pursuant to the provisions of this Section 2.3 and
Section 2.2(a). Connetics and InterMune shall give Genentech a copy of any
sublicense agreement entered into by either of them with a third party pursuant
to this Agreement as soon as reasonably possible
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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after execution, provided that Connetics and InterMune may each redact from such
copies text of information or provisions that are not relevant to this Agreement
and the rights and obligations of the Parties hereunder. Genentech agrees to
permit InterMune to perform Connetics' rights and obligations under Section
2.2(b), (c) and (d), Section 2.5, Sections 3.1 through 3.8 and Article 4.0 of
this Agreement (excluding matters related to any alleged breach of the
Agreement, or dispute between the Parties concerning the performance of this
Agreement, under such enumerated Sections and Article), to the extent such
rights and obligations are sublicensed to InterMune by Connetics, and Genentech
agrees to deal with InterMune in lieu of Connetics as if it were Connetics
hereunder for purposes of performance under such enumerated Sections and
Article, provided that Connetics shall remain liable and responsible for
performance of all of the obligations of Connetics and InterMune under this
Agreement. In the event that Connetics sublicenses all of its rights under
Section 2.1 and 2.2(a) to InterMune pursuant to a written sublicense which
provides that InterMune (and not Connetics) shall make, have made, use, sell,
offer for sale, import and develop Licensed Products in all Areas of the Field
of Use in the Territory, then Genentech agrees to permit InterMune to also
perform Connetics' rights and obligations under Articles 5.0 and 6.0 and
Sections 8.2 through 8.8 of this Agreement (excluding matters related to any
alleged breach of the Agreement, or dispute between the Parties concerning the
performance of this Agreement, under such enumerated Sections and Articles), and
Genentech also agrees to deal with InterMune in lieu of Connetics as if it were
Connetics hereunder for purposes of performance under such enumerated Sections
and Articles, provided
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that Connetics shall remain liable and responsible for performance of all of the
obligations of Connetics and InterMune under this Agreement. In the event that
InterMune sublicenses any of its rights to a third party pursuant to this
Agreement, such sublicensee shall not have the right to perform the rights and
obligations of Connetics or InterMune under the Sections and Articles enumerated
above, and Genentech shall not have any obligation to deal directly with such
sublicensee. Notwithstanding the above provisions of this Section 2.3(c), with
respect to any dispute concerning InterMune's performance, or alleged breach by
InterMune, of any applicable term of this Agreement, Genentech shall have the
right to deal directly with Connetics, and to proceed either against InterMune
or directly against Connetics, in Genentech's sole discretion, to enforce this
Agreement.
(d) In the event of the grant of any sublicense by
Connetics (including such grant to InterMune) or by InterMune, the sublicensee
shall be subject to all of the applicable obligations of Connetics hereunder.
Connetics guarantees to Genentech the performance of Connetics' applicable
obligations hereunder by Connetics' sublicensees and by InterMune's
sublicensees.
2.4 Grant Back License. Connetics hereby grants to Genentech under
any Connetics Patent Rights and Connetics Knowhow, a nonexclusive,
sublicenseable license in the Territory to make, have made, use, sell, offer for
sale and import Interferon Gamma for any use outside of the Field of Use, with a
royalty rate of one-half of a percent (0.5%) payable to Connetics on net sales
of Interferon Gamma by Genentech, its affiliates and its sublicensees covered by
such Connetics
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Patent Rights or incorporating such Connetics Knowhow. Genentech shall have the
right to grant sublicenses under such license, subject to the prior written
approval of Connetics, which approval shall not be unreasonably withheld. The
license granted to Genentech under this Section 2.4 shall expire on the later
of: (a) the expiration of the last to expire of any Connetics Patent Rights or
(b) if Connetics Knowhow was used, twenty (20) years from the first commercial
sale of Interferon Gamma outside the Field of Use by Genentech, its affiliates
or its sublicensees hereunder. As used herein, "net sales" shall have the
equivalent definition given to Net Sales in Section 1.25 above.
2.5 Data Transfer and Cooperation
(a) Genentech shall provide Connetics with reasonable
access to all such relevant information and materials in its possession (subject
to Genentech's own internal reasonable needs for the information and materials)
that Connetics reasonably needs to develop and commercialize Licensed Products
in the Field of Use under the license granted to Connetics under Section 2.1
above. Connetics shall submit requests for such information to Genentech's
Clinical Collaborations Operations Department - Medical Affairs at the address
set forth at the beginning of this Agreement. Access to such information and
materials shall be made in a timely and orderly fashion and in a manner such
that the value of the accessed information is preserved in all material
respects.
(b) Connetics shall provide Genentech with reasonable
access to such relevant information and materials in its possession as is
reasonably necessary for Genentech to exercise
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the license rights granted by Connetics under Section 2.4 and Genentech shall
submit requests for such information to Connetics' Vice President - Intellectual
Property at the address set forth at the beginning of this Agreement. Access to
such information and materials shall be made in a timely and orderly fashion and
in a manner such that the value of the accessed information is preserved in all
material respects.
(c) Commencing on May 1, 1998 Connetics or its
sublicensees shall be responsible for any costs associated with maintaining the
Genentech breeding colony of interferon gamma gene knock-out mice at Charles
River Labs (the "Knock-Out Mice"). In consideration for Connetics paying these
costs, Genentech hereby transfers all ownership of such particular Knock-Out
Mice to Connetics, subject to Genentech's right to use such Knock-Out Mice and
the progeny thereof for Genentech's own research purposes to the extent such
Knock-Out Mice are not being used (or planned to be used) by Connetics or its
sublicensees. If Connetics and its sublicensees wish to discontinue the
maintenance of such Knock-Out Mice colony, Connetics shall give Genentech sixty
(60) days prior notice and the right to take over such maintenance, at
Genentech's sole discretion, before Connetics discontinues such maintenance.
Connetics acknowledges that Genentech has, prior to the Effective Date hereof,
transferred interferon gamma gene knock-out mice to other third parties.
(d) Connetics shall use its Best Efforts to obtain a
license from the FDA, which shall include obtaining a U.S. license number and an
NDC number, to enable the effective transfer from Genentech to Connetics of the
PLA for CGD on file with the FDA (the "CGD
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PLA"). Genentech shall use its Best Efforts to assist such transfer, to the
extent reasonably requested by Connetics. Genentech also shall, before the
Transfer Date, reasonably assist Connetics in initiating Connetics' sales of
Licensed Product in the Area of the Field of Use of CGD by transferring to
Connetics information reasonably requested by Connetics that relates to such
sales efforts for CGD. Connetics shall reimburse Genentech for all reasonable
costs associated with Genentech's providing of such information within ninety
(90) days of Connetics' receipt of an invoice of such cost from Genentech.
(e) Genentech shall transfer the CGD PLA, IND and copies
of all material correspondence with the FDA regarding such PLA and IND to
Connetics as soon as reasonably possible after the Effective Date of this
Agreement and Connetics shall be responsible for all activities, at its own
cost, necessary to maintain the CGD PLA and IND and keep them active with the
FDA after such date. Connetics shall reimburse Genentech for 50% of all
reasonable costs associated with Genentech's transfer of the CGD PLA, IND and
such FDA correspondence within ninety (90) days of Connetics' receipt of an
invoice of such cost from Genentech.
(f) Connetics shall not commence marketing and sales of
Finished Product prior to the Transfer Date. On the Transfer Date, Genentech
shall transfer to Connetics the responsibility for all marketing and sales of
Finished Product in the Field of Use in the Territory, provided that all the
activities listed on Exhibit H attached hereto are completed. The Parties shall
use Best Efforts to complete the tasks set forth on Exhibit H as expeditiously
as possible.
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(g) Genentech shall provide Connetics with reasonable
access to relevant data and regulatory information in its possession in the form
existing as of the Effective Date, whether written or electronic, including all
clinical safety data and clinical efficacy data that are related to the
manufacture, use and sale of Interferon Gamma within the Field of Use and the
right to cross-reference Genentech's IND, ELA, and PLA information for
Interferon Gamma in any Genentech regulatory filings related to Interferon Gamma
within the Field of Use. Other than as expressly set forth herein, Genentech
shall have no further obligation with respect to Connetics' efforts to obtain
the FDA license referred to in Section 2.5(d) above. At Genentech's sole
discretion, Genentech may participate in regulatory filings in the Field of Use
in the Territory if the Parties agree that Genentech's participation in such
regulatory filings would expedite the approval and commercialization of a
Licensed Product. Connetics shall reimburse Genentech for all reasonable costs
associated with Genentech's providing of data and regulatory information and
referencing within ninety (90) days of Connetics' receipt of an invoice of such
cost from Genentech. Connetics shall submit requests for such information to
Genentech's Clinical Collaborations Operations Dept. - Medical Affairs at the
address set forth in the beginning of this Agreement. Such requests shall not be
submitted more than two (2) times in any twelve (12) month period, unless such
requests concern information that is critical to product registration
activities. Access to such information shall be made in a timely and orderly
fashion and in a manner such that the value of the accessed information is
preserved in all material respects.
(h) To the extent reasonably requested by Genentech,
Connetics shall provide
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Genentech with access to all data and regulatory information in its possession,
whether written or electronic, in the form existing as of the date of
Genentech's request, including all clinical safety data and clinical efficacy
data, that directly relates to the use of Interferon Gamma outside the Field of
Use and shall give Genentech the right to cross-reference Connetics' IND, ELA,
BLA and PLA information, if applicable, in any Genentech regulatory filings that
are related to the use or sale of Interferon Gamma outside the Field of Use.
Genentech shall reimburse Connetics for all reasonable actual costs associated
with Connetics' providing of data and regulatory information and referencing
within ninety (90) days of the receipt of an invoice of such cost by Genentech
from Connetics. Such requests shall not be submitted more than two (2) times in
any twelve (12) month period, unless such requests concern information that is
critical to product registration activities. Access to such information shall be
made in a timely and orderly fashion and in a manner such that the value of the
accessed information is preserved in all material respects.
(i) Commencing from Genentech's first delivery to
Connetics or Intermune of Finished Product for clinical studies in accordance
with the Supply Agreement, Connetics shall thereafter be responsible for
supplying ACTIMUNE free of charge to, and funding (if any) of, the third party
sponsors of the clinical studies listed in Exhibit D attached hereto and
incorporated herein. Connetics shall enter into clinical research agreements
with such third party sponsors governing such studies that commence after the
Effective Date hereof. With respect to clinical research agreements between
Genentech and such sponsors in effect prior to the Effective Date,
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Connetics shall replace Genentech, pursuant to an assignment, as a party.
ACTIMMUNE (and funding, if any) for all such studies shall be supplied by
Connetics to such sponsors as described in such clinical research agreements.
(j) As of the Transfer Date, Connetics shall conduct an
indigent patient program for Licensed Products sold for use in the field of CGD.
As soon as reasonably possible after Genentech transfers information regarding
patients who have participated in Genentech's indigent patient program,
Connetics will inform Genentech whether or not such patients will be eligible
and participating in Connetics' indigent patient program.
3.0 PRODUCT DEVELOPMENT AND MILESTONES
3.1 Commercialization Milestones.
(a) Connetics shall use its Best Efforts to develop, seek
FDA clearance for marketing of, commercialize and sell Licensed Products in the
Territory in all Areas of the Field of Use. The Parties acknowledge that a new
company, named InterMune Pharmaceuticals, Inc. ("InterMune"), has been
incorporated to conduct development and commercialization of Licensed Products
in the Field of Use pursuant to an appropriate sublicense from Connetics to
Intermune. Connetics agrees to perform the following Commercialization
Milestones no later than the date set forth below opposite the appropriate
Commercialization Milestone description:
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<TABLE>
<CAPTION>
COMMERCIALIZATION MILESTONE DATE OF COMPLETION
- ---------------------------------------- -----------
<S> <C>
(a) Completion of the formation of InterMune May 1, 1998
(b) Execution of a sublicense agreement granting to
InterMune rights, as permitted in this Agreement, necessary
to perform development of Licensed Products in the Field June 1, 1998
(c) Closing of at least [ * ] in equity
financing of InterMune by third parties and/or Connetics July 15, 1998
(d) Closing of at least another additional [ * ] in
equity financing of InterMune by third parties and/or Connetics September 1, 1998
(e) Enrollment and active participation
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of the first patient in the first new clinical trial
for a Licensed Product in the Field of Use in the Territory October 1, 1998
</TABLE>
(b) If Connetics fails to perform any of the
Commercialization Milestones described in 3.1 (a) through (e) inclusive by the
applicable Date of Completion for any reason within Connetics' control, then,
notwithstanding the termination provisions in Section 11.2 below, Genentech
shall have the right to terminate this Agreement and the licenses granted to
Connetics hereunder, upon written notice to Connetics, which termination shall
become effective thirty (30) days after Genentech's sending written notice of
such termination, unless such Commercialization Milestone has been completed
prior to the expiration of such thirty day period. If Connetics fails to perform
any of the Commercialization Milestones for causes beyond Connetics' control,
Genentech shall not have the termination rights above, provided that Connetics
has mitigated such causes to the extent it can reasonably do so. If Connetics
fails to reasonably mitigate such causes, Genentech will have the termination
rights described above. In addition, if Genentech exercises such termination
rights above, Genentech shall be automatically granted a co-exclusive (with
Connetics and Connetics' sublicensees), sublicenseable, royalty-free, worldwide
license: (i) to the result of efforts made by Connetics and its sublicensees in
the development of Licensed Products hereunder, (ii) to use all regulatory
submissions made by Connetics and its sublicensees hereunder, and (iii) under
all Connetics Patent Rights and
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Connetics Knowhow, arising from the efforts made by Connetics and its
sublicensees hereunder in the research and development of Licensed Products, to
make, have made, use, sell, offer for sale or import Licensed Products. Upon
Genentech's exercise of such termination right described above, Connetics shall
promptly provide Genentech with copies of all related documentation, whether
written or electronic, and materials, including biological materials, in the
form existing as of the effective date of such termination, reasonably necessary
for Genentech to exercise its license rights under this Section 3.1(b). Such
transfer shall be made in an orderly fashion and in a manner such that the value
in what is being transferred is preserved in all material respects. The
foregoing shall constitute Genentech's exclusive remedies for Connetics failure
to complete one or more of the Commercialization Milestones above, provided,
however, that Genentech's rights and remedies for breach of other provisions of
this Agreement, and under the Supply Agreement and the Stock Agreement, shall
remain in full force and effect.
3.2 Diligence
(a) Attached hereto as EXHIBIT E are Connetics' Clinical
Development Milestones (the "Clinical Development Milestones") for Licensed
Products in the Field of Use and the Dates of Completion for each such
milestone. Connetics shall use its Best Efforts to adhere to the Dates of
Completion as set forth in Exhibit E. Connetics shall notify Genentech in
writing when it achieves a Clinical Development Milestone.
(b) From time to time, Connetics may suggest
modifications to the Clinical Development Milestones based on new information.
Such modifications shall be effective only
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as mutually agreed upon, in writing, by the Parties. Genentech shall consider
such requested modifications in good faith and shall agree to any modifications
that are reasonably necessary to achieve the overall objectives of the
development of Licensed Product hereunder.
(c) In the event that Connetics determines that it will
be unable to meet any Date of Completion for a Clinical Development Milestone
due to an event within Genentech's control, including without limitation, delay
in the performance by Genentech of any of its obligations hereunder (e.g. the
transfer of technology or materials, including the supply of Interferon
Gamma-1B), Connetics shall give prompt notice to Genentech of such inability and
shall specify the amount of delay Connetics believes resulted from such event
within Genentech's control. Unless Genentech disagrees in writing on reasonable
grounds with the amount of such delay specified by Connetics, such Date of
Completion will automatically be extended by the length of time of the delay. In
the event Genentech disagrees in writing on reasonable grounds with the amount
of delay specified by Connetics, the Parties shall negotiate a new Date of
Completion in good faith.
(d) In the event that Connetics determines that it will
be unable to meet any Date of Completion for a Clinical Development Milestone
due to an event which would be considered a force majeure (as described in
Section 12.9), Connetics shall give prompt written notice to Genentech of such
inability and the length of the delay Connetics believes resulted from such
force majeure. Unless Genentech disagrees in writing on reasonable grounds with
the length of such delay specified by Connetics, such Date of Completion will be
automatically
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extended by such specified length of time of the delay. In the event Genentech
disagrees in writing on reasonable grounds with the length of delay specified by
Connetics, the Parties shall negotiate a new Date of Completion in good faith.
(e) In the event that Connetics determines that it will
be unable to meet any Date of Completion for a Clinical Development Milestone
for reasons other than (i) force majeure and/or (ii) an event within Genentech's
control, Connetics shall notify Genentech of such inability, identifying the
nature of the inability with reasonable specificity and may ask Genentech for a
reasonable extension of time in which to complete such Clinical Development
Milestone. In Genentech's sole discretion, Genentech may grant Connetics such an
extension to complete such Clinical Development Milestone.
(f) Except as set forth in Sections 3.2(c) or 3.2(d) or
in the event that Genentech shall have agreed to an extension of the time to
complete a Clinical Development Milestone as set forth in Section 3.2(e), if
Connetics fails to complete a Clinical Development Milestone by the
corresponding Date of Completion with respect to one or more of the Areas of the
Field of Use (other than in the dermatological Area of the Field of Use as
described in Section 1.12(a) above) Genentech shall have the right to terminate
this Agreement with respect to such Area(s) of the Field of Use, by providing
Connetics written notice thereof, and the termination of the Agreement with
respect to such Area(s) of the Field of Use shall be effective thirty (30) days
after Connetics' receipt of such notice unless such Clinical Development
Milestone shall have been met prior to the expiration of such thirty (30) day
period, and such
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termination shall be Genentech's exclusive remedy for such failure of Connetics
to complete such Clinical Development Milestone. Upon such termination of the
Agreement with respect to such Area(s) of the Field of Use: (i) Genentech shall
automatically have all the rights set forth in Sections 11.3(a) and (b) solely
with respect to such Area(s) of the Field of Use; and (ii) any sublicense(s)
granted by Connetics with respect to such Area(s) of the Field of Use shall not
automatically terminate, but instead, Genentech shall have the option to either
terminate or continue this Agreement with respect to such Area(s) of the Field
of Use with such sublicensee(s).
3.3 Review of Clinical Development Plan and Marketing Programs. On
or about each August 1 during the term of this Agreement, Connetics shall supply
Genentech with a report on Connetics' development and marketing programs for
Licensed Products in the Field of Use in the Territory. The report shall include
the following: (i) a description of Connetics' progress in such programs during
the twelve (12) months prior to the date of each such report, (ii) a description
of Connetics' planned development and marketing programs for the twelve (12)
months after the date of each such report, (iii) a copy of the most recent
version of the Clinical Development Milestones (if not previously provided to
Genentech), (iv) a copy of all previous versions of the Clinical Development
Milestones (if not previously provided to Genentech), (v) an explanation of any
discrepancies between Connetics' progress during the prior twelve (12) months
and the Clinical Development Milestones and (vi) a proposal to address such
discrepancies, as contemplated under Section 3.2. Genentech shall have the right
to comment on the Clinical
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Development Milestones and the development and marketing programs, and at
Genentech's discretion, the Parties shall meet to discuss and agree upon changes
to the Clinical Development Milestones.
3.4 New Delivery Forms. Connetics shall have the right to develop
and obtain regulatory approval for the marketing of new delivery forms of
Interferon Gamma for use in Licensed Products in the Field of Use in the
Territory.
3.5 Costs of Development. Connetics shall be responsible for all
aspects and costs of development, regulatory approval and registration of
Licensed Products.
3.6 Joint Development and Marketing Activities. Upon written
notice to Genentech, Connetics and InterMune shall be permitted to discuss and
enter into agreements and participate in joint development and marketing
activities for Licensed Products in the Field of Use outside the Territory with
other Genentech Interferon Gamma licensees.
3.7 Compliance with Law and Safety and Adverse Event Reporting.
(a) Connetics shall conduct clinical trials hereunder,
and shall make, use, sell and distribute Licensed Products in accordance with
all applicable laws and regulations. Genentech and Connetics shall make
available to each other during the term of this Agreement all safety data
obtained which relates to the use of Licensed Products in the Field of Use.
Connetics will provide to Genentech's Medical Information and Drug Experience
department at the time of filing a copy of each adverse event report or any
report, including summary reports, it is required to file under Title 21 or any
other applicable provision of the C.F.R. regarding
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Interferon Gamma. Genentech will provide Connetics at the time of filing with a
copy of each adverse event report or any report, including summary reports, it
is required to file regarding Interferon Gamma under Title 21 or any other
applicable provision of the C.F.R..
(b) Connetics shall maintain a safety database for all
Licensed Products and clinical trials conducted hereunder and shall submit to
regulatory agencies all adverse event and safety reports required to be filed
pursuant to Title 21 or any other applicable provision of the C.F.R. Connetics
shall also be responsible for providing product, medical and clinical
information regarding Licensed Product to its customers.
3.8 Clinical Development Reports. During the course of clinical
development of Licensed Products and clinical studies conducted by Connetics
hereunder, Connetics shall submit to Genentech the reports listed on Exhibit F
attached hereto and incorporated herein. Connetics shall submit such reports to
Genentech as promptly as reasonably practicable after such reports are completed
or such applicable information is available.
3.9 Technology Outside the Field of Use
(a) Upon mutual written amendment to this Agreement, the
Parties may expand the Field of Use, subject to the terms and conditions for
supply of Interferon Gamma 1-B set forth in the Supply Agreement, the payments
set forth in Sections 8.2 through 8.8 below inclusive and all other applicable
obligations of Connetics under this Agreement.
(b) Connetics may request an expansion of the Field of
Use in the Territory, by providing Genentech with a written letter of intent
which incorporates the terms and
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conditions specified in the Supply Agreement and Sections 8.2 through 8.8 of
this Agreement and sets forth a detailed clinical development plan and
reasonable proposed timeline (through FDA clearance) for developing the
additional medical indication(s) sought. Such letter of intent shall be deemed
Confidential Information of Connetics. Upon receipt of such letter of intent,
unless Genentech is conducting research in, or developing, Interferon Gamma for
such specified use, is already engaged in negotiations with a third party for
such specified use, or is prevented by prior written agreements to grant rights
to such additional indications to Connetics, Genentech shall negotiate
exclusively in good faith with Connetics, for a period of sixty (60) days on a
one time basis only for each such new indication outside the Field of Use, to
expand the Field of Use as proposed in the letter of intent on terms
substantially similar to those contained in this Agreement. If the Parties do
not reach mutual written agreement with respect to such proposed expansion of
the Field of Use within sixty (60) days, Genentech shall continue to have the
right to license its rights to such proposed additional indications for
Interferon Gamma outside the Field of Use to third parties other than Connetics,
provided that, for a period of six (6) months after the 60 day exclusive
negotiation period with Connetics, the milestone fee and royalty terms offered
by Genentech to third parties for such indications are not more favorable to
such third parties than those in the final offer made by Connetics.
(c) Prior to offering any third party an opportunity to
obtain any right or license under Genentech Patent Rights, Genentech Knowhow, or
Biogen License Rights to use, sell, offer for sale or import Licensed Products
for any indication outside the Field of Use in the
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Territory, Genentech shall first offer to Connetics to expand the Field of Use
to include such indication, in accordance with Section 3.8(d) below. Such
obligation to first offer to Connetics such indication outside the Field of Use
shall apply only to the first time Genentech wishes to offer rights to another
party to such indication outside the Field of Use.
(d) Genentech may offer to expand the Field of Use by
written notice to Connetics ("Offer Notice"). Upon receipt of such Offer Notice,
Connetics shall have thirty (30) days to provide Genentech with a written letter
of intent which incorporates the terms and conditions specified in the Supply
Agreement and Sections 8.2 through 8.8 of this Agreement. Upon receipt of such
letter of intent, Genentech shall negotiate exclusively in good faith with
Connetics, for a period of thirty (30) days on a one time basis only for each
such new indication outside the Field of Use, to expand the Field of Use as
proposed in the letter of intent on terms substantially similar to those
contained in this Agreement. If the Parties do not reach mutual written
agreement with respect to such proposed expansion of the Field of Use within 30
days, Genentech shall continue to have the right to license its rights to such
proposed additional indications for Interferon Gamma outside the Field of Use to
third parties other than Connetics. To remain under consideration as a potential
licensee for such rights to Interferon Gamma outside the Field of Use, within
ninety (90) days of receipt of Genentech's Offer Notice, Connetics shall provide
Genentech with a detailed written clinical development plan and reasonable
proposed timeline for developing (through FDA clearance) the additional medical
indication(s) sought, which development plan shall be deemed the Confidential
Information of
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Connetics.
4.0 Supply of Interferon Gamma-1B
4.1 Bulk Product and Finished Product. Genentech shall supply
Connetics with, and Connetics shall purchase, Bulk Product for clinical studies
and for sales of Licensed Product and Finished Product for commercial sale of
Licensed Product to treat CGD and osteopetrosis and for clinical studies,
pursuant to the terms and conditions of the Supply Agreement.
4.2 Supply of Non-human Interferon Gamma. Upon Connetics'
reasonable request and in Genentech's sole discretion, Genentech may choose to
sell to Connetics Non-human Interferon Gamma at a price equal to [ * ].
Notwithstanding the foregoing, Genentech shall have no obligation to (a) provide
any minimum amount of Non-human Interferon Gamma to Connetics or (b) produce
additional amounts of Non-human Gamma Interferon in the event its current
inventory is depleted.
5.0 Intellectual Property Rights
5.1 Ownership. Genentech shall retain title to Genentech Patent
Rights, Genentech Knowhow, Genentech Manufacturing Knowhow, the ACTIMMUNE mark,
and to any patent rights and knowhow related to Interferon Gamma or Licensed
Products developed solely by Genentech. Connetics shall retain title to
Connetics Patent Rights and Connetics Knowhow and to any patent rights and
knowhow related to Interferon Gamma and Licensed Products developed
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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solely by Connetics. Except as expressly provided herein, each Party shall own
and shall have the exclusive right to exploit all intellectual property rights
owned or acquired by such Party.
5.2 Patent Prosecution and License Fees
(a) With the exception of Genentech Patent Rights under
the CMCC License, Genentech shall be responsible for the prosecution and
maintenance of the Genentech Patent Rights in the Territory at Genentech's
expense, in consultation with Connetics. Genentech shall be responsible for the
prosecution and maintenance and outside counsel fees associated therewith of the
Genentech Patent Rights under the CMCC License in the Field of Use in the
Territory at Connetics' expense, upon prior consultation with and approval from
Connetics, which approval shall not be unreasonably withheld or delayed.
Genentech shall keep Connetics promptly informed of the status of prosecution of
Genentech Patent Rights in the Territory, including providing copies of all
material correspondence with the U.S. Patent and Trademark Office. Connetics
shall have the right to comment upon such prosecution and Genentech agrees to
take such comments into consideration reasonably in advance of any action taken
by Genentech in such prosecution.
(b) Connetics shall assist Genentech in prosecuting and
maintaining the Genentech Patent Rights as contemplated by Section 5.2(a) above.
(c) At least thirty (30) days prior to the time each
benchmark payment of [ * ] under the [ * ] License becomes due during the term
of this Agreement, Genentech shall notify Connetics of such payment due and
Connetics shall have the option of paying such benchmark
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payment, on Genentech's behalf, when due to [ * ]. In the event that
Connetics chooses not to pay the benchmark payment when due, Connetics shall
so notify Genentech and Genentech shall have the option of paying such
benchmark payment. If Genentech pays such benchmark payment, Connetics shall
reimburse Genentech for such payment within thirty (30) days of receipt of
Genentech's request for reimbursement.
5.3 Patent Infringement
(a) If either Party learns that a third party is
infringing Genentech Patent Rights or Connetics Patent Rights, it shall promptly
notify the other in writing. The Parties shall use reasonable efforts in
cooperation with each other to stop such patent infringement without litigation.
(b) Genentech and Connetics each shall have the first
opportunity to take the appropriate steps to remove the infringement of its own
Patent Rights which claim Interferon Gamma and/or its manufacture or use in the
Field of Use including, without limitation, initiating suit. In either case, if
such Party decides not to take such steps with respect to its own Patent Rights
within one hundred twenty (120) days of discovering or being notified of the
infringement, the other Party may do so. Each of the Parties agrees to provide
reasonable assistance to the other in taking such steps. Any legal action taken
under this section will be at the expense of the Party by whom suit is filed and
will be controlled by the Party bringing suit. The Party not bringing suit may
choose to be represented in any such action by counsel of its own choice at its
own expense. The Party bringing suit shall be reimbursed for its costs
associated
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with bringing suit with the proceeds of any damages or costs recovered. Any
monies remaining shall be split between the Parties on an equitable basis
proportional to their respective damage from the infringement. If both Parties
bring suit, equitable apportionment of the costs and damages to be recovered
shall be agreed upon before the filing of the suit.
5.4 Third Party Rights. If a notice of infringement is received
by, or a suit is initiated against, either of Connetics or Genentech with
respect to Licensed Products or the ACTIMMUNE mark, the Parties will in good
faith discuss the best way to respond.
5.5 Trademark Infringement
(a) If either Party learns that a third party is
infringing the ACTIMMUNE mark, it shall promptly notify the other in writing.
The Parties shall use reasonable efforts in cooperation with each other to stop
such trademark infringement without litigation.
(b) Genentech shall have the first opportunity to take
the appropriate steps to remove the infringement of the ACTIMMUNE mark,
including, without limitation, initiating suit. If Genentech decides not to take
such steps within one hundred twenty (120) days of discovering or being notified
of the infringement, Connetics may do so. Each of the Parties agrees to provide
reasonable assistance to the other in taking such steps. Any legal action taken
under this section will be at the expense of the Party by whom suit is filed and
will be controlled by the Party bringing suit. The Party not bringing suit may
choose to be represented in any such action by counsel of its own choice at its
own expense. The Party bringing suit shall be reimbursed for its costs
associated with bringing suit with the proceeds of any damages or costs
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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recovered. Any monies remaining shall be split between the Parties on an
equitable basis proportional to their respective damage from the infringement.
If both Parties bring suit, equitable apportionment of the costs and damages to
be recovered shall be agreed upon before the filing of the suit.
5.6 [ * ] License. If Genentech receives notice that it has
acquired any Genentech Patent Rights under the [ * ] License after the Effective
Date of this Agreement, Genentech shall notify Connetics in writing of such
additional rights as soon as reasonable after Genentech receives such notice.
6.0 Product Promotion
6.1 Promotion. Genentech agrees, and shall require its
sublicensees, if any, to agree, not to promote Interferon Gamma or a Licensed
Product in the Field of Use in the Territory. Connetics agrees, and shall
require its sublicensees to agree, not to promote Interferon Gamma or a Licensed
Product outside the Field of Use or outside the Territory.
6.2 Encroachment. In the event that either Party becomes aware of
spillover sales of Interferon Gamma by Genentech that is used within the Field
of Use or of Licensed Product by Connetics that is used outside the Field of
Use, the Parties shall meet and agree in good faith on reasonably appropriate
steps (a) to abate such encroachment and (b) to compensate the Party which has
suffered encroachment in its field of use by such spillover sales.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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7.0 Confidentiality
In the course of performance of this Agreement, one Party may disclose
to the other or receive information from the other relating to the subject
matter of this Agreement which information shall be considered to be the
disclosing Party's confidential information, if in the case of a written
disclosure, it is designated as confidential at the time of disclosure, or if in
the case of oral disclosure, the specific nature of the oral disclosure and its
confidentiality is confirmed in writing to the other Party within thirty (30)
days of the oral disclosure (the "Confidential Information"). Each Party shall
protect and keep confidential and shall not use, publish or otherwise disclose
to any third party, except as permitted by this Agreement or with the other
Party's written consent, the other Party's Confidential Information for a period
of five (5) years from the date of termination of this Agreement if it is
terminated at any time within five (5) years after the Effective Date of this
Agreement, otherwise for a period of three (3) years from date of termination or
expiration of this Agreement. A Party may disclose the other Party's
Confidential Information to its sublicensees hereunder, provided that such
sublicensees are subject to obligations of confidentiality at least equivalent
to those set forth in this Article 7. The Parties shall consult prior to the
submission of any manuscript for publication to determine if the publication
will contain any Confidential Information of the other Party. Such consultation
shall include providing a copy of the proposed manuscript to the other Party at
least forty-five (45) days prior to the proposed date of submission to a
publisher, incorporating appropriate changes proposed by the other Party into
the manuscript submission and deleting all of the other Party's
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Confidential Information which such Party does not agree to the publication
thereof. The foregoing notwithstanding, Confidential Information may be
disclosed: (a) during any official proceeding before a court or governmental
agency if reasonably related to that proceeding; (b) as a part of a patent
application filed on inventions made under this Agreement, provided that the
Party whose Confidential Information is included in such application shall have
the opportunity to review such disclosure at least fifteen (15) business days
prior to the date of such filing and such Party does not object to such
disclosure; and (c) as may be reasonably required to comply with applicable
governmental laws or regulations. For the purposes of this Agreement,
Confidential Information shall not include such information that:
(i) was known to the receiving Party at the time of
disclosure;
(ii) was generally available to the public or was
otherwise part of the public domain at the time of
disclosure or became generally available to the
public or otherwise part of the public domain after
disclosure other than through any act or omission of
the receiving Party in breach of this Agreement;
(iii) became known to the receiving Party after disclosure
from a source that had a lawful right to disclose
such information to others; or
(iv) was independently developed by the receiving Party
without the use of Confidential Information of the
other Party, as evidenced by written records.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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If Connetics sublicenses any of its rights hereunder to InterMune pursuant to
this Agreement, Genentech and InterMune shall enter into a mutual
confidentiality agreement, substantially in the form of this Article 7.0, to
protect confidential information that may be disclosed by InterMune to
Genentech.
8.0 Up-front Payment, Milestone Payments and Royalties
In consideration for the licenses granted to Connetics by Genentech
pursuant to Section 2.0 above, Connetics shall make the following payments to
Genentech:
8.1 Up-front Payment. Connetics shall issue to Genentech upon the
Original Closing Date (as defined in the Stock Agreement) shares of Connetics
Common Stock ("Original Issuance Shares" as defined in the Stock Agreement) with
a fair market value equal to two million dollars ($2,000,000), on the terms and
conditions set forth in the Stock Agreement. If, on the Second Closing Date (as
defined in the Stock Agreement), the aggregate market value of the Original
Issuance Shares (based on the Second Issuance Price (as defined in the Stock
Agreement)) is less than four million dollars ($4,000,000), Connetics shall
issue to Genentech upon the Second Closing Date the number of additional shares
of Connetics Common Stock (the ASecond Issuance Shares," as defined in the Stock
Agreement) equal to the lesser of: (i) the number of shares necessary to
increase the aggregate market value of the Original Issuance Shares (based on
the Second Issuance Price) plus the Second Issuance Shares (based on the Second
Issuance Price) to four million dollars ($4,000,000) or (ii) the number of
shares necessary to increase the aggregate number of the Company's shares of
Common Stock held by Genentech
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(exclusive of any shares that Genentech has purchased from parties other than
the Company) to 9.9% of the Company's total outstanding shares of Common Stock
as of the close of business on the third trading day before the Second Closing
Date, on the terms and conditions set forth in the Stock Agreement. In lieu of
all or any portion of the Second Issuance Shares that the Company is obligated
to issue to Genentech on the Second Closing Date, the Company may elect to pay
Genentech the cash value of such Second Issuance Shares (based on the Second
Issuance Price). The Original Closing and the Second Closing of the stock
issuances shall take place as described in the Stock Agreement. In the event
that Connetics does not issue to Genentech all of the Second Issuance Shares or
the cash value of the Second Issuance Shares, Genentech may, in addition to
other remedies available to it by law or in equity, immediately terminate this
Agreement and the licenses granted to Connetics hereunder. Such termination by
Genentech of the Agreement and the licenses hereunder does not discharge
Connetics' obligation to issue all of the Second Issuance Shares or to pay to
Genentech the cash value of the Second Issuance Shares. The up-front payment
shall not be creditable against any royalty payments owed by Connetics under
Sections 8.3 and 8.4 below.
8.2 Milestone Payments for Licensed Products. Connetics shall make
the following cash milestone payments to Genentech:
(a) [ * ] within thirty (30) days following the dates on
which each of the first three (3) NDA's or BLA's for a Licensed Product is filed
with the FDA by Connetics for a new indication in the Field of Use; provided
however, that such milestone payments shall not be paid
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upon the filing of a NDA or BLA for an osteopetrosis or atypical mycobacterial
infection indication.
(b) [ * ] within thirty (30) days following the date
Connetics receives FDA clearance of each new indication for a Licensed Product
for commercial sale in the United States; provided however, that such milestone
payment shall not be paid upon receipt of FDA clearance for an osteopetrosis or
atypical mycobacterial infection indication.
(c) [ * ] within thirty (30) days following the first
date Connetics' aggregate Net Sales of all Licensed Products in the Territory
exceed [ * ] in any calendar year.
(d) [ * ] within thirty (30) days following the first
date Connetics' aggregate Net Sales of all Licensed Products in the Territory
exceed [ * ] in any calendar year.
Notwithstanding the foregoing, upon the expiration or revocation of the
last remaining issued patent within the Genentech Patent Rights during the term
of this Agreement, each of the milestones payments set forth in (a)-(d) above
thereafter shall be reduced by fifty percent (50%). Milestone payments shall not
be creditable against any royalty payments owed under Sections 8.3 and 8.4
below.
8.3 Royalties. Connetics shall pay Genentech the following
royalties on Net Sales of Licensed Products by Connetics and its sublicensees:
(a) For annual aggregate Net Sales of all Licensed
Products in the Territory of up to three million seven hundred thousand dollars
($3,700,000), a royalty rate equal to [ * ] of such Net Sales.
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(b) In addition to the payment of the royalty rate
specified in (a) above, for annual aggregate Net Sales of all Licensed Products
in the Territory exceeding three million seven hundred thousand dollars
($3,700,000), a royalty rate equal to [ * ] of such Net Sales exceeding
$3,700,000.
(c) The above royalties shall be payable until the later
of: (i) the expiration or revocation of the last remaining issued patent within
the Genentech Patent Rights or (ii) twenty (20) years from the Effective Date of
this Agreement. Notwithstanding the foregoing, upon the expiration of the last
to expire issued patent within the Genentech Patent Rights during the term of
this Agreement, thereafter each of the royalty rates set forth in (a) and (b)
above shall be reduced by fifty percent (50%).
8.4 Third-Party Royalties. If Genentech or Connetics is required
to pay any third party a royalty due to the manufacture, use, sale, offer for
sale or importation of a Licensed Product in the Territory for or by Connetics
or its sublicensees, Connetics shall be responsible for the payment of [ * ] of
such third-party royalty, provided however, that Connetics may deduct from the
royalties payable to Genentech under Section 8.3 above [ * ] of such third party
royalties incurred only due to use patents in the Field of Use in the Territory,
up to a maximum total deduction of [ * ] percentage points from the royalties
payable by Connetics to Genentech under Section 8.3. For purposes of
clarification, such deductions shall not apply to any benchmark payment under
the [ * ] License made by Connetics pursuant to Section 5.2(c) above. Attached
hereto as Exhibit G is a list of all such royalty obligations to third parties
known to Genentech as
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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of the Effective Date without diligent search. No later than thirty (30) days
from the Effective Date, Genentech shall complete a reasonable internal
investigation of its records and update Exhibit G, as necessary, to accurately
reflect all such royalty obligations to third parties to the best of Genentech's
knowledge; provided however, Connetics acknowledges that Genentech has no
obligation to conduct due diligence or any investigation with respect to third
party patent rights related to Licensed Products. Genentech shall notify
Connetics in writing during the term of this Agreement if it becomes aware of
any additional Genentech third party royalty obligations.
8.5 Royalty Payments. Royalty payments shall be made to Genentech
quarterly within ninety (90) days following the end of each calendar quarter for
which royalties are due. Each royalty payment shall be accompanied by a report
summarizing the total Net Sales during the relevant three-month period, and the
calculation of royalties, if any, due thereon pursuant to Section 8.3.
8.6 Taxes. Genentech shall pay any and all taxes levied on account
of, or measured by, any payment, including, without limitation, royalties, it
receives under this Agreement.
8.7 Termination. If the license granted to Connetics herein is
terminated by the Parties, Connetics shall have no obligation to make any
milestone or royalty payments to Genentech that has not accrued prior to the
effective date of such termination, but shall remain liable for all such
payments accruing prior to termination.
8.8 Records and Reporting
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(a) Records. Connetics and any sublicensee of Connetics
shall keep full, true and accurate books of account containing all particulars
which may be necessary for the purpose of showing Net Sales. Said books of
account shall be kept at the principal place of business of Connetics or its
sublicensee, as the case may be. Said books and the supporting data shall be
open at all reasonable times, for three (3) years following the end of the
calendar year to which they pertain (and access shall not be denied thereafter,
if reasonably available), to the inspection of an independent public accountant
retained by Genentech and reasonably acceptable to Connetics (or its
sublicensee) for the purpose of verifying Net Sales under this Agreement;
subject to the provisions of Section 8.8(c) below
(b) Reports. Connetics shall within ninety (90) days
after the end of each calendar quarter beginning with the quarter of the first
commercial sale of Licensed Product in the Field of Use in the Territory by
Connetics or its sublicensee, deliver to Genentech a true and accurate report,
setting forth such particulars of the business conducted by Connetics and its
sublicensees during the preceding quarter as are pertinent to an accounting for
Net Sales and deductible expenses under this Agreement. Such reports shall
include at least the following: (i) the total gross sales of Licensed Products
occurring during that calendar quarter, (ii) the allowable deductions therefrom,
(iii) the total Net Sales of Licensed Products occurring during that calendar
quarter and (iv) the calculation of royalties, if any, due thereon pursuant to
the above Section 8.3.
(c) Auditing. At Genentech's request and expense,
Connetics shall permit a
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certified public accountant selected by Genentech and acceptable to Connetics to
examine, not more than once in any four consecutive calendar quarters during the
term of this Agreement, but including one (1) post-termination audit, Connetics'
books of account and records of all sales of Licensed Products by Connetics for
the sole purpose of determining the correctness of the reports provided by
Connetics under the above Section 8.8(b). If such accountant reasonably
determines that the royalties owed by Connetics to Genentech under the above
Section 8.3 have been, for any calendar year in total, understated by Connetics,
Connetics shall immediately pay all understated royalties, together with
interest on such royalties from the date accrued at a rate of [ * ] and shall
pay the reasonable costs of the examination if Connetics has understated such
royalties by more than [ * ].
9.0 Representations and Warranties
9.1 Disclaimer. Except as expressly provided herein, the Parties
disclaim all other representations and warranties, express or implied, including
without limitation, WARRANTIES OF COMMERCIAL UTILITY, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, VALIDITY OR SCOPE OF GENENTECH PATENT RIGHTS or
NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
9.2 Representations and Warranties.
(a) Each party represents and warrants to the other that: (a)
it is free to enter into this Agreement; (b) in so doing it will not violate any
other agreement to which it is a party;
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(c) it is currently capable of making the grant of rights described in Sections
2.1(a), (b), (c), (d), 2.2 and 2.4; and (d) it will not enter into any agreement
in the future which conflicts with or violates any term or provision of this
Agreement. Genentech makes no representation or warranty that all intellectual
property rights necessary for Connetics to make, have made, use, sell, offer for
sale and import Licensed Products in the Field of Use in the Territory have been
granted to Connetics under Section 2.0 of this Agreement.
(b) Connetics further represents and warrants that, prior
to the Effective Date of this Agreement, Connetics' officers (acting under
delegated authority of its Board of Directors) have determined that the fair
market value of the exclusive license granted to Connetics hereunder is less
than $15,000,000 and therefore that the execution and delivery of this exclusive
license Agreement, or the performance of the obligations by Genentech or
Connetics hereunder, do not require that filings be made under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or under the
rules or regulations promulgated thereunder, by Connetics, Genentech, or their
respective affiliates or ultimate parent entities, if any.
(c) Genentech represents and warrants to Connetics that
as of the Effective Date: (i) to Genentech's knowledge, it has not received any
notice of a claim by a third party for infringement of such third party's
intellectual property relating to the use and practice of the Genentech Knowhow,
the Genentech Manufacturing Knowhow, the Genentech Patent Rights or the Biogen
License Rights; and (ii) to the knowledge of Genentech's patent counsel, there
is no
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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issued patent that would be infringed by the practice of the Genentech Knowhow,
the Genentech Manufacturing Knowhow or the Genentech Patent Rights as permitted
under the license rights granted under Section 2.1; and (iii) it has no
knowledge of any actual infringement by any third party in the Field of Use in
the Territory of the Genentech Patent Rights.
10.0 Liability
10.1 Limitation of Liability. Neither Party shall be liable to the
other for indirect, incidental, special or consequential damages arising out of
any of the terms or conditions of this Agreement or with respect to their
performance or lack thereof.
10.2 Connetics Indemnification. Connetics shall indemnify, defend
and hold harmless Genentech and its affiliates from and against all third party
costs, claims, suits, expenses (including reasonable attorneys' fees) and
damages arising out of or resulting from: (a) any willful or negligent act or
omission by Connetics relating to the subject matter of this Agreement or (b)
the use by or administration to any person of a Licensed Product, Bulk Product
or Finished Product that was sold, distributed or otherwise provided to a third
party by Connetics or its sublicensees under this Agreement; except where such
costs, claims, suits, expenses or damages arose or resulted from any negligent
act or omission by Genentech or any defect in the manufacture of Bulk Product or
Finished Product by Genentech that was not discovered by Connetics, provided
that Genentech gives reasonable notice to Connetics of any such claim or action,
tenders the defense of such claim or action to Connetics and assists Connetics
at
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Connetics' expense in defending such claim or action and does not compromise or
settle such claim or action without Connetics' prior written consent.
10.3 Genentech Indemnification. Genentech shall indemnify, defend
and hold harmless Connetics, its affiliates and sublicensees from and against
all third party costs, claims, suits, expenses (including reasonable attorney's
fees) and damages arising out of or resulting from: (a) any willful or negligent
act or omission by Genentech relating to the subject matter of this Agreement;
(b) any defect in the manufacture of Bulk Product or Finished Product by
Genentech that was not discovered by Connetics; or (c) the use by or
administration to any person of a product containing Interferon Gamma sold,
distributed or otherwise provided to a third party by Genentech or its
sublicensees; except where the foregoing costs, claims, suits, expenses or
damages arose or resulted from (i) any negligent act or omission by Connetics or
(ii) the use by or administration to any person of a Licensed Product sold,
distributed or otherwise provided by Connetics or its sublicensees other than
resulting from a defect in the manufacture of such Licensed Product by
Genentech, provided that Connetics gives reasonable notice to Genentech of any
such claims or action, tenders the defense of such claim or action to Genentech
and assists Genentech at Genentech's expense in defending such claim or action
and does not compromise or settle such claim or action without Genentech's prior
written consent.
11.0 Term and Termination
11.1 Term. This Agreement shall commence on the Effective Date of
this Agreement
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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and, unless terminated earlier, shall expire at the later to occur of (a) the
expiration of the last to expire of any Genentech Patent Rights or (b) twenty
(20) years from the Effective Date of this Agreement; provided, however, that in
the event that either the [ * ] License or the [ * ] License is terminated, the
licenses granted by Genentech to Connetics under the [ * ] License or the [ * ]
License shall also terminate. Genentech shall use its Best Efforts to keep the
[ * ] License and the [ * ] License in effect during the term of this Agreement,
provided, however, that if Connetics declines to pay a [ * ] benchmark payment
as outlined in Section 5.2(c) or pay any royalty owed to [ * ] under the [ * ]
License for the sales of Licensed Products, then Genentech shall not be
obligated to make such payment and Genentech shall have the option, in its sole
discretion, to terminate the [ * ] License. One year before the expiration of
this Agreement under this Section 11.1, the Parties agree to meet and to discuss
in good faith extending the term of this Agreement on terms mutually agreeable
to the Parties.
11.2 Termination for Default. If either Party shall default in a
material manner with respect to any material provision of this Agreement and the
other Party shall have given the defaulting Party written notice of such
default, the defaulting Party shall have thirty (30) days to cure such default.
If such default is not cured within such thirty (30) day period, the
non-defaulting Party shall have the right, upon notice to the defaulting Party
and without prejudice to any other rights the non-defaulting Party may have, to
terminate this Agreement unless the defaulting Party is in the process of
attempting in good faith to remedy such default, in which case, the thirty (30)
day cure period shall be extended by an additional thirty (30) days. If
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Genentech terminates this Agreement pursuant to this Section 11.2, Genentech
shall automatically have all of the rights set forth in Sections 11.3(a) and (b)
of this Agreement. Upon such termination, any sublicenses granted under this
Agreement shall not automatically terminate, but instead, Genentech shall have
the option to either terminate or continue this Agreement with each sublicensee.
If Connetics terminates this agreement pursuant to this Section 11.2, Connetics
shall automatically have all of the rights set forth in Section 11.4 of this
Agreement. Connetics shall have no right to terminate this Agreement pursuant to
this Section 11.2 in the event of Genentech's failure to supply Bulk Product or
Finished Product. In the event of Genentech's failure to supply Bulk Product or
Finished Product, Connetics shall have the rights set forth in the Supply
Agreement.
11.3 Genentech's Rights on Termination
(a) If Genentech terminates this Agreement pursuant to Section
11.2 above, Genentech shall be automatically granted a nonexclusive,
sublicenseable, license in the Territory under Connetics Patent Rights and
Connetics Knowhow arising from the efforts made by Connetics and its
sublicensees hereunder in the research and development of Licensed Products, to
make, have made, use, sell, offer for sale or import Licensed Products and shall
be automatically granted a right to use all of Connetics' regulatory submissions
made by or on behalf of Connetics for Interferon Gamma and Licensed Products. If
Genentech sells a commercial product under the license granted in this Section
11.3 that would, but for the license granted herein, infringe a claim of such
Connetics Patent Rights or that is based upon, incorporates or
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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utilizes such Connetics Knowhow, Genentech shall pay Connetics a royalty, under
terms and conditions to be mutually agreed upon by the Parties, such royalty to
be commensurate with the value contributed by such Connetics Patent Rights and
Connetics Knowhow to such commercial product, but in no event shall such royalty
exceed two percent (2%) of Genentech's net sales of such commercial product. As
used herein, "net sales" shall have the equivalent definition given to Net Sales
in Section 1.25 above.
(b) Upon the effective date of termination by Genentech pursuant
to Section 11.2 above, Connetics shall promptly provide Genentech with copies of
all related documentation regarding Connetics Patent Rights and Connetics
Knowhow arising from the efforts made by Connetics and its sublicensees
hereunder in the research, development and manufacture of Licensed Products,
whether written or electronic, and materials, including biological materials, in
the form existing as of the effective date of such termination, reasonably
necessary for Genentech to exercise its license rights under Section 11.3(a)
above. Such transfer shall be made in a timely and orderly fashion and in a
manner such that the value of what is being transferred is preserved in all
material respects. Connetics shall promptly take all appropriate and necessary
actions, including action before the involved regulatory agency, to effect
transfer to Genentech of, and shall also permit Genentech to reference, any FDA
submissions, including, without limitation, any PLA or BLA filed with the FDA
with respect to Licensed Products. Within ninety (90) days of such assignment
and completion of all such appropriate and necessary actions, Genentech will
reimburse Connetics for its actual expenses incurred in preparing
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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documentation for filing or referencing the submission and in taking such
appropriate and necessary action related to such transfer or referencing.
11.4 Connetics' Rights on Termination. Should Connetics terminate this
Agreement pursuant to Section 11.2 above, Genentech shall grant to Connetics (a)
an exclusive, sublicenseable, royalty-bearing license, according to royalty
terms described in Sections 8.3 and 8.4 within the Field of Use in the
Territory, under terms and conditions agreed upon by the Parties, under the
Genentech Patent Rights and Genentech Knowhow in order to permit Connetics to
continue using, selling, offering for sale and importing Licensed Products in
the Field of Use in the Territory (excluding, with respect to the fields of
scleroderma and infectious disease or condition caused by human papillomavirus,
Licensed Products containing any form of Interferon Gamma other than Genentech
Gamma Interferon TRIANGLE3, as that term is defined in the Biogen License), (b)
a non-exclusive, sublicenseable, royalty-bearing license, (conforming to the
license grant in Section 2.1 (b) above) according to royalty terms described in
Sections 8.3 and 8.4 in the Territory , under terms and conditions agreed upon
by the Parties, under the Genentech Patent Rights and Genentech Knowhow in order
to permit Connetics to continue using, selling, offering for sale and importing
Licensed Products containing any form of Interferon Gamma other than Genentech
Gamma Interferon TRIANGLE3 (as that term is defined in the Biogen License) in
the Territory in the fields of scleroderma and infectious desease or condition
caused by human papillomavirus, (c) a non-exclusive, sublicenseable license (the
royalty for which is already included in clause (a) above) in the Territory in
the fields of scleroderma and infectious disease
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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or condition caused by human papillomavirus, under terms and conditions agreed
upon by the Parties, under the Biogen License Rights in order to permit
Connetics to continue using, selling, offering for sale and importing Licensed
Products (except those Licensed Products containing Biogen Gamma Interferon
TRIANGLE0) in the field of scleroderma and infectious disease or condition
caused by human papillomavirus in the Territory and (d) a non-exclusive
sublicenseable license (the royalty for which is already included in clause (a)
above) under Genentech Patent Rights and Genentech Manufacturing Knowhow in
order to permit Connetics to continue making and having made Licensed Products
in the Field of Use in the Territory.
11.5 Bankruptcy. Either Party may, in addition to any other remedies
available to it by law or in equity, terminate this Agreement, in whole or in
part as the terminating Party may determine, by written notice to the other
Party in the event the other Party shall have become bankrupt, or shall have
made an assignment for the benefit of its creditors or there shall have been
appointed a trustee or receiver of the other Party or for all or a substantial
part of its property or any case or proceeding shall have been commenced or
other action taken by or against the other Party in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement, composition
or readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization or other similar act or law of any jurisdiction now
or hereafter in effect and any such event shall have continued for sixty (60)
days undismissed, unbonded and undischarged. All rights and licenses granted
under to this Agreement by one Party to the other Party are, and shall otherwise
be deemed to be, for purposes of Section 365 (n)
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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of the Bankruptcy Code, licenses of rights to "intellectual property" as defined
under Section 101 (56) of the Bankruptcy Code. The Parties agree that the
licensing Party under this Agreement shall retain and may fully exercise all of
its rights and elections under the Bankruptcy Code in the event of a bankruptcy
by the other Party. The Parties further agree that in the event of the
commencement of a bankruptcy proceeding by or against one Party under the
Bankruptcy Code, the other Party shall be entitled to complete access to any
such intellectual property pertaining to the rights granted in the licenses
hereunder of the Party by or against whom a bankruptcy proceeding has been
commenced and all embodiments of such intellectual property.
11.6 Unilateral Termination. In addition to any other right of
termination provided herein, Connetics shall have the right to terminate this
Agreement for any reason, with or without cause upon six (6) months' prior
written notice to Genentech. If Connetics terminates this Agreement pursuant to
this Section 11.6, Connetics agrees that for the following three (3) years it
will not use, sell or acquire from any third party (whether by license or
otherwise) any Licensed Product in the Field of Use. If Connetics terminates
this Agreement pursuant to this Section 11.6, the licenses granted hereunder
shall terminate and Genentech shall automatically have all of the rights set
forth in Sections 11.3(a) and (b) of this Agreement.
11.7 Survival of Certain Provisions. Termination of this Agreement for
any reason shall not release either Party from any obligation arising prior to
the date of termination. The provisions of Sections 1.0, 2.4 (except in the
event of termination of this Agreement by Connetics pursuant to Section 11.2),
11.3(a) and (b) (except in the event of termination of this
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Agreement by Connetics pursuant to Section 11.2), 11.4 (except in the event of
termination of this Agreement by Genentech pursuant to Section 11.2), and
Articles 5.0, 7.0, 9.0, 10.0, 11.0 (except as provided in this paragraph) and
12.0 shall survive any termination of this Agreement.
12.0 General Provisions
12.1 Notices. All notices which may be required pursuant to this
Agreement: (i) shall be in writing, (ii) shall be addressed, in the case of
Genentech (except as otherwise specified herein), to the Corporate Secretary at
the address set forth at the beginning of this Agreement, and in the case of
Connetics, to the Vice President - Intellectual Property at the address set
forth at the beginning of this Agreement, (or to such other person or address as
either Party may so designate from time to time), (iii) shall be mailed,
postage-prepaid, by registered mail or certified mail, return receipt requested,
or transmitted by courier for hand delivery or transmitted by facsimile and (iv)
shall be deemed to have been given on the date of receipt if sent by mail or on
the date of delivery if transmitted by courier or facsimile. Notices by
facsimile may be sent to the following numbers: for Connetics, to (650)
843-2899; for Genentech, to (650) 952-9881.
12.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of California (other than its choice of
law principles).
12.3 Entire Agreement. This Agreement is the entire agreement between
the Parties, and there are no prior written or oral promises or representations
not incorporated herein or therein, except that certain Confidentiality
Agreement between the Parties dated January 9, 1997
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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which shall remain in full force and effect. This Agreement shall supersede and
replace the Prior Agreement in its entirety, and the Prior Agreement shall be
terminated automatically as of the Effective Date. No amendment or modification
of the terms of this Agreement shall be binding on either Party unless reduced
to writing and signed by an authorized officer of the Party to be bound.
12.4 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
permitted successors and assigns. This Agreement shall not be assignable by
either Party without the other's prior written consent, provided however, that
either Party may assign this Agreement, without the other Party's written
consent but after providing thirty (30) days prior written notice to the other
Party, to any successor pursuant to a consolidation or merger of such Party with
or into any other corporation or corporations that results in a change of
greater than 50% of the voting control of such Party, or a sale, conveyance or
disposition of all or substantially all of the assets of such Party or the
effectuation by such Party of a transaction or series of related transactions in
which more than 50% of the voting power of such Party is disposed of.
12.5 Waiver. The waiver by a Party hereto of any breach of or default
under any of the provisions of this Agreement or the failure of a Party to
enforce any of the provisions of this Agreement or to exercise any right
thereunder shall not be construed as a waiver of any other breach or default or
as a waiver of any such rights or provisions hereunder.
12.6 Severability. If any part of this Agreement shall be invalid or
unenforceable under
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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applicable law, such part shall be ineffective only to the extent of such
invalidity or unenforceability, without in any way affecting the remaining parts
of this Agreement. In addition, the part that is ineffective shall be reformed
in a mutually agreeable manner so as to as nearly approximate the intent of the
Parties as possible.
12.7 Publicity. Connetics and Genentech agree that, except as may
otherwise be required by applicable laws, regulations, rules, or orders,
including the disclosure requirements of the Securities and Exchange Commission
("SEC"), no information concerning this Agreement and the transactions
contemplated herein (except information which is already in the public domain)
shall be made public by either Party without the prior written consent of the
other Party. Notwithstanding the foregoing, with respect to complying with the
disclosure requirements of the SEC, in connection with any required SEC filing
of this Agreement by Connetics, Connetics shall seek confidential treatment of
portions of this Agreement from the SEC and Genentech shall have the right to
review and comment on such an application for confidential treatment prior to
its being filed with the SEC. Genentech shall provide its comments, if any, on
such application as soon as practicable and in no event later than seven (7)
days after such application is provided to Genentech. To assist Connetics in its
compliance with SEC disclosure obligations, Genentech shall provide to
Connetics, within fourteen (14) days of the Effective Date, electronic copies of
this Agreement (and all exhibits hereto) and the Supply Agreement. In addition,
notwithstanding the foregoing, Connetics shall have the right to disclose
information concerning this Agreement and the transactions contemplated herein
to its legal representatives, advisors,
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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prospective investors, investors, third party auditors, sublicensees and
prospective sublicensees hereunder to the extent reasonably necessary and under
obligations of confidentiality no less stringent than those provided for in
Article 7.0.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original for all purposes, but
all of which together shall constitute one and the same instrument.
12.9 Force Majeure. Neither Party shall be liable to the other for its
delay or failure to perform under this Agreement or shall have any right to
terminate this Agreement for any such delay or failure in performance
attributable to any act of God, flood, fire, explosion, strike, lockout, labor
dispute, casualty or accident, war, revolution, civil commotion, act of public
enemies, blockage or embargo, injunction, law, order, proclamation, regulation,
ordinance, demand or requirement of any government or subdivision, authority or
representative of any such government, or any other cause beyond the reasonable
control of such Party, if the Party affected shall give prompt notice of any
such cause to the other Party. The Party giving such notice shall thereupon be
excused from such of its obligations, hereunder for the period of time that it
is so disabled.
12.10 Headings. Headings are for the convenience of reference only and
shall not control the construction or interpretation of any of the provisions of
this Agreement.
12.11 No Partnership. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, employer-employee, or joint venture
relationship between the
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Parties.
[SIGNATURE PAGE TO FOLLOW]
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by its duly authorized representatives as of the date set forth above.
GENENTECH, INC. CONNETICS CORPORATION
By: /s/ Nick Simon By: /s/ Thomas G. Wiggans
---------------------------------
Name: Nick Simon Name: Thomas G. Wiggans
------------------------------- -----------------
Title: V.P., Business and Corporate Development Title: President and CEO
----------------------------------------- ------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A
PATENT APPLICATIONS AND PATENTS INCLUDED IN GENENTECH PATENT RIGHTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
U.S. SERIAL NUMBER U.S. PATENT NUMBER
- --------------------------------------------------------------------------------
<S> <C>
08/460,524 Pending
- --------------------------------------------------------------------------------
08/460,539 Pending
- --------------------------------------------------------------------------------
5,690,925
- --------------------------------------------------------------------------------
5,582,824
- --------------------------------------------------------------------------------
5,151,265
- --------------------------------------------------------------------------------
5,200,177
- --------------------------------------------------------------------------------
5,112,605
- --------------------------------------------------------------------------------
5,196,191
- --------------------------------------------------------------------------------
5,096,705
- --------------------------------------------------------------------------------
5,574,137
- --------------------------------------------------------------------------------
5,248,499
- --------------------------------------------------------------------------------
</TABLE>
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
EXHIBIT B
INTERFERON GAMMA
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C
INTERFERON GAMMA-1B
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT D
THIRD PARTY SPONSORED STUDIES
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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EXHIBIT E
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT F
CLINICAL REPORTS
The following information/reports will be provided to Genentech in a timely
manner:
- - FDA Meeting Minutes
- - IND(s)
- - Initial
- - Updates (if applicable)
- - Annual Report(s)
- - Investigator Brochure(s)
- - Clinical Studies:
- - Protocol(s)
- - Prior to FDA submission
- - First Patient-In (FPI)
- - First Patient-Out (FPO)
- - Last Patient-In (LPI)
- - Last Patient-Out (LPO)
- - Serious Adverse Event (SAE) Summary
- - Clinical Study Interim Analysis and Update(s) (if applicable)
- - Go/No-Go Decision Minutes
- - Clinical Study Final Report(s)
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- - Draft
- - Final Copy
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT G
THIRD PARTY ROYALTIES
Royalties are payable under the [ * ] License, as follows (capitalized terms
shall have the meanings defined in the [ * ] License): a [ * ] royalty is
payable on Net Sales of gamma interferon in Approved Countries in the Territory
for the prophylaxis or treatment of atopic dermatitis and/or steroid-dependent
asthma, where there is substantial protection from an issued Licensed Patent for
the approved indication and where the Licensee has enjoyed Market Exclusivity.
The royalty rate is [ * ] on Net Sales in the Licensed Field in Approved
Countries where the Licensee enjoyed Market Exclusivity but where there is no
substantial patent protection, or while the Licensed Patent applications
covering the indication are still pending, provided that such applications have
been diligently prepared, filed and maintained. The royalty rates described
above are reduced by [ * ] for Approved Countries where the Licensee has not
enjoyed Market Exclusivity.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT H
TRANSFER DATE ACTIVITIES FOR COMMERCIAL
SALES OF ACTIMMUNE FOR CGD
Prior to the Transfer Date, as defined in Section 1.29 of this
Agreement, the following activities must be completed by the appropriate Party
as described below:
I. Regulatory Requirements
1. FDA License - Connetics must obtain all licenses,
including license numbers, required for the sale of
Actimmune for CGD by Connetics. Connetics shall also
obtain a NDC number.
2. PLA/IND Transfer - Genentech shall transfer to Connetics
the PLA and IND for CGD on file with the FDA.
3. Connetics must obtain FDA review and approval, as required
by law or regulation, for Connetics' labels, product
insert and packaging for sale of Actimmune for CGD.
4. Genentech shall transfer its safety information to
Connetics for Actimmune, as provided in Section 2.5(g) of
this Agreement. Connetics shall establish a safety
database system for Actimmune, such that as of the
Transfer Date, Connetics shall be responsible for all
safety-related requirements under FDA regulations,
including the reporting of adverse events.
5. Prior to the Transfer Date, Connetics shall establish all
procedures, controls and other methods and capabilities
needed in order to comply with all requirements, laws and
regulations applicable to the use, distribution and sale
of Actimmune for CGD.
II. Quality Control, Product Testing
1. To the extent that Connetics is required by law or
regulation to conduct any quality control, quality
assurance and/or stability testing of Actimmune sold for
CGD, in addition to any such testing to be conducted by
Genentech pursuant to the Supply Agreement, Connetics
shall establish procedures and obtain regulatory approval
to do so prior to the Transfer Date.
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III. Uninsured Patient Program
Connetics shall have established an uninsured patient program,
including procedures for determining patient eligibility.
Genentech shall transfer to Connetics its existing information
regarding such patients prior to the Transfer Date, to the
extent it has received consent from such patients to do so.
Connetics shall notify Gennetech prior to the Transfer Date
which of the patients participating in Genentech's uninsured
patient program, and for which Genentech has transferred
information, shall receive drug under Connetics' uninsured
patient program.
IV. Product Distribution and Sale
1. Connetics shall establish product distribution and
inventory systems for Actimmune. Genentech will provide to
Connetics the name of its current distributor.
2. Connetics shall establish systems and personnel required
to address customer inquiries, medical information
requrests and product returns.
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AMENDMENT NO. ONE
TO
LICENSE AGREEMENT
THIS AMENDMENT NUMBER ONE TO LICENSE AGREEMENT FOR INTERFERON GAMMA
("Amendment") is entered into effective December 28, 1998, between Genentech,
Inc. ("Genentech") and Connetics Corporation ("Connetics"). Terms not otherwise
defined in this Amendment shall have the meanings as defined in the License
Agreement.
R E C I T A L S
A. The parties have previously entered into a License Agreement effective
May 5, 1998, relating to interferon gamma (the "License Agreement"),
together with a Stock Purchase Agreement of even date (the "Stock
Agreement").
B. Pursuant to Section 2.3(c) of the License Agreement, Connetics had the
right to sublicense the Agreement to InterMune, and has in fact entered
into a sublicense to that effect dated August 21, 1998.
C. Pursuant to Section 8.1 of the License Agreement, and the terms of the
Stock Agreement, Connetics agreed to issue additional stock to
Genentech if certain conditions were not met by December 28, 1998, and
the parties anticipate that those conditions will not be met by that
date.
D. The parties desire to amend the License Agreement effective as of the
date first written above, on the terms forth in this Amendment, and
simultaneously with a corresponding Amendment Number One to the Stock
Purchase Agreement ("Stock Agreement Amendment").
NOW THEREFORE, the parties agree as follows:
AGREEMENT
1. Section 8.1 of the License Agreement is hereby amended to read in its
entirety as follows:
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8.1 Up-front Payment. Connetics shall issue to Genentech upon the
Original Closing Date (as defined in the Stock Agreement) shares of
Connetics Common Stock ("Original Issuance Shares" as defined in the
Stock Agreement) with a fair market value equal to two million dollars
($2,000,000), on the terms and conditions set forth in the Stock
Agreement. If on the Notification Date or, if later, the Second Closing
Date (each as defined in the Stock Agreement Amendment), the aggregate
market value of the Original Issuance Shares (based on the Second
Issuance Price, as defined in the Stock Agreement Amendment) is less
than $4,000,000, then Connetics shall issue to Genentech on the Second
Closing Date that number of additional shares of its Common Stock (the
"Second Issuance Shares") equal to the lesser of: (i) the number of
shares necessary to increase the aggregate market value of the Original
Issuance Shares (based on the Second Issuance Price) and the Second
Issuance Shares (based on the Second Issuance Price) to $4,000,000; or
(ii) the number of shares (rounded to the nearest whole number )
necessary to increase the aggregate number of shares of Connetics
Common Stock held by Genentech (exclusive of any shares that Genentech
has purchased from parties other than Connetics) to 9.9% of Connetics'
total outstanding shares of Common Stock as of the close of business on
the Notification Date or the Second Closing Date, if later. In lieu of
all or any portion of the Second Issuance Shares that Connetics is
obligated to issue to Genentech on the Second Closing Date, Connetics
may elect to pay Genentech the cash value of such Second Issuance
Shares (based on the Second Issuance Price). The Original Closing of
the stock issuances shall take place as described in the Stock
Agreement and the Second Closing of the stock issuances shall take
place as described in the Stock Agreement Amendment. In the event that
Connetics does not issue to Genentech all of the Second Issuance Shares
or the cash value of the Second Issuance Shares, Genentech may, in
addition to other remedies available to it by law or in equity,
immediately terminate this Agreement and the licenses granted to
Connetics under this Agreement. Such termination by Genentech of the
Agreement and the licenses hereunder does not discharge Connetics'
obligation to issue all of the Second Issuance Shares or to pay to
Genentech the case value of the Second Issuance Shares. The up-front
payment shall not be creditable against any royalty payments owed by
Connetics under Section 8.3 and 8.4 of this Agreement.
2. To the extent necessary, the remaining provisions of the License
Agreement are amended to reflect the revised definitions of Second
Closing Date and Second Issuance Shares, as modified by the Stock
Agreement Amendment.
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3. The remainder of the License Agreement, including the exhibits to that
Agreement (except the Stock Agreement, to the extent modified by the
Stock Agreement Amendment), will continue in full force and effect as
though fully set forth in this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment Number One to
License Agreement as of the date first written above.
Genentech, Inc. Connetics Corporation
By: /s/ William D. Young By: /s/ Thomas G. Wiggans
------------------------------------ ----------------------------------
William D. Young Thomas G. Wiggans
Chief Operating Officer President & Chief Executive Officer
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AMENDMENT NO. TWO
TO
LICENSE AGREEMENT
THIS AMENDMENT NUMBER TWO TO LICENSE AGREEMENT FOR INTERFERON GAMMA
("AMENDMENT") is entered into effective January 15, 1999, by and between
Genentech, Inc. ("Genentech") and Connetics Corporation ("Connetics").
R E C I T A L S
A. The Parties have previously entered into that certain License Agreement
for Interferon Gamma, dated May 5, 1999, as amended on December 23,
1998 (the "License Agreement").
B. Pursuant to Section 2.3(c) of the License Agreement, Connetics has the
right to sublicense certain of its rights under the Agreement to
InterMune Pharmaceutical, Inc. ("InterMune"), and has in fact entered
into a sublicense to that effect dated August 21, 1998.
C. On December 3, 1998, the Parties entered into a Letter Agreement to
document the intent and agreement of Connetics and Genentech with
respect to additional terms governing the transfer and distribution of
Interferon Gamma-1B, pending the preparation of an amendment to the
License Agreement.
D. The Parties now desire to enter into a definitive amendment to the
License Agreement, effective as of the date first written above, to
permit a limited distribution of Interferon Gamma-1B by Connetics or
its sublicensee under Genentech labels and to add other additional
terms governing the transfer and distribution of Interferon Gamma-1B.
NOW THEREFORE, the Parties hereby agree as follows:
AGREEMENT
1. Terms not otherwise defined in the Amendment shall have the meanings defined
in the License Agreement.
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2. Section 1.29 of the License Agreement is hereby deleted and replaced in its
entirety as follows:
1.29 "Transfer Date" shall mean January 15, 1999, unless otherwise
mutually agreed to in writing by the Parties
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3. A new Section 1.30 is added to the License Agreement to read in its entirety
as follows:
1.30 "Connetics Product" shall mean Finished Product under the
ACTIMMUNE-Registered Trademark- and labeled under the name of
Connetics or its sublicensee. For clarification, all terms and
conditions of this Agreement that apply to Finished Product shall
also apply to Connetics Product.
4. A new Section 1.31 is added to the License Agreement to read in its entirety
as follows:
1.31 "Distribution Period" shall mean the period of time beginning
January 15, 1999 and ending on the earlier of: (a) the first date on
which Genentech supplies InterMune with Connetics Product or (b) sixty
(60) days after InterMune's receipt of a license from the FDA to sell
interferon Gamma-1B for CGD.
5. A new Section 1.32 is added to the License Agreement to read in its entirety
as follows:
1.32 "Genentech Finished Product" shall mean Genentech's inventory
of Interferon Gamma-1B under the ACTIMMUNE-Registered Trademark- and
labeled under Genentech's name. For clarification, Genentech
Finished Product is a Licensed Product under this Agreement.
6. A new Section 1.33 is added to the License Agreement to read in its entirety
as follows:
1.33 "Genentech Bulk Product" shall mean Genentech's inventory of
Interferon Gamma-1B bulk protein existing as of the Transfer Date.
7. A new Section 1.34 is added to the License Agreement to read in its entirety
as follows:
1.34 "Genentech Product" shall mean, together, Genentech Finished
Product and Genentech Bulk Product.
8. A new Section 1.35 is added to the License Agreement to read in its entirety
as follows:
1.35 "Fully Burdened Manufacturing Cost" shall mean [ * ], which shall
be comprised of the sum of: [ * ].
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9. A new Section 1.36 is added to the License Agreement to read in its entirety
as follows:
1.36 "Third Party Manufacturing Royalties" shall mean all royalties
paid or incurred by Genentech to third parties under licenses taken by
Genentech with respect to patents or patent applications that, but for
such license(s), would be infringed by the manufacture, use, sale,
offer for sale or importation of Genentech Finished Product or
Genentech Bulk Product, which royalties are based on the manufacture
and sale of Genentech Finished Product or Genentech Bulk Product by
Genentech (or its contract manufacturer) or by Connetics or its
sublicensees (or a contract manufacturer on their behalf). Genentech
shall notify Connetics in writing during the term of this Agreement if
it becomes aware of any Third Party Manufacturing Royalties.
10. A new Subsection 2.5(k) is added to the License Agreement to read in its
entirety as follows:
2.5(k) Provided that all the activities listed on Exhibit H attached
hereto are completed, Genentech also shall transfer to Connetics or its
sublicensee on the Transfer Date all responsibility for the
distribution, sales and product support of Genentech Finished Product,
in the Territory, for the treatment of infections associated with CGD,
subject to the provisions of Section 4.3 below and the following terms
and conditions:
(i) Product support of Genentech Finished Product shall
include, without limitation, all financial services, all
reporting required by federal and state law or regulation,
professional services, customer inquiries, product returns,
government chargebacks, product refunds, and patient
assistance programs except for the processing of state
Medicaid invoices and certain product returns as provided in
Subsections 2.5(k)(iii) and (iv) below.
(ii) Connetics or its sublicensee shall sell and distribute
Genentech Finished Product only during the Distribution
Period, after which time Connetics or its sublicensee shall
market, sell and distribute Connetics Product, or other
Finished Product, for CGD. Notwithstanding the foregoing, for
a period of ten (10) business days after the last day of the
Distribution Period, Connetics or its sublicensee may continue
to sell and
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distribute its existing inventory of Genentech Finished
Product in order to reduce or exhaust such existing inventory.
Under no circumstances, however, will Genentech be required to
manufacture, fill, label, package, or otherwise supply
Genentech Finished Product to Connetics or its sublicensees
after the end of the Distribution Period. After the
Distribution Period Connetics or its sublicensees shall retain
full responsibility, and provide all product support, for all
Genentech Product sold or distributed by Genentech, Connetics
or its sublicensees, prior to, during and after the
Distribution Period, including without limitation, Genentech
Product in distribution channels.
(iii) Notwithstanding the above, Genentech shall remain
responsible for processing state Medicaid invoices for
Genentech Finished Product, in accordance with this
subsection, during the Distribution Period and for that period
of time after the Distribution Period during which states
continue to send Medicaid rebate invoices for Genentech
Finished Production sold under the Genentech NDC label number
50242. Within fifteen (15) days after the end of each calendar
quarter, Connetics or its sublicensee shall supply Genentech
with a report of its Average Manufacturer Price ("AMP") and
Best Price ("BP"), as defined in the U.S. Omnibus Budget
Reconciliation Act of 1990 ("OBRA 90"), for Genentech Finished
Product for such quarter, and detailed calculations
determining such AMP and BP. The AMP, BP and supporting
calculations shall be based on the carton price for Genentech
Finished Product. Genentech shall report such quarterly AMP
and BP to the Health Care Finance Administration as required
by law and regulation, and will also process state Medicaid
rebate invoices received for Genentech Finished Product.
Genentech will pay, adjust or dispute the state Medicaid
rebate invoices as permitted under OBRA 90. Within sixty (60)
days of receipt of an invoice from Genentech, Connetics or its
sublicensee will reimburse Genentech the full amounts of
Medicaid rebates paid by Genentech. Genentech will have the
right to examine, but not more than once every calendar year,
the books of account and records of Connetics and its
sublicensees for the purpose of determining the correctness of
the quarterly reports provided by Connetics or its
sublicensees under this subsection. If Genentech reasonably
determines that any such reports(s) were incorrect, Connetics
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shall pay Genentech's costs of correcting its reports to
federal agencies and will also pay any penalties or fees
associated with such incorrect reporting.
(iv) As of the Transfer Date, Connetics or its sublicensees
will be responsible for processing returns and related credits
for all Finished Product, except that Genentech will process
credits for returns of Genentech Finished Product if Genentech
receives a returned Genentech Finished Product from a third
party. Within sixty (60) days of receipt of an invoice from
Genentech, Connetics or its sublicensees will reimburse
Genentech for such return credits processed by Genentech.
(v) Connetics or its sublicensees shall be responsible for all
government chargebacks for Genentech Finished Product sold by
wholesalers to customers on and after the Transfer Date, and
for all government chargebacks for all Connetics Product and
other Finished Product sold by Connetics and its sublicensees.
(vi) Connetics and its sublicensees shall not actively market
or promote Interferon Gamma-1B during the Distribution Period
and while selling or distributing Genentech Finished Product.
During the Distribution Period, Connetics and its sublicensees
shall not distribute any notice, publication or make any
presentation to any third party regarding Interferon Gamma-1B
without Genentech's prior review of such notice, publication
or presentation, and receipt of Genentech's prior written
consent. Connetics and its sublicensees shall not sell
Genentech Finished Product at a price higher than that charged
by Genentech on January 14, 1999.
11. A new Section 2.5(l) is added to the License Agreement to read in its
entirety as follows:
2.5(l) Connetics agrees that, as of the Transfer Date and under the
terms and conditions below, it or its sublicensee will supply Genentech
Finished Product to those certain patients in the U.S. to whom Genentech
has an existing contractual or regulatory obligation to supply Interferon
Gamma-1B, including prior clinical study patients. In addition, Connetics
or its sublicensee will supply Genentech Finished
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Product to Hoffman-LaRoche Canada Limited ("Roche Canada") for distribution
to patients to whom there is a contractural or regulatory obligation to
supply Interferon Gamma-1B. Connetics also agrees that it or its
sublicensee will supply Genentech Finished Product free of charge to those
[ * ] oncology study patients (including [ * ] National Cancer Institute
oncology clinical trial patients) who are continuing to receive Interferon
Gamma-1B. Genentech shall supply a list of all such patients, and
information regarding the amount and destination of such Interferon
Gamma-1B, as soon as reasonably possible. After the end of the Distribution
Period, Connetics or its sublicensee shall supply Connetics Product, or
other Finished Product, to such patients and to Roche Canada in the same
quantities. No other right or license is implied or granted to Connetics or
its sublicensees to distribute Genentech Finished Product, or any other
Licensed Product, outside the Field of Use or outside the Territory.
(i) To supply the patients and Roche Canada as described
above, Connetics or its sublicensee shall pay a price for such
Genentech Finished Product, and such Connetics Product and
other Finished Product supplied by Genentech, equal to [ * ]
percent [ * ] of Genentech's Fully Burdened Manufacturing
Cost, plus [ * ] of Third Party Manufacturing Royalties
attributable to the manufacture or distribution of such
Genentech Finished Product or other Finished Product.
(ii) For U.S. CGD clinical study patients that do not qualify
for Connetics' (or its sublicensee's) indigent patient
program, Connetics (or its sublicensee) shall supply, at its
own cost, Genentech Finished Product and Finished Product to
such patients free of charge for a period of time ending not
later than December 31, 1999. Connetics (or its sublicensee)
shall notify such patients that such drug shall not continue
to be supplied free of charge by Genentech, Connetics or its
sublicensee, and Connetics or its sublicensee shall use its
best efforts to terminate such supply of drug before December
31, 1999, after reasonable prior notice to such patients. If [
* ] reasonably determines that [ * ].
(iii) Roche Canada will reimburse Connetics, or its
sublicensee, for its cost of supplying such Genentech Finished
Product and Connetics Product
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to the patients in Canada under a separate agreement to be
negotiated and executed by Roche Canada and Connetics.
(iv) Connetics, or its sublicensee, will supply Genentech
Finished Product and Finished Product to the [ * ] oncology
patients without charge to Genentech or to such patients. If,
however, Genentech has not extended the Field of Use of this
Agreement to the field of oncology within six (6) months of
the Effective Date of this Amendment No. 2, then Genentech
will reimburse Connetics, or its sublicensee, for the cost of
such Genentech Finished Product and Finished Product during
such six month period. If Genentech thereafter extends the
Field of Use to oncology, then as of the effective date of
such extension Connetics or its sublicensee will provide
Finished Product to such patients without charge to Genentech
or to such patients. If Genentech does not extend the Field of
Use to oncology, Connetics or its sublicensee will continue to
supply such oncology patients, but Genentech will reimburse
Connetics, or its sublicensee, for such drug in an amount
equal to one hundred percent (100%) of the price paid to
Genentech for such Genentech Finished Product and Finished
Product and the direct administrative and distribution costs
of providing such drug to such patient.
12. A new Section 4.3 is added to the License Agreement to read in its entirety
as follows:
4.3 (a) Genentech shall sell to Connetics, or its sublicensee,
Genentech's existing inventory of Genentech Product for commercial sale
solely for the treatment of infections associated with CGD. Connetics shall
pay a price for such Genentech Product equal to [ * ] percent [ * ] of
Genentech's Fully Burdened Manufacturing Cost, plus [ * ] of Third Party
Manufacturing Royalties attributable to the manufacture or sale of such
Genentech Product.
(b) Genentech shall deliver Genentech Finished Product to
Connetics to a single destination in the United States chosen by Connetics,
by carrier identified by Connetics. Title and risk of loss as to all
Genentech Finished Product shall pass to Connetics at point of origin (FOB
Genentech). Connetics shall be responsible for all freight, freight
brokerage, insurance and other costs associated with shipping
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Genentech Finished Product hereunder. As soon as reasonably possible after
each shipment of Genentech Finished Product, Genentech shall forward to
Connetics all customary documents concerning the shipment, including
Genentech's invoice relating to such shipment. To the extent possible, a
certificate of analysis will be included in each shipment. Where it is not
possible to include a certificate of analysis with a shipment, Genentech
shall furnish the same to Connetics as soon as reasonably possible.
(c) Payment by Connetics shall be made within sixty (60) days
after Connetics' receipt of Genentech's invoice for the supply of
Genentech Finished Product. All payments to Genentech by Connetics
under this Agreement shall be made in United States dollars by wire
transfer (or such other reasonable means as Genentech may direct) to
such United States bank account as Genentech may direct. If a wire
transfer is to be made, Connetics shall provide notice at least five
(5) days prior to the date of transfer of the amount of payment and the
date good funds will be received. Such notice shall be given to the
Treasurer of Genentech at the address set forth at the beginning of
this Agreement or such other address as Genentech may subsequently
direct.
(d) Genentech shall use its best efforts to maintain its Fully
Burdened Manufacturing Cost for Genentech Finished Product at or below
the benchmark costs of [ * ] dollars [ * ] per vial of Genentech
Finished Product (the "Benchmark Costs"). All the provisions of Section
2.6(e) of that certain Supply Agreement, dated May 5, 1998, between
Genentech and Connetics, shall apply to such Benchmark Costs herein.
(e) All transfer of Genentech Finished Product to Connetics or
its sublicensee hereunder shall be subject to the provisions hereof and
shall not be subject to the terms and conditions contained on any
purchase order or confirmation by Genentech, except insofar as any such
purchase order or confirmation establishes: (i) the quantity and form
of Genentech Product, (ii) the shipment date; (iii) the shipment routes
and destinations; or (iv) the carrier.
13. This Amendment supersedes in its entirety the Letter Agreement dated
December 3, 1998.
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14. All other terms and provisions of the License Agreement, including all
exhibits to that Agreement, will continue in full force and effect as though
fully set forth in this Amendment. Nothing in this Amendment shall be construed
as affecting Connetics' obligations to be liable and responsible for the
performance of all of the obligations of Connetics and its sublicensees under
the License Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment Number Two to
License Agreement as of the date first written above.
Genentech, Inc. Connetics Corporation
By: /s/ Nicholas J. Simon By: /s/ Thomas G. Wiggans
------------------------------------ ------------------------------------
Name: Nicholas J. Simon Thomas G. Wiggans
---------------------------------- President and Chief Executive Officer
Title: Vice President, Business and
---------------------------------
Corporate Development
Acknowledged and agreed as to InterMune's rights and obligations hereunder as
Connetics' sublicensee under the License Agreement:
InterMune Pharmaceuticals, Inc.
By: /s/ Scott Harkonen
------------------------------------
Scott Harkonen, M.D.
President
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AMENDMENT NO. THREE
TO
LICENSE AGREEMENT
THIS AMENDMENT NUMBER THREE TO LICENSE AGREEMENT FOR INTERFERON GAMMA
("Amendment") is entered into effective April 27, 1999 (the "Amendment Effective
Date"), by and between Genentech, Inc. ("Genentech") and Connetics Corporation
("Connetics"). Genentech and Connetics may each be referred to herein as a
"Party" and jointly as the "Parties."
RECITALS
A. The Parties have previously entered into that certain License Agreement
for Interferon Gamma, dated May 5, 1998, as amended on December 23,
1998 and on January 15, 1999 (the "License Agreement").
B. Pursuant to Section 2.3(c) of the License Agreement, Connetics has the
right to sublicense certain of its rights under the Agreement to
InterMune Pharmaceuticals, Inc. ("InterMune"), and has in fact entered
into such sublicense to that effect dated August 21, 1998.
C. The Parties have entered into that certain letter agreement dated
January 5, 1999 and revised on March 1, 1999 (the "Letter Agreement"),
documenting the intent and agreement of Connetics and Genentech with
respect to certain additional rights to be granted to Connetics and its
sublicensees under the Genentech License, pending the preparation of an
amendment to the License Agreement.
D. In consideration of such additional rights, InterMune will issue to
Genentech shares of Genentech Series A-1 Preferred InterMune stock on
the terms and conditions set forth in that certain stock purchase
agreement between Genentech and InterMune of even date herewith.
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E. The Parties now desire to enter into a definitive amendment to the
License Agreement, as of the Amendment Effective Date, through which
Genentech shall grant, and Connetics and InterMune shall accept, such
certain additional rights under the License Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and conditions herein contained, and intending to be legally bound hereby, the
Parties mutually agree as follows:
1. Terms not otherwise defined in this Amendment shall have the meanings
defined in the License Agreement.
2. A new Section 1.7.1 is hereby added to read in its entirety as follows:
1.7.1 "Combination Product Adjustment" shall mean the
following: in the event that a Licensed Product is sold in the form of
a combination product containing one or more active ingredients or
components in addition to such Licensed Product, Net Sales for such
combination product will be adjusted by multiplying actual Net Sales of
such combination product by the fraction A/(A + B) where A is the
invoice price of the Licensed Product, if sold separately, and B is the
invoice price of any other active ingredient(s) or component(s) in the
combination, if sold separately. If, on a country-by-country basis, the
other active ingredient(s) or component(s) in the combination are not
sold separately in said country, Net Sales shall be calculated by
multiplying actual Net Sales of such combination product by the
fraction A/C where A is the invoice price of the Licensed Product if
sold separately, and C is the invoice price of the combination product.
If, on a country-by-country basis, neither the Licensed Product nor the
other active ingredient(s) or component(s) of the combination product
is sold separately in said country, Net Sales allocable to the Licensed
Product shall be determined by mutual agreement reached in good faith
by the Parties based on an equitable method of determining such Net
Sales that, among other considerations, takes into account, on a
country-by-country basis, variations in potency, the relative
contribution of each active ingredient or component in the combination
product and the relative value to the end-user of each active
ingredient or component.
3. Section 1.12 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
1.12 "Field of Use" shall mean the administration to humans of
Licensed Protein Product for the treatment or prevention of any human
disease or condition, provided
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however, that "Field of Use" shall not include: (i) the administration
to humans of Licensed Protein Product for the treatment or prevention
of any type of arthritis or cardiac or cardiovascular disease or
condition or (ii) use of Licensed Protein Product for Gene Therapy.
Each "indication" listed on Exhibit E attached hereto shall be referred
to herein individually as an "Area of the Field of Use" and
collectively as "Areas of the Field of Use."
4. A new Section 1.15.1 is hereby added to the Agreement to read in its
entirety as follows:
1.15.1 "Gene Therapy Field of Use" shall mean the
administration to humans of Licensed Gene Product for Gene Therapy for
the treatment or prevention of any human disease or condition, provided
however, that "Gene Therapy Field of Use" shall not include any
treatment or prevention of any type of cardiac or cardiovascular
disease or condition.
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5. Section 1.18 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
1.18 "Genentech Patent Rights" shall mean all patents and
patent applications and any patents issuing therefrom, together with
any extensions, reissues, reexaminations, substitutions, renewals,
divisions, continuations and continuations-in-part thereof:
(a) that are owned or controlled by Genentech
presently or hereafter, during the term of this Agreement, and
under which Genentech is free to license or sublicense; and
(b) to the extent they claim or directly relate to:
(i) Interferon Gamma or the manufacture or use of Interferon
Gamma in the Field of Use, or (ii) IG Nucleotide Sequence or
the manufacture or use of IG Nucleotide Sequence in the Gene
Therapy Field of Use;
including, without limitation, the patent rights granted under
that certain license agreement between Genentech and
Children's Medical Center Corporation, dated July 16, 1990
(the "CMCC License"), but specifically excluding any rights
granted to Genentech under the Biogen License. Genentech
Patent Rights shall include, without limitation, the patents
and patent applications listed in Exhibit A attached hereto.
Notwithstanding the foregoing, Genentech Patent Rights shall
exclude any rights Genentech acquires after the Effective Date
under third-party license agreements, with the exception of
those rights acquired under the CMCC License, unless and until
the Parties mutually agree on terms and conditions for the
sublicense of such rights from Genentech to Connetics.
6. A new Section 1.20.1 of the License Agreement is hereby added to read
in its entirety as follows:
1.20.1 "IG Nucleotide Sequence" shall mean any DNA or RNA
sequence encoding Interferon Gamma.
7. Section 1.22 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
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1.22 "Licensed Product" shall mean, collectively:
(a) Any pharmaceutical formulation containing
Interferon Gamma, whether alone or together with or
incorporated into any other substance or product or
material or device, whether active or not, and which
(i) but for the licenses granted hereunder, the
manufacture, use, sale, offer for sale or
importation of which in the Territory would infringe
or contribute to the infringement of the Genentech
Patent Rights in the Territory, or (ii) is based
upon or incorporates or utilizes Genentech Knowhow
(a "Licensed Protein Product"); and
(b) Any pharmaceutical formulation containing the IG
Nucleotide Sequence, whether alone or together with
or incorporated into any other substance or product
or material or device, whether active or not, and
which but for the licenses granted hereunder, the
manufacture, use, sale, offer for sale or
importation of which in the Territory would infringe
or contribute to the infringement of the Genentech
Patent Rights in the Territory (a "Licensed Gene
Product").
8. The following two sentences are hereby added to the end of
Section 1.25:
[ * ], shall also be deducted from the gross invoiced sales
prices charged for such Licensed Products in determining Net Sales for
such Licensed Products. In the event that a Licensed Product is sold in
the form of a combination product containing one or more active
ingredients or components in addition to such Licensed Product, Net
Sales for such combination product will be calculated in accordance
with the Combination Product Adjustment."
9. Section 1.28 of the License Agreement is hereby deleted and replaced in
its entirely as follows:
1.28 "Territory" shall mean the United States of America, and
its territories and possessions, and Japan.
10. A new Section 1.37 is hereby added to the License Agreement to read in
its entirety as follows:
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1.37 "Third Party Product Rights" shall mean any rights
licensed or sublicensed to any third party by Genentech as of the
Effective Date to use, manufacture or sell (a) Interferon Gamma, (b)
the IG Nucleotide Sequence or (c) any pharmaceutical formulation
containing either or both of Interferon Gamma and the IG Nucleotide
Sequence, whether alone or together with or incorporated into any other
substance or product or material or device, whether active or not;
PROVIDED, HOWEVER, that Third Party Product Rights shall not include
any right regarding use of the foregoing in any treatment or prevention
of any type of cardiac or cardiovascular disease or condition.
11. Section 2.1 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
2.1 Patent and Knowhow License Grants.
(a) Genentech hereby grants to Connetics an exclusive license,
even as to Genentech, under Genentech Patent Rights and under Genentech
Knowhow to use, sell, offer for sale and import (but not to make or
have made) Licensed Protein Products in the Field of Use in the
Territory (excluding Japan), (excluding, with respect to the fields of
(i) scleroderma and (ii) infectious disease or condition caused by
human papillomavirus, Licensed Protein Products containing any form of
Interferon Gamma other than Genentech Gamma Interferon TRIANGLE 3 (as
that term is defined in the Biogen License)). Notwithstanding the
foregoing, Genentech reserves the right to use (but not to import,
offer for sale or sell) Licensed Protein Products within the Field of
Use solely for non-commercial research purposes.
(b) Genentech hereby grants to Connetics a non-exclusive
license under Genentech Patent Rights and under Genentech Knowhow to
use, sell, offer for sale and import (but not to make or have made)
Licensed Protein Products containing any form of Interferon Gamma other
than Genentech Gamma Interferon TRIANGLE 3 (as that term is defined in
the Biogen License) in the Territory (excluding Japan) in the fields
of: (i) scleroderma and (ii) infectious disease or condition caused by
human papillomavirus.
(c) Genentech hereby grants to Connetics a non-exclusive
sublicense under the Biogen License Rights to use, sell, offer for sale
and import Licensed Protein Products (excluding Licensed Protein
Products containing Biogen Gamma Interferon TRIANGLE 0 (as that
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term is defined in the Biogen License)) in the Territory (excluding
Japan) in the fields of scleroderma and infectious disease or condition
caused by human papillomavirus.
(d) Genentech hereby grants to Connetics a non-exclusive
license under Genentech Patent Rights to make or have made in the
Territory (excluding Japan) Licensed Protein Products for use or sale
in the Field of Use in the Territory (excluding Japan).
(e) Genentech hereby grants to Connetics a non-exclusive
license under Genentech Patent Rights and Genentech Knowhow to use
non-human animal species derived homologues of Interferon Gamma
("Non-human Interferon Gamma") solely for non-commercial research
purposes to support the Field of Use in the Territory (excluding
Japan). Genentech hereby grants to Connetics a non-exclusive license
under Genentech Patent Rights to use non-human animal species derived
homologues of IG Nucleotide Sequence ("Non-human Interferon
Gamma-encoding IG Nucleotide Sequence") solely for non-commercial
research purposes to support the Gene Therapy Field of Use in the
Territory (excluding Japan).
(f) Genentech hereby grants to Connetics a co-exclusive
license under Genentech Patent Rights to use, make, have made, import,
offer for sale and sell Licensed Gene Products in the Gene Therapy
Field of Use in the Territory (excluding Japan). Notwithstanding the
foregoing, Genentech reserves the right to use (but not to import,
offer for sale or sell) Licensed Gene Products within the Gene Therapy
Field of Use solely for non-commercial research purposes. As used in
this subsection (f), "co-exclusive" shall mean that (i) Genentech shall
not grant a license to any party other than Connetics to use, make,
have made, import, offer for sale or sell Licensed Gene Products in the
Gene Therapy Field in the Territory (excluding Japan) other than to the
extent that such rights (including certain rights to sublicense) [ * ],
and (ii) Genentech shall not authorize or approve any grant or
assignment [ * ].
(g) (i) Genentech hereby grants to Connetics an exclusive
license, even as to Genentech, under Genentech Patent Rights and under
Genentech Knowhow, in Japan to make, have made, use, sell, offer for
sale and import Licensed Protein Product that is [ * ] (as that term is
defined in [ * ] solely for the treatment of atopic dermatitis and
infectious tuberculosis, subject to subsection (ii) below.
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(ii) Connetics, its Affiliates and sublicensees
hereunder shall [ * ] acting on behalf and in place of [ * ], and shall
[ * ], to the extent based, in whole or in part, upon [ * ] Genentech
Patent Rights as the result of the [ * ] to the extent such [ * ]
(including, without limitation, the [ * ] other than the [ * ] shall
not extend to: (A) the [ * ]; or (B) the [ * ] for the [ * ] (except
for [ * ] or as an [ * ]) or [ * ]. Connetics' and its Affiliates' and
sublicensees' obligation to [ * ] described in this subsection (ii)
shall terminate with respect to each of [ * ] simultaneously with [ *
].
(iii) In the event that any Third Party Product
Rights held by a third party in Japan that [ * ] revert to Genentech,
then Genentech shall notify Connetics or its designated sublicensee in
Japan of such reversion, and upon such notice Genentech shall be deemed
to have automatically granted to Connetics the license under Genentech
Patent Rights and under Genentech Knowhow to all such reverted rights,
which license shall be exclusive to the extent that such reverted
rights were exclusive. All rights granted to Connetics pursuant to this
subsection (iii) shall be subject to the terms of this Agreement,
including without limitation subsection (ii) above, Section 3.2(g) and
Section 8.3.
(h) In the event that any Third Party Product Rights (other
than those described in subsection (g) above) shall revert to
Genentech, then Genentech shall notify Connetics of such reversion. For
the ninety (90) day period following its receipt of such notice,
Genentech and Connetics shall negotiate exclusively in good faith the
reasonable commercial terms upon which Genentech would be willing to
grant to Connetics the license to such reverted rights. If the Parties
fail to enter a written agreement for a license to such rights by the
end of such ninety (90) day period, then Genentech shall have no
further obligation to Connetics with respect to such rights; provided
that for six (6) months following such ninety (90) day period,
Genentech shall not enter into an agreement to grant a license to such
rights with a third party on terms that, taken as a whole, are less
favorable to Genentech than those last offered by Connetics for such
rights. With respect to the foregoing sentence, [ * ] shall be [ * ] in
light of all [ * ], including without limitation the [ * ] with such [
* ] of such [ * ] under such [ * ] commercially reasonable [ * ] of the
[ * ] of such [ * ] that may be [ * ]. Nothing in the preceding
sentence shall imply any [ * ]. Connetics may not transfer its rights
under this Section 2.1(h) to any party other than InterMune without
Genentech's prior written consent.
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Except as expressly granted herein, there are no implied licenses under
the Genentech Patent Rights or any other intellectual property rights owned or
controlled by Genentech.
12. Section 2.3(b) of the License Agreement is hereby deleted and replaced
in its entirety as follows:
(b) Connetics may grant one or more sublicenses under the
rights granted in Sections 2.1(a), (b), (c), (e), (f) and (g) in the
Field of Use and the Gene Therapy Field of Use, on thirty (30) days
prior written notice to Genentech, and subject to Genentech's prior
written approval, which approval shall not be unreasonably withheld.
13. A new Section 3.2(g) is hereby added to read in its entirely as
follows:
(g) In addition to the Clinical Development Milestones (as set
forth in Exhibit E hereto), Connetics shall use its Best Efforts to
develop and commercialize Licensed Products: (i) in the Field of Use
with respect to indications and diseases that, under the provisions of
this Amendment, have been added to the "Field of Use" as defined in the
original License Agreement executed as of May 5, 1998, and (ii) in the
Gene Therapy Field of Use. Such additional indications and diseases in
the Field of Use, and the Gene Therapy Field of Use, collectively are
referred to in this subsection (g) as the "Additional Indications." In
the event that Connetics is not conducting such development efforts
with respect to any Additional Indication(s) in a country or countries
in the Territory as of the [ * ] (or if rights to such Additional
Indication were granted to Connetics pursuant to Section 2.1(g)(iii),
then as of the [ * ] that Genentech notifies Connetics or its
designated sublicensee regarding such rights as set forth in that
Section) or at any time thereafter, Genentech shall have the right to
terminate this Agreement, and the licenses granted hereunder, with
respect to Licensed Products for such Additional Indication(s) in such
country or countries, upon [ * ] days prior written notice to
Connetics, unless Connetics can reasonably demonstrate, during such
notice period, by its written records that as of the date of such
notice it is conducting such development efforts with respect to such
Additional Indication(s) in such country or countries.
14. Sections 8.2(a) and (b) of the License Agreement are hereby deleted and
replaced in their entirety as follows:
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(a) [ * ] within thirty (30) days following the dates on which
the first NDA or BLA, as applicable, for a Licensed Protein Product is
filed with the FDA by Connetics for [ * ]; provided however, that such
milestone payments shall only be paid once for each of the foregoing
indications, and shall not be paid upon the filing of a NDA or BLA for
an osteopetrosis or any mycobacterial infection indication.
(b) [ * ] within thirty (30) days following the date Connetics
receives the first FDA approval of [ * ]; provided however, that such
milestone payment shall only be paid once for each of the foregoing
indications, and shall not be paid upon receipt of FDA approval for
commercial sale for an osteopetrosis or any mycobacterial infection
indication.
15. Section 8.3 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
8.3 Royalties. Connetics shall pay Genentech the following
royalties on Net Sales of Licensed Products by Connetics and its
sublicensees:
(a) For annual aggregate Net Sales of all Licensed Protein
Products in the Territory (excluding Japan) [ * ], a royalty rate equal
to [ * ] of such Net Sales.
(b) [ * ], for annual aggregate Net Sales of all Licensed
Protein Products in the Territory (excluding Japan) [ * ], a royalty
rate equal to [ * ] of such Net Sales [ * ].
(c) For Net Sales of all Licensed Protein Products in Japan, a
royalty rate equal to [ * ] of such Net Sales; PROVIDED, HOWEVER, that
in the event that [ * ] in Japan for an indication for which InterMune
has exclusive rights under Section 2.1(g), the foregoing royalty rate
shall be reduced to [ * ] for Net Sales of [ * ] in Japan for such
indication [ * ]. For the sake of clarity, Net Sales of Licensed
Protein Products to which Connetics acquires rights pursuant to Section
2.1(g)(iii) shall be subject to this subsection (c).
(d) (i) For Net Sales of Licensed Gene Product in the
Territory, where such Licensed Gene Product is used in conjunction with
a Licensed Protein Product for the treatment or prevention of a given
indication in a given patient population, a royalty rate equal to [ * ]
of such Net Sales. As used in this subsection (d), "indication" shall
mean any particular medical condition within the Field of Use and
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Gene Therapy Field of Use, including but not limited to labeling claims
approved by a regulatory agency.
(ii) For Net Sales of Licensed Gene Product
in a country in the Territory, where such Licensed Gene Product is used
in a given patient population for the treatment or prevention of the
same indication for which a given Licensed Protein Product is used in
such patient population, a royalty rate equal to (A) [ * ] of such Net
Sales during the [ * ] period following the first commercial sale of
such Licensed Gene Product in such country for the treatment or
prevention of such indication in such patient population by Connetics,
or its Affiliates and sublicensees (the "First Commercial Sale"); (B) [
* ] of such Net Sales during the [ * ] period following the First
Commercial Sale; and (C) [ * ] of such Net Sales beginning on the [ * ]
anniversary of the First Commercial Sale and thereafter.
(iii) Notwithstanding the provisions of subsections
(i) and (ii) above, in the event that annual Net Sales of a Licensed
Gene Product for the treatment or prevention of an indication in a
patient population in a country in the Territory [ * ] for the
treatment or prevention of such indication in such patient population
in such country, the royalty rate thereafter applicable to Net Sales of
such Licensed Gene Product for the treatment or prevention of such
indication in such patient population in such country shall be [ * ] of
such Net Sales.
(iv) In the event that Connetics or InterMune
determines at any point following [ * ] that the above royalty rates
are having or are likely to have an adverse impact on Connetics' or
InterMune's ability to compete effectively in its sales of such
Licensed Gene Product, Connetics or InterMune shall so notify
Genentech, and the Parties shall in good faith discuss and attempt to
reach a reasonable and mutually agreeable resolution to the situation.
(e) (i) The royalties set forth in subsections (a), (b) and
(c) above shall be payable, on a country-by-country basis, until the
later of: (A) the expiration or revocation of the last remaining issued
patent in such country within the Genentech Patent Rights that covers
Licensed Protein Products, or (B) [ * ] years from the Effective Date
of this Agreement. Notwithstanding the foregoing, upon the expiration
of the last to expire issued patent in each country within the
Genentech Patent Rights during the term of this
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Agreement, thereafter each of the royalty rates set forth in (a), (b)
and (c) above shall be reduced by [ * ] with respect to such country.
(ii) The royalties set forth in subsection (d) above
shall be payable, on a country-by-country basis, until the expiration
or revocation of the last remaining issued patent in such country
within the Genentech Patent Rights that covers Licensed Gene Products.
16. Section 8.4 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
8.4 Third-Party Royalties. If Genentech or Connetics is
required to pay any third party a royalty due to the manufacture, use,
sale, offer for sale or importation of a Licensed Product in the
Territory for or by Connetics or its sublicensees, Connetics shall be
responsible for the payment of [ * ] of such third-party royalty,
PROVIDED HOWEVER, that Connetics may deduct from the royalties
otherwise payable to Genentech under Section 8.3 above, an amount equal
to [ * ] of such third party royalties incurred only due to use patents
in the Field of Use or in the Gene Therapy Field of Use in the
Territory, provided that the amount deducted shall not exceed [ * ] of
the royalties otherwise payable by Connetics to Genentech under Section
8.3. For purposes of clarification, such deductions shall not apply to
[ * ]. Attached hereto as Exhibit G is a list of all such royalty
obligations to third parties known to Genentech as of the Effective
Date without diligent search. No later than thirty (30) days from the
Effective Date, Genentech shall complete a reasonable internal
investigation of its records and update Exhibit G, as necessary, to
accurately reflect all such royalty obligations to third parties to the
best of Genentech's knowledge; provided however, Connetics acknowledges
that Genentech has no obligation to conduct due diligence or any
investigation with respect to third party patent rights related to
Licensed Products. Genentech shall notify Connetics in writing during
the term of this Agreement if it becomes aware of any additional
Genentech third party royalty obligations.
17. Section 8.5 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
8.5 Royalty Payments.
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(a) Royalty payments shall be made to Genentech quarterly
within ninety (90) days following the end of each calendar quarter for
which royalties are due. Each royalty payment shall be accompanied by a
report summarizing the total Net Sales during the relevant three-month
period, and the calculation of royalties, if any, due thereon pursuant
to Section 8.3.
(b) Notwithstanding subsection (a) above, any royalty payments
which accrue during 1999 on Net Sales of Licensed Protein Product sold
by Connetics' sublicensee InterMune shall be paid to Genentech in the
form of promissory note, in the form attached hereto as Exhibit I. For
each calendar quarter in 1999 for which royalty payments are due,
InterMune shall execute and deliver to Genentech, within ninety (90)
days following the end of each such calendar quarter, a promissory note
in the form of Exhibit I, and in the amount of such royalties due to
Genentech for such quarter. Each such promissory note shall be
accompanied by the report described in Section 8.5(a) above for such
quarter. In the event that any such note is delivered by InterMune
after such 90 day period, nevertheless interest shall accrue on the
date that such note was due.
18. The following provision is hereby inserted as Section 10.4 to the
License Agreement:
10.4 Insurance. At all times during the term of this
Agreement, Connetics and its sublicensees shall provide the following
insurance at its sole cost and expense:
(a) Commercial General Liability, including coverage
for products and completed operations (maintained for a period of at
least [ * ] after the expiration or termination of this Agreement) [ *
]. The policy shall have a limit of no less than [ * ] dollars.
(b) Foreign Local Coverages: Where required by law,
Connetics and its sublicensees will purchase foreign local coverages in
an amount that, at a minimum, satisfies the legal requirements of that
jurisdiction.
(c) Policy Conditions: All policies under (a) and (b)
above shall:
(i) be written by insurance companies with an A.M.
Best's rating of A:VIII or higher (or if Connetics' or its sublicensees
policies are not subject to the Best rating, then by carriers who are
acceptable to Genentech); and
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(ii) add Genentech as an additional insured.
(d) Additionally, Connetics shall use its Best Efforts to
obtain from its insurance carrier for the policies described in
subsections (a) and (b) covenants:
(i) [ * ]; and
(ii) [ * ].
Connetics and its sublicensees shall provide Genentech a
certificate of insurance which shall reflect the above coverages and
provisions, with annual renewals as long as the contract continues.
19. Section 11.1 of the License Agreement is hereby deleted and replaced in
its entirety as follows:
11.1 Term. This Agreement shall commence on the Effective Date of this
Agreement and, unless terminated earlier, shall expire:
(a) With respect to Licensed Protein Products, at the later to
occur of (i) the expiration of the last to expire of any Genentech
Patent Rights covering a Licensed Protein Product, or (ii) twenty (20)
years from the Effective Date of this Agreement; and
(b) With respect to Licensed Gene Products, at the expiration
of the last to expire of any Genentech Patent Rights covering a
Licensed Gene Product;
PROVIDED, HOWEVER, that in the event that either the CMCC
License or the Biogen License is terminated, the licenses granted by
Genentech to Connetics under the CMCC License or the Biogen License
shall also terminate. Genentech shall use its Best Efforts to keep the
CMCC License and the Biogen License in effect during the term of this
Agreement, provided, however, that if [ * ] as outlined in Section
[ * ] under the [ * ] shall not be [ * ] shall have the [ * ]. One (1)
year before the expiration of this Agreement under Section 11.1(a), the
Parties agree to meet and to discuss in good faith extending the term
of this Agreement with respect to Licensed Protein Products on terms
mutually agreeable to the Parties.
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20. Exhibit E of the License Agreement is hereby deleted and replaced in
its entirety with new Exhibit E attached hereto and incorporated herein.
21. In consideration for the rights granted to Connetics and its
sublicensees under this Amendment, InterMune shall issue to Genentech eight
hundred seventy five thousand (875,000) shares of Series A-1 Preferred Stock
simultaneously herewith.
22. This Amendment supersedes the Letter Agreement in its entirety. All
other terms and provisions of the License Agreement, including all exhibits to
that Agreement, will continue in full force and effect as though fully set forth
in this Amendment. Nothing in this Amendment shall be construed as affecting
Connetics' obligations to be liable and responsible for the performance of all
of the obligations of Connetics and its sublicensees under the License
Agreement.
THIS SPACE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by the
respective duly authorized officers as of the date first written above.
GENENTECH, INC. CONNETICS CORPORATION
By: /s/ Nicholas J. Simon By: /s/ T. G. Wiggans
--------------------------------- -----------------------------------
Printed Name: Nicholas J. Simon Printed Name: T. G. Wiggans
Title: Vice President, Business and Title: President and Chief Executive
Corporate Development Officer
Acknowledged and agreed as to InterMune's rights and obligations hereunder as
Connetics' sublicensee under the License Agreement:
INTERMUNE PHARMACEUTICALS, INC.
By: /s/ W. Scott Harkonen
---------------------------------
Printed Name: W. Scott Harkonen
Title: President
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EXHIBIT E
CLINICAL DEVELOPMENT MILESTONES
[ * ]
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CONVERTIBLE PROMISSORY NOTE
$ , 2000
---------- ----------
Palo Alto, California
FOR VALUE RECEIVED, InterMune Pharmaceuticals, Inc., a California corporation
("COMPANY") promises to pay to Genentech, Inc., a Delaware corporation, or its
registered assigns ("HOLDER"), the principal sum of _______________ Dollars and
__________ Cents ($__________ ), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Note on the unpaid principal balance at a rate equal to prime rate plus two
percent (2%) per annum, computed on the basis of the actual number of days
elapsed and a year of 365 days. All unpaid principal, together with any then
unpaid and accrued interest and other amounts payable hereunder, shall be due
and payable on the earlier of (i) December 31, 2002, (ii) the closing of the
initial public offering of the Company's Common Stock pursuant to a registration
statement declared effective by the Securities Exchange Commission, and (iii)
the merger or consolidation of the Company with or into any other corporation or
corporations (except where a majority of the outstanding equity securities of
the surviving corporation immediately after the merger or consolidation is held
by persons who were shareholders of the Company immediately prior to the merger
or consolidation), or a sale or other transfer of all or substantially all of
the assets of the Company (or any series of related transactions resulting in
the same).
The following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which Holder, by the acceptance of this Note,
agrees:
1. DEFINITIONS. As used in this Note, the following capitalized
terms have the following meanings:
(a) "COMPANY" includes the corporation initially executing this
Note and any Person which shall succeed to or assume the
obligations of Company under this Note in accordance with and
subject to the terms of this Note.
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(b) "HOLDER" shall mean the Person specified in the introductory
paragraph of this Note or any other Person(s) who shall at the
time be the registered holder of this Note.
(c) "LIEN" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other
encumbrance in, of, or on such property or the income
therefrom, including, without limitation, the interest of a
vendor or lessor under a conditional sale agreement, capital
lease or other title retention agreement, or any agreement to
provide any of the foregoing, and the filing of any financing
statement or similar instrument under the Uniform Commercial
Code or comparable law of any jurisdiction.
(d) "LICENSE AGREEMENT" means the License Agreement for Interferon
Gamma between Genentech, Inc. and Connectics Corporation dated
May 5, 1998, as amended on December 23, 1999, January 15, 1999
and April ___, 1999, and as further amended from time to time.
(e) "PERSON" shall mean and include an individual, a partnership,
a corporation (including a business trust), a joint stock
company, a limited liability company, an unincorporated
association, a joint venture or other entity or a governmental
authority.
2. PREPAYMENT. Upon five (5) days prior written notice to Holder,
Company may prepay this Note in whole or in part; provided, however, that any
such prepayment will be applied first to the payment of expenses due under this
Note, second to interest accrued on this Note and third, if the amount of
prepayment exceeds the amount of all such expenses and accrued interest, to the
payment of principal of this Note.
3. CERTAIN COVENANTS. While any amount is outstanding under the
Note:
(a) LIENS. Without the prior written consent of Holder, Company
shall not create, incur, assume or permit to exist any Lien on
or with respect to the License Agreement or any intellectual
property or other assets of Holder licensed by the Company
thereunder.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) ASSET DISPOSITIONS. Without the prior written consent of
Holder, Company shall not sell, lease, transfer, license or
otherwise dispose of the License Agreement or any intellectual
property or other assets of Holder licensed or sublicensed by
the Company thereunder, other than as permitted under the
License Agreement.
(c) DIVIDENDS, REDEMPTIONS, ETC. Without the prior written consent
of Holder, Company shall not (i) pay any dividends or make any
distributions on its equity securities; (ii) purchase, redeem,
retire, defease or otherwise acquire for value any of its
equity securities, other than in respect to stock purchases
from departing employees; (iii) return any capital to any
holder of its equity securities; (iv) make any distribution of
assets, equity securities, obligations or other securities to
any holder of its equity securities; or (v) set apart any sum
for any such purpose.
4. EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Note and the other Transaction
Documents:
(a) FAILURE TO PAY. Company shall fail to pay (i) when due any
principal payment under this Note or the License Agreement or
(ii) any interest or other payment required under the terms of
this Note or the License Agreement and such payment shall not
have been made within five (5) days of Company's receipt of
Holder's written notice to Company of such failure to pay; or
(b) BREACHES OF CERTAIN COVENANTS. Company shall fall to observe
or perform any covenant, obligation, condition or agreement
set forth in Section 3 of this Note; or
(c) BREACHES OF OTHER COVENANTS. Company shall fall to observe or
perform any other covenant, obligation, condition or agreement
contained in this Note (other than those specified in Sections
4(a) and 4(b)) or fail to observe or perform any material
covenant, obligation, condition or agreement contained in the
License Agreement and such failure shall continue for fifteen
(15) days; or
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(d) REPRESENTATIONS AND WARRANTIES. Any representation, warranty,
certificate, or other statement (financial or otherwise) made
or furnished by or on behalf of Company to Holder in writing
in connection with this Note or the License Agreement, or as
an inducement to Holder to enter into this Note or the License
Agreement, shall be false, incorrect, incomplete or misleading
in any material respect when made or furnished; or
(e) VOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Company shall
(i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated, (v)
become insolvent (as such term may be defined or interpreted
under applicable statute), (vi) commence a voluntary case or
other proceeding seeking liquidation, reorganization' or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or
(vi) take any action for the purpose of effecting any of the
foregoing; or
(f) INVOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Proceedings
for the appointment of a receiver, trustee, liquidator or
custodian of Company or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings
seeking liquidation, reorganization or other relief with
respect to Company or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within thirty
(30) days of commencement; or
(g) LICENSE AGREEMENT. The License Agreement terminates or is
declared void.
5. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or
existence of arty Event of Default (other than an Event of Default, referred to
in Sections 4(e) and 4(f)) and at any time thereafter during the continuance of
such Event of Default, Holder may, by written notice to Company, declare all
outstanding obligations payable by Company under this Note to be
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immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the License Agreement to the contrary notwithstanding. Upon the
occurrence or existence of any Event of Default described in Sections 4(e) and
4(f), immediately and without notice, all outstanding Obligations payable by
Company under this Note shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the License
Agreement to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Holder may
exercise any other right, power or remedy granted to it by this Note or the
License Agreement or otherwise permitted to it by law, either by suit in equity
or by action at law, or both.
6. CONVERSION RIGHTS.
(a) OPTIONAL CONVERSION. At the sole election of Holder, this Note
may be converted into equity securities of the Company, as set
forth in Section 6(b) below, at any time.
(b) SECURITIES ISSUED UPON CONVERSION. In the event that Holder
elects to convert all or a part of this Note into equity
securities of the Company, Holder shall provide the Company
with written notice of its election. Upon receipt of such
notice by the Company, the sum of the aggregate principal and
accrued interest designated in such notice shall be
automatically converted into that number of shares of the
Company's equity securities (the "SHARES") that are sold in
the last financing precedent to the date of such conversion
involving the sale by the Company of equity securities (other
than those issued to employees of the Company) in which the
Company receives an aggregate of at least $1,000,000 in cash
(excluding any financing incident to a corporate or strategic
partnering transaction) (an "EQUITY FINANCING") as is equal to
such unpaid principal and interest to be converted divided by
the per share purchase price of the Shares issued in such
Equity Financing (the "PER SHARE PRICE"), with any fraction of
a Share rounded to the next whole Share. The Company covenants
to cause the Shares, when issued pursuant to this Section 6,
to be fully paid and nonassessable, and free from all taxes,
liens and charges with respect to
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the issuance thereof and such Shares shall be issued on the
same contractual terms as those issued in the Equity
Financing.
7. SURRENDER AND CANCELLATION OF NOTE. Upon payment in full of
all principal, expenses and interest payable under this Note, Holder agrees to
surrender this Note to Company for cancellation.
8. SUCCESSORS AND ASSIGNS. Subject to the restrictions on
transfer described in Section 10 below, the rights and obligations of Company
and Holder shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
9. WAIVER AND AMENDMENT. Any provision of this Note may be
amended, waived or modified upon the written consent of Company and Holder.
10. ASSIGNMENT BY COMPANY. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by Company without the prior written consent
of Holder.
11. NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery (a) if to
Company, at 3294 West Bayshore Road, Palo Alto, CA 94303, and (b) if to Holder,
to Genentech, Inc. 1 DNA Way, South San Francisco, CA 94080-4990, attention
Legal Department. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when received.
12. PAYMENT. Payment shall be made in lawful tender of the United
States.
13. DEFAULT RATE; USURY. In the event that any payment of
principal or interest provided for herein is not paid by Company when due
(including the entire unpaid balance of this Note in the event such amount is
made immediately due and payable pursuant to the terms hereof), then Company
shall pay interest on the such amounts not paid when due at a rate per annum
equal to the rate otherwise applicable hereunder plus two percent (2%). In the
event any interest is paid on this Note which is deemed to be in excess of the
then legal maximum rate, then that portion of the interest payment representing
an amount in excess of the then legal
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maximum rate shall be deemed a payment of principal and applied against the
principal of this Note.
14. ENTIRE AGREEMENT. This Note and the License Agreement, taken
together, constitute and contain the entire agreement of Company and Holder, and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications among the parties, whether written or oral,
respecting the subject matter hereof.
15. EXPENSES; WAIVERS. If action is instituted to collect this
Note, Company promises to pay all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action. Company hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or
demands relative to this instrument.
16. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California. or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date
first written above.
INTERMUNE PHARMACEUTICALS, INC.
a California corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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EXHIBIT 1.16
GENENTECH SUPPLY AGREEMENT
The Genentech Supply Agreement was filed as Exhibit 10.16 to the Company's
Registration Statement on Form S-1/A, dated March 22, 2000, and is herein
incorporated by reference.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CONFIDENTIAL
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
EXHIBIT 10.17
SPONSORED RESEARCH AND LICENSE AGREEMENT
THIS SPONSORED RESEARCH AND LICENSE AGREEMENT (the "Agreement") is
entered into and made effective as of January 1, 2000, between INTERMUNE
PHARMACEUTICALS, INC., a California corporation located at 3924 West
Bayshore, Palo Alto, CA 94303 ("InterMune"), and PANORAMA RESEARCH, INC., a
California corporation having its principal place of business at 2462
Wyandotte St., Mountain View, CA 94043 ("PRI"). InterMune and PRI may be
referred to herein each individually as a "Party" and jointly as the
"Parties."
RECITALS
WHEREAS, InterMune is involved in the research, development and
commercialization of products potentially useful in the prevention,
mitigation and treatment of infectious and other diseases;
WHEREAS, PRI has research facilities and expertise related to
infectious diseases caused by STAPHYLOCOCCUS AUREUS;
WHEREAS, InterMune and PRI are parties to that certain research
agreement dated September 1, 1998, pursuant to which InterMune sponsored and
PRI performed certain research related to S. AUREUS (the "Prior Research
Agreement");
WHEREAS, InterMune and PRI now desire to undertake further research
based on certain discoveries made by PRI pursuant to the Prior Research
Agreement (the "Research Programs," as further described below) in accordance
with the terms and conditions set forth herein; and
WHEREAS, InterMune desires to obtain from PRI, and PRI desires to grant
to InterMune, an exclusive world-wide license to develop and commercialize
products from the technology arising under the Prior Research Agreement and
the Research Programs conducted hereunder;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the Parties hereby agree as
follows:
1. DEFINITIONS
1.1 "AFFILIATE" means any company or entity controlled by, controlling
or under common control with a Party. As used in this Section 1.1, "control"
means (a) that an entity or company owns, directly or indirectly, more than
fifty percent (50%) of the voting stock of another entity, or (b) that an
entity, person or group has the actual ability to control and direct the
management of the entity, whether by contract or otherwise.
1.2 "BUDGET" means the annual aggregate budget for the Research
Programs, which shall equal [ * ], as may be adjusted pursuant to Section
5.1(a).
1.
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CONFIDENTIAL
1.3 "INFORMATION" means information, results and data of any type
whatsoever, in any tangible or intangible form, including without limitation
inventions, practices, methods, techniques, specifications, formulations,
formulae, knowledge, know-how, skill, experience, trade secrets, test data
(including pharmacological, biological, chemical, biochemical, toxicological
and clinical test data), analytical and quality control data, stability data,
studies and procedures, and patent and other legal information or
descriptions, and all intellectual property rights therein.
1.4 "LEAD COMPOUND" means a compound that utilizes or incorporates the
Research Technology and that InterMune publicly announces to its investors
and potential investors as having significant potential as a therapeutic,
prophylactic or diagnostic product, subject to Section 4.2(a)(ii).
1.5 "LICENSED PRODUCT" means a product that utilizes or incorporates
the Research Technology.
1.6 "NDA" means a New Drug Application filed with the United States
Food and Drug Administration, or any other equivalent regulatory filing in a
major country.
1.7 "NET SALES" means, with respect to any Licensed Product, the gross
invoiced sales of such Licensed Product by InterMune, its Affiliates and its
sublicensees to Third Party purchasers, less the following deductions:
(a) discounts, credits, rebates, allowances, adjustments,
rejections and recalls for which the customer has been credited the original
sales price and returns;
(b) trade, quantity, or cash discounts or rebates customary to
the industry and actually allowed, given or accrued (including, but not
limited to, cash, governmental and managed care rebates, and hospitals or
other buying group chargebacks);
(c) sales, excise, turnover, inventory, value-added, and
similar taxes assessed on the sale of such Licensed Product;
(d) an allowance equal to two percent (2.0%) of gross invoiced
sales for transportation, importation, insurance and other handling expenses;
(e) the portion of any management fees paid during the relevant
time period to group purchasing organizations that relate specifically to the
sale of such Licensed Product to such organizations.
A sale of a Licensed Product shall be deemed to occur upon the receipt
of payment by InterMune for such Licensed Product from a Third Party
purchaser.
In the event that a Licensed Product includes one or more active
ingredients that do not utilize or incorporate any Research Technology (a
"Combination Product"), Net Sales shall be calculated on the basis of the
invoice price of such Licensed Product sold without such other active
ingredients. If such Licensed Product is not sold separately from such other
active ingredients, then Net Sales shall be calculated on the basis of the
invoice price of the
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BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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CONFIDENTIAL
Combination Product multiplied by a fraction, the numerator of which shall be
the inventory cost of such Licensed Product and the denominator of which
shall be the inventory cost of all of the active ingredients in the
Combination Product. Inventory cost shall be determined in good faith by
InterMune in accordance with InterMune's regular accounting methods.
1.8 "PRINCIPAL INVESTIGATOR" means Dr. James Larrick.
1.9 "PRIOR RESEARCH TECHNOLOGY" means all Information conceived of or
reduced to practice by PRI in the course of any work conducted pursuant to
the Prior Research Agreement.
1.10 [ * ].
1.11 "[ * ] RESEARCH PLAN" means the research plan covering the [ * ]
Research Program to be determined by the Research Committee pursuant to
Section 2.5 hereof.
1.12 "[ * ] RESEARCH PROGRAM" means the research program related to
[ * ] to be performed by PRI hereunder.
1.13 "RESEARCH COMMITTEE" means the committee described in Section 2.3.
1.14 "RESEARCH PATENT" means any Patent that claims or otherwise covers
an invention in the Research Technology.
1.15 "RESEARCH PLANS" means the [ * ] Research Plan and the [ * ]
Research Plan, each of which may be referred to individually as a "Research
Plan."
1.16 "RESEARCH PROGRAMS" means the [ * ] Research Program and the [ * ]
Research Program, each of which may be referred to individually as a
"Research Program."
1.17 "RESEARCH TECHNOLOGY" means (a) all Information conceived of or
reduced to practice by PRI in the course of any work conducted pursuant to
this Agreement, and (b) all Prior Research Technology.
1.18 "RESEARCH TERM" means the period commencing on the Effective Date
and terminating on the earlier of (a) the third anniversary of the Effective
Date, or (b) the termination of both Research Programs pursuant to Section
2.10.
1.19 "PATENT" means (a) all patent applications heretofore or hereafter
filed or having legal force in any country including without limitation
divisionals, continuations, continuation-in-part and provisional
applications; (b) all issued, unexpired patents in any country, including
utility, model and design patents and certificates of invention; and (c) all
substitutions, extensions, reissues, renewals and supplementary protection
certificates with respect to any such issued patent.
1.20 "THIRD PARTY" means any party other than InterMune and PRI and
their respective Affiliates.
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BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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CONFIDENTIAL
1.21 "VALID CLAIM" means a claim in an issued Research Patent that has
not expired or been canceled, been declared invalid by an unreversed and
unappealable decision of a court or other appropriate body of competent
jurisdiction, been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise, and/or been abandoned.
1.22 [ * ].
1.23 [ * ] RESEARCH PLAN" means the research plan covering the [ * ]
Research Program to be determined by the Research Committee pursuant to
Section 2.5 hereof.
1.24 "[ * ] RESEARCH PROGRAM" means the research program related to
[ * ] to be performed by PRI hereunder pursuant to the [ * ] Research Plan.
2. CONDUCT OF RESEARCH PROGRAMS
2.1 RESEARCH PROGRAMS. PRI agrees to conduct each of the Research
Programs during the Research Term in accordance with the applicable Research
Plan, as such Research Plan may be amended from time to time by the Research
Committee. PRI shall use its best efforts in carrying out the Research
Programs and will furnish the research staff, technical know-how, equipment,
instruments, supplies and facilities necessary to carry out the Research
Programs at its own expense. InterMune shall provide funding to support PRI's
conduct of the Research Programs, as described in Section 5.1. Title in any
equipment purchased or manufactured in the performance of the Research
Programs shall vest in PRI.
2.2 PRINCIPAL INVESTIGATOR. All the work performed in conducting the
Research Programs shall be under the direct supervision of the Principal
Investigator. If for any reason the Principal Investigator is unable or
ceases to continue to directly supervise the conduct of the Research
Programs, then InterMune may terminate the Agreement on thirty (30) days
written notice. In such event, PRI automatically shall be deemed to have
granted to InterMune an exclusive, world-wide, fully paid-up, royalty-free,
perpetual, irrevocable, sublicenseable license under the Research Technology
for all internal research purposes and to develop, use, make, have made,
import, offer for sale and sell Licensed Products.
2.3 RESEARCH COMMITTEE.
(a) Promptly after the Effective Date, the Parties shall form
the Research Committee, which shall be comprised of a total of four (4)
members, two (2) appointed by each Party. Each member of the Research
Committee shall have the appropriate level of skill, experience and
familiarity with the Research Programs. The Principal Investigator shall
serve as one of PRI's Research Committee members. Each Party shall have the
right to substitute different representatives as members on the Research
Committee as needed from time to time, and each Party may bring additional
representatives to attend meetings of the Research Committee in a non-voting,
AD HOC capacity. One of InterMune's members shall serve as the chairperson
of the Research Committee.
(b) The Research Committee shall meet at least once every other
month at such times and at such meeting places as shall be mutually agreed
upon by the Parties. The
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BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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CONFIDENTIAL
Research Committee meetings may be held by telephone or videoconference, if
agreed by the Research Committee members. Each Party will designate an
individual to serve as the liaison between the Parties to undertake and
coordinate any day-to-day communications as may be required between the
Parties relating to the Research Programs. The Research Committee shall
operate by majority decision of its members, and the Research Committee
members shall use good faith efforts to reach agreement on all matters to be
decided. In the event the Research Committee is unable to reach agreement on
any matter before it within thirty (30) days of undertaking consideration of
such matter, then InterMune shall have the deciding vote on such matter.
(c) Minutes of the Research Committee meetings shall be
prepared by the chairperson. Such minutes shall be promptly reviewed and
shall be deemed approved when mutually accepted in writing by both Parties
through their respective Research Committee representatives; provided,
however, that if the Research Committee representatives of a Party fail to
comment on, or otherwise indicate disagreement with, the minutes provided by
the other Party in writing within fifteen (15) days of receipt, then the
receiving Party shall be deemed to have approved such minutes.
2.4 DUTIES AND AUTHORITY OF THE RESEARCH COMMITTEE.
(a) The Research Committee shall have the following duties and
responsibilities during the Research Term: (i) to prepare the Research Plans;
(ii) to coordinate and monitor the progress of PRI's efforts in conducting
the Research Programs; (iii) to review the results of the Research Programs;
(iv) to allocate the Budget between the Research Programs; and (v) to amend
or modify the Research Plans as appropriate or necessary.
(b) The powers of the Research Committee are limited to those
expressly set forth in this Agreement. Without limiting the generality of
the foregoing, the Research Committee shall not have the right to amend this
Agreement. The actions of the Research Committee shall not substitute for
either Party's ability to exercise any right set forth herein, nor excuse the
performance of any obligation set forth herein.
2.5 RESEARCH PLANS. As soon as possible following the Effective Date,
the Research Committee shall define the specific tasks of each Party under
each of the [ * ] Research Program and the [ * ] Research Program, which
tasks shall be set forth in the "[ * ] Research Plan" and the "[ * ] Research
Program" respectively, and attached and incorporated herein as Schedule 2.5
hereto. Each Research Plan may be amended or modified by the Research
Committee as necessary.
2.6 RECORDS; INSPECTION.
(a) PRI shall maintain records of all work conducted under the
Research Programs and all results (including without limitation any
inventions, discoveries and developments) made pursuant to its efforts under
the Research Programs, in laboratory notebooks (or similar records) separate
from all other work conducted by PRI. Such records shall be complete and
accurate and shall fully and properly reflect all work done and results
achieved in the performance of the Research Program in sufficient detail and
in good scientific
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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manner appropriate for patent and for regulatory purposes. InterMune shall
have the right, during normal business hours and upon reasonable notice to
inspect and copy such records.
(b) InterMune shall have the right to arrange for a reasonable
number of its employees, agents and outside consultants to visit PRI at its
offices and laboratories during normal business hours and upon reasonable
notice, and to discuss the Research Programs and its results in detail with
the technical personnel and consultants of PRI.
(c) All inspections, copying and visits hereunder shall be
conducted in a manner so as not to disrupt PRI's business nor cause any
disclosure of any other PRI confidential information.
2.7 DISCLOSURE OF INVENTIONS AND RESEARCH RESULTS. PRI shall provide
to InterMune a complete written disclosure for each and every invention or
other discovery, whether or not patentable, first conceived or reduced to
practice in the performance of the Research Programs (an "Invention"),
promptly after each such Invention is made. All such inventions and
discoveries, and any other Information disclosed under this Section 2.7,
shall be deemed "Confidential Information," and shall be subject to the
provisions of Article 7. PRI shall regularly inform InterMune of the results
of the Research Programs, and shall provide InterMune copies of the results
and raw data from the Research Programs as requested by InterMune. As used
herein, "raw data" means all Information generated by the Principal
Investigator and the persons working at his direction on the Research,
whether in written, graphic or electronic form, and including without
limitation all materials such as films, printouts, and photographs that
record such Information, all to the extent concerning work conducted pursuant
to the Research Programs. Panorama shall also provide quarterly written
summaries of the Research Programs as set forth in Section 2.8. InterMune
shall be free to use all such Information for any and all purposes.
2.8 QUARTERLY REPORTS. PRI shall provide InterMune and the Research
Committee with a written progress report biannually during the Research Term.
Each such report shall summarize the work performed by PRI in relation to the
goals of the Research Programs during such period, and shall provide any
other information required by the Research Plans or reasonably requested by
InterMune or the Research Committee.
2.9 PRI COVENANTS.
(a) INVENTION ASSIGNMENT AGREEMENTS. PRI hereby covenants that
each of its employees, consultants and agents performing any work under the
[ * ] Research Program and/or the [ * ] Research Program will have entered
into a written invention assignment agreement requiring that each such
individual assign to PRI all right, title and interest in any Information
conceived of or reduced to practice by such individual pursuant to such
Research Program.
(b) NO MISAPPROPRIATION. PRI hereby covenants that it shall
not knowingly misappropriate or otherwise misuse, nor shall it knowingly
permit any of its employees, consultants or agents to misappropriate or
otherwise misuse, any intellectual property of any Third Party in its conduct
of the Research Programs hereunder.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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2.10 TERMINATION OF RESEARCH PROGRAMS.
(a) InterMune may terminate either or both of the Research
Programs, without cause, at any time during the Research Term upon six (6)
months written notice; provided that InterMune shall remain liable for all
payments due within the Budget and in accordance with the Research Plan for
such Research Program through the date of termination of such Research
Program.
(b) In the event that InterMune terminates only one of the
Research Programs, InterMune shall provide PRI written notice of any
adjustment InterMune desires to make to the Budget with respect to the
remaining Research Program, if any; provided that the Budget shall not be
reduced by more than fifty percent (50%) without the written consent of both
Parties. The Research Committee shall amend the Research Plan for such
remaining Research Program appropriately to reflect the resources to be
dedicated to such remaining Research Program in light of such adjusted Budget.
3. ASSIGNMENT OF RIGHTS; LICENSE GRANT
3.1 ASSIGNMENT TO PRI. InterMune hereby assigns to PRI all of its
right, title and interest in and to the Prior Research Technology. InterMune
shall take all actions reasonably requested by PRI to effect such assignment.
3.2 GRANT TO INTERMUNE. PRI hereby grants to InterMune an exclusive,
world-wide, royalty-bearing, sublicenseable license under the Research
Technology for all internal research purposes and to develop, use, make, have
made, import, offer for sale and sell Licensed Products.
3.3 EXCLUSIVITY. PRI and the Principal Investigator each hereby
covenant that it shall not perform any work for any Third Party relating to
[ * ] during the Research Term without InterMune's prior written consent.
3.4 GOVERNMENT FUNDING. PRI and the Principal Investigator each
hereby covenant that no government funding will be used to conduct any of the
work under either Research Program without InterMune's prior written consent.
In the event the PRI receives government funding as permitted in the
preceding sentence: (a) InterMune's payment obligation under Section 4.1(a)
shall continue at its then-current level, and (b) PRI shall not use such
funding other than for the conduct of the Research Programs without
InterMune's prior written consent.
4. DILIGENCE
4.1 GENERALLY. Following the Research Term and during the term of
this Agreement, InterMune shall use commercially reasonable efforts
consistent with its usual practice in developing and commercializing
pharmaceutical products of similar market potential, at its own expense, to
develop and commercialize Licensed Products in such countries throughout the
world where in InterMune's opinion it is commercially viable to do so.
4.2 FUNDING REQUIREMENTS.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(a) InterMune shall be deemed to have met its diligence
obligations under this Article 4 provided that the total aggregate annualized
development costs incurred by InterMune, its Affiliates and its sublicensees
in connection with the Licensed Products equals or exceeds the amount
indicated below (the "Diligence Amount") for the corresponding period
indicated below (the "Diligence Period"), until such time as the first NDA is
approved for the first Licensed Product.
<TABLE>
<CAPTION>
DILIGENCE PERIOD DILIGENCE AMOUNT
<S> <C>
From the end of the Research Term [ * ]
until designation of a Lead Compound
From the designation of a Lead [ * ]
Compound, and for so long as InterMune
is conducting preclinical development
on a Lead Compound, until initiation
by InterMune of Phase I trials for a
Lead Compound
From the initiation by InterMune of [ * ]
Phase I trials for a Lead Compound,
and for so long as InterMune is
conducting Phase I trials, until
initiation by InterMune of Phase II
trials for a Lead Compound
From the initiation by InterMune of [ * ]
Phase II trials for a Lead Compound,
and for so long as InterMune is
conducting Phase II or Phase III
trials, until receipt of NDA approval
for a Licensed Product
</TABLE>
(i) Only one Diligence Amount shall apply at any given
time. In the event that there are multiple Lead Compounds being
preclinically and/or clinically developed by InterMune at any given time, the
Diligence Amount corresponding to the most advanced level of preclinical or
clinical development of such Lead Compounds then being conducted by InterMune
shall apply.
(ii) In the event that InterMune ceases preclinical or
clinical development of a Lead Compound, InterMune shall provide PRI written
notice thereof and such compound thereafter shall no longer be deemed a Lead
Compound. For all periods following the Research Term and prior to receipt
of the first NDA approval for the first Licensed Product for which there are
no then-existing Lead Compounds, the Diligence Amount shall be deemed to be
[ * ] per year.
(b) In the event that InterMune fails during any Diligence
Period to expend the corresponding Diligence Amount, and such failure is not
excused as described in Section 4.3
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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below, InterMune shall not be deemed to have breached its diligence
obligations under this Article 4 if within thirty (30) days of its receipt
from PRI of written notice of such failure, InterMune pays to PRI an amount
equal to the differential between such Diligence Amount and InterMune's and
its Affiliates' and sublicensees' actual development costs for Licensed
Products during such Diligence Period.
4.3 LIMITATION. Notwithstanding anything in this Article 4 to the
contrary, InterMune shall not be deemed to have breached its obligations
under this Article 4 if (a) the Parties agree in writing on a different
standard of diligence, or (b) any clinical trial, IND, NDA or other aspect of
the development or commercialization of any Licensed Product is suspended or
delayed due to problems or issues with the safety or efficacy of such
Licensed Product.
5. CONSIDERATION
5.1 RESEARCH SUPPORT PAYMENTS.
(a) InterMune shall reimburse PRI for costs incurred in
connection with performing the Research Programs in accordance with the
Budget. While it is estimated that the amounts in the Budget will be
sufficient to conduct the Research Programs, Panorama may submit to InterMune
a revised budget requesting additional funds to conduct the Research
Programs. However, InterMune is not liable for any cost in excess of the
Budget unless InterMune agrees in writing to such increase the Budget.
(b) InterMune shall make payments to PRI for the amounts owed
under the Budget for each calendar year during the Research Term in four (4)
equal quarterly installments, each of which shall be due within thirty (30)
days of the first day of the relevant calendar quarter.
5.2 EQUITY.
(a) InterMune shall grant non-statutory stock options to
purchase shares of InterMune Common Stock to the below-designated PRI
employees during the Research Term in consideration for their work on the
Research Programs, which options shall vest as follows up to the total amount
indicated:
<TABLE>
<CAPTION>
OPTIONS VESTING OPTIONS VESTING ON THE FIRST OF EACH
ON THE EFFECTIVE MONTH DURING THE RESEARCH TERM TOTAL
EMPLOYEE DATE FOLLOWING THE EFFECTIVE DATE
<S> <C> <C> <C>
James Larrick 12,000 800 40,000
Susan Wright 15,000 1000 50,000
Yuguiang Wang 3,000 200 10,000
</TABLE>
Each such grant of options shall be pursuant to InterMune's equity
incentive plan, and shall have an exercise price per share equal to the fair
market value of InterMune's Common
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Stock on the date of such grant as determined by InterMune's Board of
Directors at the Board meeting of November 17, 1999.
(b) In the event that any employee of PRI described in
subsection (a) above is no longer conducting work on any Research Program,
then such employee's right to be granted options under subsection (a) shall
terminate.
5.3 MILESTONE PAYMENT. Within thirty (30) days of its receipt of the
first approval of an NDA for the first Licensed Product, InterMune shall pay
to PRI five hundred thousand dollars ($500,000).
5.4 ROYALTIES.
(a) InterMune shall pay PRI a royalty of [ * ] on all Net Sales
of Licensed Products; provided that if the manufacture, use or sale of a
Licensed Product is not covered by a Valid Claim in the country of sale at
the time of sale, then the foregoing royalty rate shall be reduced by fifty
percent (50%) with respect to such sale of such Licensed Product.
(b) InterMune's obligation to pay royalties under subsection
(a) above shall commence, on a country-by-country and Licensed
Product-by-Licensed Product basis, with the first commercial sale of such
Licensed Product in such country (the "First Sale"), and shall expire upon
the later of (i) expiration of the last issued Research Patent containing a
Valid Claim covering the manufacture, use or sale of such Licensed Product in
such country, or (ii) ten (10) years from the First Sale. Upon such
expiration of InterMune's royalty obligation under this Section 5.4, PRI
automatically shall be deemed to have granted to InterMune an exclusive,
fully paid-up, royalty-free, perpetual, irrevocable, sublicenseable license
under the Research Technology to use, make, have made, import, offer for sale
and sell such Licensed Product in such country.
5.5 PAYMENT OF ROYALTIES. Following the First Sale of a Licensed
Product and during the term of the Agreement, InterMune shall furnish to PRI
a quarterly written report for each calendar quarter showing the sales of all
Licensed Products subject to royalty payments hereunder during the reporting
period and the royalties payable under this Agreement. Reports shall be due
within sixty (60) days following the close of each calendar quarter.
Royalties that have accrued in a particular calendar quarter shall be due and
payable on the date such royalty report is due. InterMune shall keep complete
and accurate records in sufficient detail to enable the royalties payable
hereunder to be determined. All payments to be made by InterMune to PRI under
this Agreement shall be made in United States dollars and may be paid by
check made to the order of PRI or bank wire transfer to such bank account in
the United States designated in writing by PRI from time to time.
5.6 PAYMENT EXCHANGE RATE. The rate of exchange to be used in
computing Net Sales and the amount of currency equivalent in United States
dollars due PRI shall be made at the rate of exchange quoted on the last
business day of the applicable royalty period in the Wall Street Journal.
5.7 INCOME TAX WITHHOLDING. If laws, rules or regulations require
withholding of income taxes or other taxes imposed upon payments set forth in
this Article 5, InterMune shall
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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make such withholding payments as required and subtract such withholding
payments from the payments set forth in this Article 5. InterMune shall
submit appropriate proof of payment of the withholding taxes to PRI within a
reasonable period of time.
5.8 AUDITS.
(a) Upon the written request of PRI and not more than once in
each calendar year, InterMune shall permit an independent certified public
accounting firm of nationally recognized standing selected by PRI and
reasonably acceptable to InterMune, at PRI's expense, to have access during
normal business hours to such records of InterMune as may be reasonably
necessary to verify the accuracy of the royalty reports hereunder for any
calendar year ending not more than twenty-four (24) months prior to the date
of such request. The accounting firm shall disclose to PRI only whether the
royalty reports are correct or incorrect and the specific details concerning
any discrepancies. No other information shall be provided to PRI.
(b) If such accounting firm correctly concludes that additional
royalties were owed during such period, InterMune shall pay the additional
royalties within thirty (30) days of the date PRI delivers to InterMune such
accounting firm's written report so correctly concluding.
(c) PRI shall treat all information subject to review under
this Section 5.6 as Confidential Information in accordance with the
confidentiality provisions of Article 7 of this Agreement, and shall cause
its accounting firm to enter into an acceptable confidentiality agreement
with InterMune obligating such firm to retain all such financial information
in confidence pursuant to such confidentiality agreement.
6. INTELLECTUAL PROPERTY MATTERS; PATENTS
6.1 OWNERSHIP. Each Party shall solely own any Information solely
invented or developed by such Party pursuant to this Agreement and all
intellectual property rights therein, including without limitation any
Patents claiming such Information. The Parties shall each own an undivided
one-half interest in any Information jointly invented or developed by the
Parties pursuant to this Agreement and all intellectual property rights
therein, including, without limitation, any Patents claiming such Information
("Joint Patents"). Inventorship shall be determined in accordance with the
U.S. laws.
6.2 PATENT FILING, PROSECUTION AND MAINTENANCE.
(a) InterMune shall have the first right, but not the
obligation, to file applications for the Research Patents and to prosecute
and maintain such Research Patents in such countries as selected by
InterMune, at its expense. InterMune shall reasonably consider any
recommendations provided by PRI regarding the filing and/or prosecution of
such Research Patents, but the final decision as to the filing and/or
prosecution matters shall rest with InterMune.
(b) In the event that PRI desires that InterMune file and
prosecute a patent application claiming a particular invention in the
Research Technology, and InterMune does not file such a patent application
within one hundred twenty (120) days of such request, or decides to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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abandon prosecution of such a filed application, then PRI may thereafter
file, prosecute and/or maintain the Patent(s) claiming such particular
inventions, at PRI's expense. In such event, InterMune shall cooperate
reasonably with PRI in such efforts, and such Patent shall thereafter be
excluded from the Research Technology.
6.3 COOPERATION. Each Party agrees to cooperate with the other and
take all reasonable additional actions as may be reasonably required to
achieve the intent of this Article 6, including, without limitation, the
execution of necessary and appropriate instruments and documents.
6.4 INFRINGEMENT OF THIRD PARTY PATENTS. In the event that a Third
Party files an action against a Party alleging that such Party's activities
under this Agreement infringe such Third Party's patent rights, such Party
shall give written notice to the other Party, and the Parties will consult
and cooperate on the best course of action. The Party that was sued shall
have the right to defend itself against such action, and the other Party
shall provide all reasonable assistance in such defense.
6.5 INFRINGEMENT OF RESEARCH PATENTS. If either Party becomes aware
that a Third Party is infringing any rights in the Research Patents, such
Party shall give written notice to the other Party describing in detail the
nature of such infringement. InterMune shall have the initial right to
enforce the Research Patents against such Third Party infringer. PRI agrees
to provide InterMune all reasonable assistance, at InterMune' expense, in
such enforcement, including without limitation being joined as a party to the
suit where appropriate. In the event that InterMune fails to institute an
infringement suit or take other reasonable action in response to such
infringement within one hundred twenty (120) days after its receipt of notice
of such infringement, PRI shall have the right, but not the obligation, to
institute such suit or take other appropriate action in its own name to
enforce the Research Patents. Regardless of which Party brings an
enforcement action under this Section 6.5, the Party not bringing the action
shall have the right to participate in such action at its own expense with
its own counsel. Any damages or other recovery, whether by settlement or
otherwise, from an action hereunder to enforce the Research Patents shall
first be applied pro rata to each Party to pay the costs and expenses of
participating in such action, and any remaining amount shall be paid to the
Party conducting the action.
7. CONFIDENTIALITY
7.1 CONFIDENTIAL INFORMATION. As used herein, "Confidential
Information" means all Information that InterMune discloses to PRI under this
Agreement, all Research Technology and all other Information deemed
"Confidential Information" under this Agreement, provided that Confidential
Information shall not include any Information excluded under Section 7.2.
Except to the extent expressly authorized by this Agreement or otherwise
agreed in writing by the Parties, PRI agrees that it shall keep confidential
and shall not publish or otherwise disclose any Confidential Information, and
shall not use such Information for any purpose other than as provided for in
this Article 7.
7.2 EXCEPTIONS. Notwithstanding Section 7.1 above, "Confidential
Information" shall not include any Information that PRI can demonstrate by
competent written evidence:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(a) was already known to PRI, other than under an obligation of
confidentiality, at the time of disclosure by InterMune or, in the case of
Research Technology, prior to its creation or discovery hereunder;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to PRI by InterMune;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of PRI in breach of this Agreement;
(d) was disclosed to PRI, other than under an obligation of
confidentiality to a Third Party, by a Third Party who had no obligation to
InterMune not to disclose such information to others; or
(e) is independently developed by PRI without using any
Confidential Information.
7.3 PERMITTED DISCLOSURE. Notwithstanding the limitations in this
Article 7, PRI may disclose Confidential Information, to the extent such
disclosure is reasonably necessary in the following instances, but solely for
the limited purpose of such necessity:
(a) prosecuting or defending litigation;
(b) complying with applicable governmental laws or regulations
or valid court orders; and
(c) disclosure to employees, consultants or agents, solely in
furtherance of this Agreement, and provided that such individuals agree in
writing to be bound by similar terms of confidentiality and non-use at least
equivalent in scope to those set forth in this Article 7.
Notwithstanding the foregoing, in the event that PRI is required
to make a disclosure of the Confidential Information pursuant to subsections
(a) and (b) above, it will give reasonable advance notice to InterMune of
such disclosure and shall use its best efforts to assist InterMune in
securing confidential treatment of such information. In any event, PRI
agrees to use its best efforts to avoid disclosure of Confidential
Information hereunder.
7.4 PUBLICITY. Neither Party shall use the name of the other Party in
connection with any product, promotional literature, or advertising material
without the prior written permission of the other party, which permission
shall not be unreasonably withheld. This restriction shall not apply to
materials used by InterMune solely for financing or corporate partnering
purposes or to documents available to the public that identify the existence
of the Agreement.
7.5 TERMS OF THE AGREEMENT. The material terms of this Agreement are
deemed to be Confidential Information, subject to Section 7.2 above.
8. REPRESENTATIONS AND WARRANTIES
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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8.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby
represents and warrants to the other Party that:
(a) it has full corporate power and authority under the laws of
the state or country of its incorporation to enter into this Agreement and to
carry out the provisions hereunder;
(b) this Agreement is a legal and valid obligation binding upon
it and is enforceable in accordance with its terms; and
(c) the execution, delivery and performance of this Agreement
by it does not materially conflict with any agreement, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.
8.2 PRI REPRESENTATIONS AND WARRANTIES. PRI hereby represents and
warrants to InterMune that:
(a) None of the Prior Research Technology has been
misappropriated from any Third Party nor is the result of any misuse of any
Third Party's intellectual property;
(b) All inventors of the Prior Research Technology existing as
of the Effective Date have irrevocably assigned all right, title and interest
in the Prior Research Technology to PRI;
(c) To PRI's knowledge as of the Effective Date, InterMune's
practice of the Research Technology as contemplated hereunder will not
infringe the rights of any Third Party; and
(d) To PRI's knowledge as of the Effective Date, no claim,
whether or not embodied in an action past or present, of any infringement, of
any conflict with, or of any violation of any patent, trade secret or other
intellectual property right or similar right of any Third Party, has been
made or is pending or threatened with respect to the Research Technology.
9. INDEMNIFICATION
9.1 BY INTERMUNE. Subject to PRI's compliance with Section 9.3,
InterMune hereby agrees to indemnify, defend and hold harmless PRI and its
officers, directors, agents and employees from and against any and all
liabilities, damages, judgments, awards or costs of defense (including
without limitation reasonable attorneys' fees, expenses to defend and amounts
paid in settlement of any action) (collectively, "Losses") arising from any
Third Party claim resulting directly or indirectly from InterMune's breach of
any of its covenants or representations and warranties hereunder, or
InterMune's negligence or wrongdoing, but only to the extent that such Losses
do not result from PRI's breach of any of its covenants or representations
and warranties hereunder or PRI's negligence or wrongdoing.
9.2 BY PRI. Subject to InterMune's compliance with Section 9.3, PRI
hereby agrees to indemnify, defend and hold harmless InterMune and its
officers, directors, agents and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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employees from and against any and all Losses from any Third Party claim
resulting directly or indirectly from PRI's breach of any of its covenants or
representations and warranties hereunder, or PRI's negligence or wrongdoing,
but only to the extent that such Losses do not result from InterMune's breach
of any of its covenants or representations and warranties hereunder or
InterMune's negligence or wrongdoing.
9.3 NOTICE AND PROCEDURES. In all cases where one Party seeks
indemnification by the other under this Article 9, the Party seeking
indemnification shall promptly notify the indemnifying Party of receipt of
any claim or lawsuit covered by such indemnification obligation and shall
cooperate fully with the indemnifying Party in connection with the
investigation and defense of such claim or lawsuit. The indemnifying Party
shall have the right to control the defense, with counsel of its choice,
provided that the non-indemnifying Party shall have the right to be
represented by advisory counsel at its own expense. The indemnifying Party
shall not settle or dispose of the matter in any manner which could
negatively and materially affect the rights or liability of the
non-indemnifying Party without the non-indemnifying Party's prior written
consent, which shall not be unreasonably withheld or delayed.
10. TERM AND TERMINATION
10.1 TERM. The term of this Agreement shall commence upon the Effective
Date and shall expire, unless earlier terminated as provided under Sections
10.2 and 10.3, upon the expiration date of the last to expire royalty or
other payment obligation under this Agreement.
10.2 TERMINATION BY INTERMUNE. Following termination of the Research
Term, InterMune may terminate this Agreement upon thirty (30) days written
notice to PRI.
10.3 TERMINATION FOR MATERIAL BREACH. If a Party materially breaches
this Agreement, and within sixty (60) days of written notice of breach from
the non-breaching Party the breaching Party has not (i) cured the breach, or
(ii) initiated good faith efforts to cure such breach to the reasonable
satisfaction of the non-breaching Party, then the non-breaching Party may
terminate this Agreement in writing promptly after expiration of such sixty
(60) day period.
10.4 EFFECT OF TERMINATION.
(a) In the event that InterMune terminates this Agreement
pursuant to Section 10.2,or PRI terminates this Agreement pursuant to Section
10.3:
(i) all licenses granted to InterMune pursuant to
Section 3.2 shall immediately terminate;
(ii) InterMune shall provide PRI with an accounting of
the total amount expended by InterMune in the development and
commercialization of the Research Technology, [ * ]; and
(iii) PRI shall have the right to grant one or more Third
Parties the right to develop and commercialize Licensed Products, or to
develop and commercialize Licensed Products itself; provided that PRI shall
pay InterMune a royalty on all net sales of Licensed
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Products by PRI, its Affiliates and its sublicensees on terms and conditions
equivalent to those set forth in Article 5 of this Agreement. Such royalty
obligation shall continue until [ * ].
(b) In the event that InterMune terminates this Agreement
pursuant to Section 10.3, (i) PRI automatically shall be deemed to have
granted to InterMune an exclusive, world-wide, fully paid-up, royalty-free,
perpetual, irrevocable, sublicenseable license under the Research Technology
for all internal research purposes and to develop, use, make, have made,
import, offer for sale and sell Licensed Products, and (ii) Article 6 shall
survive such termination.
10.5 BANKRUPTCY RIGHTS. In the event that this Agreement is terminated
or rejected by a Party or its receiver or trustee under applicable bankruptcy
laws due to such Party's bankruptcy, then all rights and licenses granted
under or pursuant to this Agreement by such Party to the other Party are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the
Bankruptcy Code and any similar law or regulation in any other country,
licenses of rights to "intellectual property" as defined under Section
101(52) of the Bankruptcy Code. The Parties agree that all intellectual
property rights licensed hereunder, including without limitation any patents
or patent applications of a Party in any country covered by the license
grants under this Agreement, are part of the "intellectual property" as
defined under Section 101(52) of the Bankruptcy Code subject to the
protections afforded the non-terminating Party under Section 365(n) of the
Bankruptcy Code, and any similar law or regulation in any other country.
10.6 SURVIVAL. The following provisions shall survive termination or
expiration of this Agreement: Sections 2.2, 5.4(b), 5.8, 6.1, 10.4 and 10.6
and Articles 7, 9 and 11. Termination or expiration of this Agreement shall
not relieve either Party of any liability which accrued hereunder prior to
the effective date of such termination, nor preclude either Party from
pursuing all rights and remedies it may have hereunder or at law or in equity
with respect to any breach of this Agreement, nor prejudice either Party's
right to obtain performance of any obligation. The remedies provided under
this Agreement are cumulative, and are not exclusive of other remedies
available to a Party in law or equity.
11. MISCELLANEOUS
11.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth the
complete, final and exclusive agreement between the Parties with respect to
the subject matter hereof, and all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between the
Parties hereto with respect to such subject matter, and supersedes and
terminates all prior agreements and understandings between the Parties with
respect to such subject matter. There are no covenants, promises,
agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties with respect to such subject matter
other than as are set forth herein and therein. No subsequent alteration,
amendment, change or addition to this Agreement shall be binding upon the
Parties unless reduced to writing and signed by an authorized officer of each
Party.
11.2 DISPUTE RESOLUTION. In the event of any controversy or claim
arising out of, relating to or in connection with any provision of this
Agreement, or the rights or obligations of the Parties hereunder, the Parties
shall try to settle their differences amicably between themselves by
referring the disputed matter to the Chief Executive Officer of InterMune and
the President
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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for PRI for discussion and resolution. Either Party may initiate such
informal dispute resolution by sending written notice of the dispute to the
other Party, and within ten (10) days of such notice the Chief Executive
Officer of InterMune and the President of PRI shall meet for attempted
resolution by good faith negotiations. If such personnel are unable to
resolve such dispute within thirty (30) days of initiating such negotiations,
each Party may thereafter pursue any and all rights and remedies it may have
at law or equity. If mutually agreeable, the Parties may explore alternative
forms of dispute resolution, such as mediation and/or arbitration.
Notwithstanding any other provision of this Section 11.2, either Party may
seek a temporary restraining order or injunction against the other Party in
the event of a breach of any confidentiality obligation hereunder, or to
prevent a Party's wrongful use of any intellectual property hereunder.
11.3 FORCE MAJEURE. Both Parties shall be excused from the performance
of their obligations under this Agreement to the extent that such performance
is prevented by force majeure and the non-performing Party promptly provides
notice of the prevention to the other Party. Such excuse shall be continued
so long as the condition constituting force majeure continues and the
non-performing Party takes reasonable efforts to remove the condition. For
purposes of this Agreement, "force majeure" shall include conditions beyond
the control of the Parties, including without limitation, an act of God,
voluntary or involuntary compliance with any regulation, law or order of any
government, war, civil commotion, labor strike or lock-out, epidemic, failure
or default of public utilities or common carriers, destruction of production
facilities or materials by fire, earthquake, storm or like catastrophe.
11.4 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing, shall specifically refer to this Agreement and
shall be deemed to have been sufficiently given for all purposes if mailed by
first class certified or registered mail, postage prepaid, express delivery
service or personally delivered, or if sent by facsimile and confirmed
through one of the foregoing methods. Unless otherwise specified in writing,
the mailing addresses of the Parties shall be as described below.
For InterMune: InterMune Pharmaceuticals, Inc.
3924 West Bayshore
Palo Alto, CA 94303
Fax: (650) 858-2937
Attention: Senior Vice President of Scientific Affairs
For PRI: Panorama Research, Inc.
2462 Wyandotte St.
Mountain View, CA 94043
Fax: (650) 694-7717
Attention: President
11.5 LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE
TO THE OTHER PARTY FOR ANY INDIRECT, COLLATERAL, CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES ARISING IN CONNECTION WITH THIS AGREEMENT.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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11.6 CONSENTS NOT UNREASONABLY WITHHELD OR DELAYED. Whenever provision
is made in this Agreement for either Party to secure the consent or approval
of the other, that consent or approval shall not unreasonably be withheld or
delayed, and whenever in this Agreement provisions are made for one Party to
object to or disapprove a matter, such objection or disapproval shall not
unreasonably be exercised, unless expressly stated that such consent is to be
given in such Party's sole discretion.
11.7 INDEPENDENT CONTRACTORS. The status of the Parties under this
Agreement shall be that of independent contractors. Neither Party shall have
the right to enter into any agreements on behalf of the other Party, nor
shall it represent to any person that it has any such right or authority.
Nothing in this Agreement shall be construed as establishing a partnership or
joint venture relationship between the Parties.
11.8 MAINTENANCE OF RECORDS. Each Party shall keep and maintain all
records required by law or regulation with respect to the Product and shall
make copies of such records available to the other Party upon request.
11.9 UNITED STATES DOLLARS. References in this Agreement to "Dollars"
or "$" shall mean the legal tender of the United States of America.
11.10 NO STRICT CONSTRUCTION. This Agreement has been prepared jointly
and shall not be strictly construed against either Party.
11.11 ASSIGNMENT. Neither Party may assign or transfer this Agreement
or any rights or obligations hereunder without the prior written consent of
the other, except a Party may make such an assignment without the other
Party's consent to a successor-in-interest to substantially all of the
business assets of such Party to which this Agreement relates, whether in a
merger, sale of stock, sale of assets or other transaction. Any permitted
successor or assignee of rights and/or obligations hereunder shall, in a
writing to the other Party, expressly assume performance of such rights
and/or obligations. This Agreement shall be binding upon and shall inure to
the benefit of each Party's successors-in-interest and permitted assigns.
Any assignment or attempted assignment by either Party in violation of the
terms of this Section 11.11 shall be null and void and of no legal effect.
11.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.13 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of
this Agreement.
11.14 SEVERABILITY. If any one or more of the provisions of this
Agreement is held to be invalid or unenforceable, the provision shall be
considered severed from this Agreement and shall not serve to invalidate any
remaining provisions hereof. The Parties shall make a good faith effort to
replace any invalid or unenforceable provision with a valid and enforceable
one
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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such that the objectives contemplated by the Parties when entering this
Agreement may be realized.
11.15 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to
have authored the ambiguous provision.
11.16 HEADINGS. The headings for each article and section in this
Agreement have been inserted for convenience of reference only and are not
intended to limit or expand on the meaning of the language contained in the
particular article or section.
11.17 NO WAIVER. Any delay in enforcing a Party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party's rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and
signed waiver as to a particular matter for a particular period of time.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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IN WITNESS WHEREOF, the Parties have executed this Agreement in by their
proper officers as of the date and year first above written.
INTERMUNE PHARMACEUTICALS, INC. PANORAMA RESEARCH, INC.
By: /s/ W. Scott Harkonen By: /s/ J. W. Larrick
------------------------------- ----------------------------------
Name: W. Scott Harkonen Name: James W. Larrick
----------------------------- --------------------------------
Title: President / CEO Title: President
---------------------------- -------------------------------
PRINCIPAL INVESTIGATOR:
I hereby acknowledge and agree to be bound by the terms and conditions of
this Agreement.
/s/ J. W. Larrick
- -----------------------------------
James Larrick, Ph.D.
Date: Dec. 30, 1999
-----------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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SCHEDULE 2.5
RESEARCH PLANS
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 "Budget". . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 "Information" . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 "Lead Compound" . . . . . . . . . . . . . . . . . . . . . . . .2
1.5 "Licensed Product". . . . . . . . . . . . . . . . . . . . . . .2
1.6 "NDA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.7 "Net Sales" . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.8 "Principal Investigator". . . . . . . . . . . . . . . . . . . .3
1.9 "Prior Research Technology" . . . . . . . . . . . . . . . . . .3
1.10 [ * ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.11 [ * ] Research Plan". . . . . . . . . . . . . . . . . . . . . .3
1.12 [ * ] Research Program" . . . . . . . . . . . . . . . . . . . .3
1.13 "Research Committee". . . . . . . . . . . . . . . . . . . . . .3
1.14 "Research Patent" . . . . . . . . . . . . . . . . . . . . . . .3
1.15 "Research Plans". . . . . . . . . . . . . . . . . . . . . . . .3
1.16 "Research Programs" . . . . . . . . . . . . . . . . . . . . . .3
1.17 "Research Technology" . . . . . . . . . . . . . . . . . . . . .3
1.18 "Research Term" . . . . . . . . . . . . . . . . . . . . . . . .3
1.19 "Patent". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.20 "Third Party" . . . . . . . . . . . . . . . . . . . . . . . . .3
1.21 "Valid Claim" . . . . . . . . . . . . . . . . . . . . . . . . .3
1.22 [ * ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.23 [ * ] Research Plan". . . . . . . . . . . . . . . . . . . . . .4
1.24 [ * ] Research Program" . . . . . . . . . . . . . . . . . . . .4
2. CONDUCT OF RESEARCH PROGRAMS. . . . . . . . . . . . . . . . . . . . . . .4
2.1 Research Programs . . . . . . . . . . . . . . . . . . . . . . .4
2.2 Principal Investigator. . . . . . . . . . . . . . . . . . . . .4
2.3 Research Committee. . . . . . . . . . . . . . . . . . . . . . .4
2.4 Duties and Authority of the Research Committee. . . . . . . . .5
2.5 Research Plans. . . . . . . . . . . . . . . . . . . . . . . . .5
2.6 Records; Inspection . . . . . . . . . . . . . . . . . . . . . .5
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<S> <C>
2.7 Disclosure of Inventions and Research Results . . . . . . . . .6
2.8 Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . .6
2.9 PRI Covenants . . . . . . . . . . . . . . . . . . . . . . . . .6
2.10 Termination of Research Programs. . . . . . . . . . . . . . . .7
3. ASSIGNMENT OF RIGHTS; LICENSE GRANT . . . . . . . . . . . . . . . . . . .7
3.1 Assignment to PRI . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Grant to InterMune. . . . . . . . . . . . . . . . . . . . . . .7
3.3 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.4 Government Funding. . . . . . . . . . . . . . . . . . . . . . .7
4. DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.2 Funding Requirements. . . . . . . . . . . . . . . . . . . . . .8
4.3 Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.1 Research Support Payments . . . . . . . . . . . . . . . . . . .9
5.2 Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
5.3 Milestone Payment . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Payment of Royalties. . . . . . . . . . . . . . . . . . . . . 10
5.6 Payment Exchange Rate . . . . . . . . . . . . . . . . . . . . 10
5.7 Income Tax Withholding. . . . . . . . . . . . . . . . . . . . 11
5.8 Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Patent Filing, Prosecution and Maintenance. . . . . . . . . . 11
6.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Infringement of Third Party Patents . . . . . . . . . . . . . 12
6.5 Infringement of Research Patents. . . . . . . . . . . . . . . 12
7. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1 Confidential Information. . . . . . . . . . . . . . . . . . . 12
7.2 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Permitted Disclosure. . . . . . . . . . . . . . . . . . . . . 13
7.4 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Terms of the Agreement. . . . . . . . . . . . . . . . . . . . 13
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<S> <C>
8.1 Mutual Representations and Warranties . . . . . . . . . . . . 14
8.2 PRI Representations and Warranties. . . . . . . . . . . . . . 14
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.1 By InterMune. . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 By PRI. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.3 Notice and Procedures . . . . . . . . . . . . . . . . . . . . 15
10. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 Termination by InterMune. . . . . . . . . . . . . . . . . . . 15
10.3 Termination for Material Breach . . . . . . . . . . . . . . . 15
10.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . 15
10.5 Bankruptcy Rights . . . . . . . . . . . . . . . . . . . . . . 16
10.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.1 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . 16
11.2 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . 16
11.3 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . 17
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.5 Limitation of Liability . . . . . . . . . . . . . . . . . . . 17
11.6 Consents Not Unreasonably Withheld or Delayed . . . . . . . . 18
11.7 Independent Contractors . . . . . . . . . . . . . . . . . . . 18
11.8 Maintenance of Records. . . . . . . . . . . . . . . . . . . . 18
11.9 United States Dollars . . . . . . . . . . . . . . . . . . . . 18
11.10 No Strict Construction. . . . . . . . . . . . . . . . . . . . 18
11.11 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 18
11.13 Further Actions . . . . . . . . . . . . . . . . . . . . . . . 18
11.14 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 18
11.15 Ambiguities . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.16 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.17 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SCHEDULE 2.5 RESEARCH PLANS . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.18
LICENSE AGREEMENT
Effective this Twenty-Fifth day of March, 1999, the MCW RESEARCH
FOUNDATION, INC. ("MCWRF"), a body having corporate powers under the laws of the
State of Wisconsin and the wholly owned subsidiary of the MEDICAL COLLEGE OF
WISCONSIN, INC. ("MCW"), and INTERMUNE PHARMACEUTICALS, INC. ("INTERMUNE") a
corporation, having a place of business at 2483 East Bayshore Road, Suite 103,
Palo Alto, CA, U.S.A., agree as follows:
1. DEFINITIONS:
(a) "PSEUDOMONAS V ANTIGEN" means [ * ] developed by [ * ] (the
"Inventors").
(b) "LICENSED RIGHTS" means any subject matter claimed in or covered by
U.S. Provisional Patent Serial No. [ * ], filed on behalf of the Inventors and
the Regents of the University of California ("THE REGENTS") by MCWRF on [ * ];
and any divisions, continuations, or continuations-in-part (but only to the
extent that such continuations-in-part have inventors from both institutions)
thereof; any corresponding foreign applications thereof, and any U.S. or joint
foreign patents issued thereon or reissues or extensions thereof assigned by
each inventor to his/her respective institution.
(c) "LICENSED PRODUCT(S)" means [ * ] manufacture, use or sale. For all
other fields of use, including but not limited to the field of [ * ].
2. BACKGROUND:
(a) MCWRF represents that it is the owner and sole administrator by
assignment, and by interinstitutional agreement with the Regents of the Licensed
Rights. MCWRF desires to grant a license for making the Licensed Product(s)
commercially available for public use and benefit.
(b) INTERMUNE wishes to acquire an exclusive LICENSE as herein specified.
3. LICENSE GRANT:
(a) MCWRF hereby grants and INTERMUNE hereby accepts an exclusive
world-wide license under the Licensed Rights to make, have made, use, and
sell Licensed Product(s).
(b) The license grant of Paragraph 3.a. shall include the right to grant
sublicenses to others during the term of this Agreement.
(c) The development of this invention was sponsored in part by the
National Institutes of Health, Department of Health and Human Services, and as a
consequence this license is subject to overriding obligations to the Federal
Government under 35 U.S.C. 200-212 and 37 C.F.R. 401.
1.
<PAGE>
(d) MCWRF and THE REGENTS reserve the Licensed Rights for educational and
research purposes.
4. FEES AND ROYALTIES:
(a) In consideration of the License granted herein, INTERMUNE shall pay to
MCWRF:
(i) a licensed issue fee in the sum of Fifty Thousand Dollars
($50,000.00) payable upon execution of this agreement;
(ii) the sum of One Hundred Thousand Dollars ($100,000.00)
payable upon filing an IND for each Licensed Product;
(iii) the sum of Two Hundred Fifty Thousand Dollars ($250,000.00)
payable upon initiation of a Phase III clinical trial for each
Licensed Product.
(iv) the sum of Six Hundred Fifty Thousand Dollars ($650,000.00)
payable upon submission of an NDA for each Licensed Product;
(v) the sum of One Million Dollars ($1,000,000.00) payable upon
receiving approval of an NDA for each licensed product;
(b) These sums are not advances against earned royalties provided for in
Paragraph 4.c.
(c) In consideration of the license granted herein, INTERMUNE shall pay
to MCWRF two and one-half (2.5) percent of net sales for each and every
Licensed Product(s) which is sold, irrespective of selling price, given as a
promotional item or gift, included with the sale of other equipment, or
transferred or caused to be transferred, to any other party by INTERMUNE.
Net sales shall mean gross sales lease:
(i) trade and/or quantity discounts as are customary in the trade;
(ii) taxes or other governmental charges on the production, sales,
transportation, delivery or use of licensed products;
(iii) transportation charges;
(iv) sales commissions paid to non-affiliated parties; and
(v) amounts repaid or credited by reasons of recall or return.
(d) Royalties pursuant to Paragraph 4.c. shall not be due by INTERMUNE to
MCWRF on Licensed Product(s) delivered to any third party solely for evaluation,
demonstration, or the like.
(e) All royalties due hereunder by INTERMUNE to MCWRF shall be paid to
MCWRF in United States Dollars. When Licensed Products are sold for monies
other than United States Dollars, INTERMUNE shall first determine the earned
royalty in the currency of the country in which the Licensed Products were sold
and then convert the amount into equivalent United States Dollars, using the
exchange rate quoted in the Wall Street Journal on the last business day of the
reporting period, as provided for in Article 5.
(f) INTERMUNE shall be responsible for all bank transfer charges.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2.
<PAGE>
5. REPORTS, PAYMENTS AND ACCOUNTING:
(a) INTERMUNE agrees to make written progress reports to MCWRF within
sixty (60) days of each June 30 and each December 31 during the life of this
Agreement covering activities related to the development and testing of all
Licensed Products and the status of government approvals necessary for
marketing. Progress reports are required for each Licensed Product until the
first commercial sale of that Licensed Product occurs in the United States.
Progress reports submitted under Paragraph 5.a. shall include, but are not
limited to, the following topics:
(i) summary of work completed;
(ii) key scientific discoveries;
(iii) summary of work in progress;
(iv) schedule of anticipated events or milestones;
(v) marketing plans for introducing Licensed Products; and
(vi) summary of resources (dollar value) expended during the
reporting period.
(b) INTERMUNE agrees to make written reports to MCWRF within sixty (60)
days of each June 30 and each December 31 during the life of this Agreement
stating in each such report the number of Licensed Product(s) used, sold, given,
included in sales of other products or equipment, transferred or leased by
INTERMUNE, upon which royalties are payable pursuant to Article 4. hereof for
the prior six (6) month period.
(c) INTERMUNE also agrees to make a similar written report to MCWRF within
ninety (90) days after the date of the termination of this Agreement on Licensed
Product(s) sold, given, included in sales of other products or equipment,
transferred or leased by INTERMUNE and upon which royalties are payable
hereunder but which were not previously reported.
(d) Concurrently with the making of each report required under this
Article 5.b. and 5.c., INTERMUNE shall pay to MCWRF all royalties due hereunder
in connection with the transactions so reported.
(e) During the term of this Agreement, and for a period of seven (7) years
after the termination of this Agreement, INTERMUNE agrees to keep records
showing the manufacture, sales, use, leases, gifts, inclusions and transfers of
Licensed Product(s) in sufficient detail to enable the royalties due and payable
hereunder by INTERMUNE to be determined, and further agrees to permit its books
and records to be examined from time to time to the extent necessary, but not
more than once a year, to verify reports provided for in Paragraphs 5.b. and
5.c. hereof. Such examination is to be made by an independent certified
accountant appointed by MCWRF, with the fees and expenses to be borne by MCWRF.
6. PATENTS:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
3.
<PAGE>
(a) MCWRF agrees to pursue and maintain patent protection of the
Pseudomonas V Antigen technology commencing on the date of this License
Agreement, using counsel to be mutually agreed upon, with the costs of
preparing, filing, prosecuting and maintaining such protection to be paid by
INTERMUNE. The initial License fee ($50,000) shall be creditable against patent
expenses incurred prior to the date of this agreement. INTERMUNE will be billed
for additional patent expenses by MCWRF as the costs are incurred.
(b) INTERMUNE may request MCWRF to obtain patent protection in foreign
countries. INTERMUNE shall notify MCWRF of this request not less than ninety
(90) days prior to the deadline for any filing, action, or payment to be made in
connection therewith. The notice of request must be in writing, must identify
the countries desired, and must reaffirm INTERMUNE's obligation to underwrite
the costs thereof. The absence of such a notice from INTERMUNE will be
considered an election not to obtain or maintain foreign rights. MCWRF may
prosecute and maintain such rights at its sole discretion and expense in any
country in which INTERMUNE has not elected to file, prosecute, or maintain
patents in accordance with this Article, but INTERMUNE will have no rights or
licenses thereunder.
(c) INTERMUNE's obligation to underwrite and pay patent costs will
continue for so long as this Agreement is in effect. However, INTERMUNE may
terminate its obligations with respect to any given patent application or patent
upon ninety (90) days written notice to MCWRF. MCWRF may prosecute and maintain
such rights at its sole discretion and expense, but INTERMUNE will have no
further rights or licenses thereunder.
7. WARRANTIES AND INDEMNITIES:
(a) Nothing in this Agreement shall be construed as:
(i) A warranty or representation that anything made, used, sold,
rented or leased, under any license granted by this Agreement is or will be free
from infringement of patents of third parties;
(ii) Granting by implication, estoppel, or otherwise any licenses or
right under patents of MCWRF or THE REGENTS regardless of whether such patents
dominate or are subordinate to any Licensed Rights. The foregoing
notwithstanding, MCWRF hereby informs INTERMUNE that they know of no patents
which dominate the Licensed Rights and under which MCWRF has the right to grant
licenses.
(b) MCWRF AND THE REGENTS MAKE NO REPRESENTATIONS, EXTENDS NO WARRANTIES
OF ANY KIND, EITHER EXPRESSED OR IMPLIED. THERE ARE NO EXPRESSED OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
USE OF THE LICENSED PRODUCT(S) WILL NOT INFRINGE ANY PATENT, COPYRIGHT,
TRADEMARK, OR OTHER RIGHTS.
(c) INTERMUNE shall indemnify, hold harmless, and defend MCWRF and MCW,
THE REGENTS, their officers, employees, and agents, and the inventors against
any and all claims, suits, losses, liabilities, damages, costs, fees, and
expenses resulting from or arising out of exercise of this license. This
indemnification includes, but is not limited to, any product liability.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. 4.
<PAGE>
8. INFRINGEMENT BY OTHERS:
INTERMUNE shall promptly inform MCWRF of any suspected infringement of any
Licensed Rights by a third party, and MCWRF and INTERMUNE shall consult in good
faith to agree on a mutually beneficial course of action.
9. TERM AND TERMINATION:
(a) The word "termination" and cognate words, such as "term" and
"terminate" as used in this Agreement, are to be read, except where the contrary
is specifically indicated, as omitting from their effect the following rights
and obligations, all of which survive any termination to the degree necessary to
permit their complete fulfillment or discharge:
(i) INTERMUNE's obligation to supply a terminal report as specified
in Paragraph 5.c. hereof;
(ii) MCWRF's rights to receive or recover and INTERMUNE's obligation
to pay fees and royalties, pursuant to Article 4. hereof, and pay patent
expenses incurred, pursuant to Article 6. hereof, due or accruable for payment
at the time of any termination;
(iii) INTERMUNE's obligation to maintain records and MCWRF's right to
conduct audits as provided in Paragraph 5.e. hereof;
(iv) Releases running in favor of customers of INTERMUNE with respect
to Licensed Product(s) sold or transferred prior to any termination and on which
royalties have been paid or are payable by INTERMUNE to MCWRF as provided in
Article 4. hereof;
(v) Any cause of action or claim of either party hereto, accrued or
to accrue, because of any breach or default by the other party; and
(vi) The provisions of Article 7.
10. DUE DILIGENCE:
(a) INTERMUNE, on execution of this Agreement shall diligently proceed
with the development, manufacture and sale of Licensed Products and shall
earnestly and diligently endeavor to market same within a reasonable time after
execution of this Agreement and in quantities sufficient to meet market demands.
(b) INTERMUNE shall endeavor to obtain all necessary government approvals
for the manufacture, use and sale of Licensed Products.
(c) INTERMUNE SHALL:
(i) file an IND and begin Phase I Clinical Trials within [ * ] years
of executing this Agreement;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
5.
<PAGE>
(ii) initiate Phase II and Phase III Clinical Trials within [ * ]
years of beginning Phase I Clinical Trials;
(iii) file an NDA within [ * ] years of beginning Phase III Clinical
Trials;
(iv) market a Licensed product within [ * ] years of filing an NDA.
(d) If INTERMUNE is unable to meet any of the above due diligence
provisions, MCWRF reserves the right to terminate this Agreement upon written
notice to INTERMUNE, which termination shall become effective sixty (60) days
after MCWRF's sending written notice of such termination unless such provision
has been met prior to the expiration of the sixty day period.
(e) From time to time, INTERMUNE may suggest modifications to the
diligence provisions above based on new information. Such modifications shall
be effective only as mutually agreed upon, in writing, by the Parties. MCWRF
shall consider such requested modifications in good faith and shall agree to
modifications that are reasonably necessary to achieve the overall objectives of
the development of the Licensed Product.
(f) In the event that INTERMUNE determines that it will be unable to meet
any of the diligence provisions, INTERMUNE shall notify MCWRF of such inability,
identifying the nature of the inability with reasonable specificity and may ask
MCWRF for a reasonable extension of time in which to complete such provision.
At MCWRF's sole discretion, MCWRF may grant InterMune such an extension to
complete the provision.
(g) If INTERMUNE shall at any time default in the payment of any earned
royalty or the making of any report hereunder, or shall commit any material
breach of any covenant herein contained, or shall make any materially false
report and shall fail to remedy any such default, breach, or report within
ninety (90) days after written notice thereof by MCWRF, MCWRF may, at its
option, terminate this Agreement and the licenses herein granted by notice in
writing to such effect.
(h) INTERMUNE shall have the right to terminate this Agreement in respect
to any or all Licensed Patent(s), upon giving at least ninety (90) days written
notice to MCWRF of its intention and desire to terminate.
11. USE OF NAMES AND TRADEMARKS:
Nothing contained in this Agreement confers any right to use in
advertising, publicity, or other promotional activities, any name, trade name,
trademark, or other designation of any party hereto or THE REGENTS.
12. ASSIGNMENT:
This Agreement may not be assigned.
13. APPLICABLE LAW:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
6.
<PAGE>
This Agreement shall be construed, interpreted, and applied in accordance
with the laws of the State of Wisconsin.
14. ARBITRATION:
(a) Any controversy arising under or related to this Agreement, and any
disputed claim by either party against the other under this Agreement,
including, without limitation, disputes relating to patent validity or
infringement, shall be settled by arbitration, upon the request of either party,
in accordance with the then-prevailing Patent Arbitration rules of the American
Arbitration Association (AAA). In the event of such controversy, the matter
shall be submitted to one arbitrator knowledgeable in the field, who has been
selected by mutual agreement of the parties hereto or by the AAA if the parties
cannot agree.
(b) Any arbitration under Paragraph 14.a. hereof shall be held at
Milwaukee, Wisconsin, or such other place as may be mutually agreed upon in
writing between the parties, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
15. NOTICES:
All notices, demands, or other writings in this Agreement provided to be
given, made, or sent, or which may be given, made, or sent by either party
hereto to the other, shall be deemed to have been fully given, made, or sent
when done in writing and deposited in the United States mail, first class,
postage prepaid, and addressed as follows:
To MCWRF: MCW Research Foundation
8701 Watertown Plank Road
Milwaukee, WI 53226
Attn: William R. Hendee, Ph.D.
Executive Vice President
To INTERMUNE: Intermune Pharmaceuticals, Inc.
3294 West Bayshore Road
Palo Alto, CA 94303
Attn: Woodruff Emlen, M.D.
Vice President, Exploratory Medicine
The address to which any notice, demand, or other writing may be given or
made or sent to any party may be changed upon written notice given by such party
as above provided.
16. WAIVER:
The parties covenant and agree that, if either party hereunder fails or
neglects for any reason to take advantage of any of the terms hereof provided
for the termination of this Agreement, or if a party, having the right to
declare this Agreement terminated, shall fail to do so, any such failure or
neglect by such party shall not be or be deemed or be construed to be a waiver
of any of the terms, covenants, or conditions of this Agreement or of the
performance thereof. None of the terms, covenants, and conditions of this
Agreement can be waived except by the written consent of the party waiving
compliance.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
7.
<PAGE>
17. SCOPE OF AGREEMENT:
(a) The article headings herein are for convenience only and in no manner
affect the rights and obligations of the parties, nor shall they be used to
interpret the provisions hereof.
(b) This Agreement constitutes the entire agreement between the parties
pertaining to the Licensed Rights. No representative of MCWRF or INTERMUNE has
been authorized to make any representation, warranty, or promise not contained
herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their officers or representatives duly authorized as of the date first herein
above written. Execution of this agreement by INTERMUNE is subject to approval
by the INTERMUNE Board of Directors, within 30 days of the date first herein
above written.
MCW RESEARCH FOUNDATION, INC. INTERMUNE PHARMACEUTICALS, INC.
By: /s/ Joseph O. Hill By: /s/ W. Scott Harkonen
---------------------------------------- -----------------------------
Title: Joseph O. Hill, Ph.D. Vice President Title: President & CEO
------------------------------------- ----------------------------
Date: 3/25/99 Date: 3/25/99
-------------------------------------- -----------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
8.
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.19
DATA TRANSFER,
CLINICAL TRIAL AND MARKET SUPPLY
AGREEMENT
THIS DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT (the
"Agreement"), is made effective as of the 27th day of January, 2000 (the
"Effective Date") by and between InterMune Pharmaceuticals, Inc. ("InterMune"),
a California corporation, having an address at 3400 West Bayshore Road, Palo
Alto, California 94303-4227, USA, and Boehringer Ingelheim Austria GmbH ("BI
Austria"), an Austrian corporation, having its registered office at Dr.
Boehringer-Gasse 5 - 11, A-1121 Vienna, Republic of Austria. InterMune and BI
Austria may be referred to herein each individually as a "Party" and jointly as
the "Parties."
WHEREAS, pursuant to the terms of a Confidential Non-Disclosure Agreement dated
June 5, 1998, between InterMune and Bender+Co Ges mbH (now BI Austria) the
Parties have discussed and evaluated the feasibility of providing manufacturing
services regarding a recombinant gamma-interferon product for InterMune and
Bender (now BI Austria) has submitted a price quotation for these services; and
WHEREAS, InterMune holds an exclusive sublicense from Connetics Corporation
under Connetics' license from Genentech Inc., a company organized under the
laws of Delaware, ("Genentech") to manufacture, use and sell recombinant
human gamma-interferon ("INTERFERON GAMMA 1b", as further described herein)
products in the USA and certain other territories. INTERFERON GAMMA 1b is
approved by the FDA for the indication Chronic Granulomatous Disease, and is
sold in the USA under the trade-mark ACTIMMUNE-Registered Trademark- (the
"GENENTECH PRODUCT", as further described herein), and InterMune intends to
seek approval for additional indications; and
WHEREAS, Boehringer Ingelheim International GmbH (BII), an affiliate of BI
Austria and BI Pharma KG, holds an exclusive license from Genentech to
manufacture, use and sell INTERFERON GAMMA 1b in the BI Territory (as further
described herein), and is the registration-holder for an INTERFERON GAMMA 1b
product in certain countries of the BI Territory for the indication Chronic
Granulomatous
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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Disease. The trade-mark for INTERFERON GAMMA 1b product in Europe is
IMUKIN-Registered Trademark- (the "BI PRODUCT", as further described herein);
and
WHEREAS, BI Austria and its affiliate BI Pharma KG (as defined hereinafter) own
facilities specialized for cGMP manufacture of biopharmaceuticals and employ
personnel who have experience in the production, quality control as well as in
the registration of biopharmaceuticals; and
WHEREAS, InterMune wishes BI Austria, and BI Austria agrees, to (a) compare the
technical and analytical documentation of GENENTECH PRODUCT and BI PRODUCT, (b)
carry out conformance / qualification runs for the cGMP manufacture of a
finished INTERFERON GAMMA 1b product; (c) conduct an analytical comparison of
the GENENTECH PRODUCT and the BI PRODUCT in order to show comparability between
the GENENTECH PRODUCT and the BI PRODUCT; and (d) prepare for an FDA inspection
in order for BI Austria to be registered with the FDA as a cGMP-compliant
manufacturer for an INTERFERON GAMMA 1b product to be sold under the ACTIMMUNE
trademark for the US market and other territories controlled by InterMune; and
WHEREAS, InterMune wishes BI Austria, and BI Austria agrees, to manufacture and
supply InterMune with finished INTERFERON GAMMA 1b product for its conduct of
clinical trials and supply of market needs for a period of six (6) years in
accordance with the terms and conditions of this Agreement; and
WHEREAS, InterMune wishes BI Austria, and BI Austria agrees, to increase its
manufacturing capability for bulk and finished INTERFERON GAMMA 1b product in
accordance with a mutually agreed-upon plan and timeline as further described
herein.
NOW, THEREFORE, the Parties hereto agree as follows:
1. DEFINITIONS
The following capitalized definitions will apply throughout this Agreement:
1.1. AFFILIATE means (i) any corporation or business entity fifty percent
(50%) or more of the voting stock of which is and continues to be
owned directly or indirectly by any party hereto; (ii) any corporation
or business entity which directly or indirectly owns fifty percent
(50%) or more of the voting stock of any party hereto; or (iii) any
corporation or business entity under the direct or indirect control of
such corporation or business entity as described in (i) or (ii).
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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1.2. APPROVAL means a regulatory approval required from a HEALTH AUTHORITY
in order to manufacture BBS or PRODUCT for use in clinical trials or
market supply as applicable, in the applicable jurisdiction.
1.3. ATS means the Austrian Shilling.
1.4. BI AUSTRIA'S IMPROVEMENTS shall mean all INFORMATION comprising any
inventions, modifications and/or improvements to the INTERMUNE
TECHNOLOGY or to the GENENTECH TECHNOLOGY, that BI Austria or BI
Pharma KG conceive of or reduce to practice pursuant to this
Agreement, either individually or in conjunction with one or more
third parties or BI Affiliates, including all patent and patent
applications covering any of the foregoing.
1.5. BI AUSTRIA'S TECHNOLOGY means all INFORMATION in the field of
manufacturing and testing of biopharmaceuticals, including without
limitation the MANUFACTURING PROCESS but only to the extent that it
relates solely to BI PRODUCT, and including all patents and patent
applications covering any of the foregoing, that are owned or
CONTROLLED by BI Austria or BI Pharma KG during the term of this
Agreement and that are related to or useful in BI Austria's carrying
out its obligations under this Agreement, but specifically excluding
INTERMUNE'S TECHNOLOGY and BI AUSTRIA'S IMPROVEMENTS.
1.6. BI TERRITORY means the territory described in EXHIBIT 1 hereto.
1.7. BII means Boehringer Ingelheim International GmbH, an AFFILIATE of BI
Austria GmbH and BI Pharma KG.
1.8. BI PHARMA KG means BI Austria's AFFILIATE BI Pharma KG, FRG-88397
Biberach an der Riss, Birkendorfer Strasse 65, Germany, owning an
FDA inspected and cGMP-certified facility.
1.9. BI PRODUCT means the liquid formulation of INTERFERON GAMMA 1b
approved in various countries of the BI Territory for the treatment of
Chronic Granulomatous Disease, and manufactured by BI Austria and BI
Pharma KG for sale. In Europe the BI PRODUCT is sold under the
trademark IMUKIN-Registered Trademark-.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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1.10. BLA means a Biologics License Application, as defined by the
regulations promulgated under the FD&C ACT, and any equivalent
application with respective HEALTH AUTHORITIES.
1.11. BULK BIOLOGICAL SUBSTANCE (BBS) means a bulk form of the PRODUCT. This
bulk form is the [ * ].
1.12. BULK SPECIFICATIONS mean the specifications for BBS listed in EXHIBIT
2.
1.13. cGMP means the current Good Manufacturing Practices of all applicable
HEALTH AUTHORITIES, including without limitation the FDA, and
including without limitation all applicable rules, regulations, guides
and guidance, such as 21C.F.R. parts 210 and 211 and parts 600 and
610.
1.14. CMC means the Chemistry, Manufacturing, and Controls content of a
submission to a HEALTH AUTHORITY.
1.15. COA means a Certificate of Analysis, a document listing testing
parameters, specifications and test results (in a format and detail as
listed in EXHIBIT 3).
1.16. COC means a Certificate of Compliance confirming compliance with cGMP
regulations and signed by BI Austria's authorized Qualified Person,
the Head of Production and the Head of Quality Assurance (in a format
and such detail as listed in EXHIBIT 4).
1.17. CONFIDENTIAL INFORMATION means any proprietary INFORMATION (a)
disclosed by one Party to the other (including without limitation,
such INFORMATION as was disclosed under the Confidential
Non-Disclosure Agreement dated June 5, 1998, between InterMune and
Bender+Co Ges mbH (now BI Austria), or (b) developed by either Party
pursuant to this Agreement, except for INFORMATION which (i) is
already in the public domain at the time of its disclosure to the
receiving Party; (ii) becomes part of the public domain through no
wrongful action or omission of the receiving Party after disclosure to
the receiving Party; (iii) is already known to the receiving Party at
the time of disclosure as evidenced by the receiving Party's written
records; or (iv) is independently developed by the receiving Party
without the use or application of the disclosing Party's proprietary
information.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
1.18. CONTROLLED means, with respect to any material, INFORMATION or
intellectual property right, possession of the ability by a Party to
grant access, a license, or a sublicense to such material, INFORMATION
or intellectual property right as provided for herein without
violating an agreement with a Third Party as of the time such Party
would be first required hereunder to grant the other Party such
access, license or sublicense.
1.19. FDA means the United States Food and Drug Administration and any
successor agency thereto.
1.20. FD&C ACT means the United States Food, Drug & Cosmetic Act as amended
from time to time and any supplements thereunder, and any equivalent
regulation of any HEALTH AUTHORITIES.
1.21. FILLING SITE CHANGE means the transfer of the filling and finishing
part of the MANUFACTURING PROCESS from BI Austria to BI Pharma KG.
1.22. FINAL RELEASE means the release of PRODUCT by InterMune or its
licensees for clinical trial use or market supply, as applicable.
1.23. GENENTECH PRODUCT means the formulation of INTERFERON GAMMA 1b
manufactured in the US by Genentech for sale under the trademark
ACTIMMUNE and approved by the FDA for the treatment of Chronic
Granulomatous Disease.
1.24. GENENTECH TECHNOLOGY means all INFORMATION relating to the
manufacture, use or sale of INTERFERON GAMMA 1b that is licensed to
either Party pursuant to an agreement with Genentech, including
without limitation the MANUFACTURING PROCESS, and all patents and
patent applications covering such INFORMATION.
1.25. HEALTH AUTHORITIES mean all regulatory authorities having jurisdiction
over the manufacture, use and/or sale of the PRODUCT in the TERRITORY,
including but not limited to the FDA.
1.26. INFORMATION means (a) techniques, data, inventions, practices,
methods, knowledge, know-how, skill, experience, test data (including
pharmacological, toxicological and clinical test data), analytical and
quality control data, regulatory submissions, correspondence and
communications, marketing, pricing, distribution, cost, sales,
manufacturing, patent and legal
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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data or descriptions, compositions of matter, assays and biological
materials, and (b) all intellectual property rights in and to any of
the foregoing.
1.27. INTERFERON-GAMMA 1B means the recombinant human Interferon-Gamma 1b
derived from a [ * ], and that is the active ingredient in
ACTIMMUNE-Registered Trademark-. The relevant amino acid sequence is
set forth in EXHIBIT 5.
1.28. INTERMUNE'S TECHNOLOGY means all INFORMATION that is CONTROLLED by
INTERMUNE during the term of this Agreement that is related to or
useful in BI Austria's manufacture of PRODUCT hereunder, and all
patents and patent applications covering any of the foregoing;
provided that "INTERMUNE'S TECHNOLOGY" shall not include any
INFORMATION (i) owned or CONTROLLED by BI Austria prior to the
Effective Date, (ii) conceived of, or reduced to practice or acquired
by BI Austria outside of this Agreement during the term of this
Agreement, or (iii) the GENENTECH TECHNOLOGY.
1.29. MCB means the original Master Cell Bank derived from the [ * ] and
established by Genentech.
1.30. MANUFACTURING PROCESS means the process for fermentation,
purification, filling, labeling and packaging of BBS and PRODUCT, as
described in EXHIBIT 6.
1.31. MATERIAL SUPPLY BREACH means a failure of BI Austria: (a) to supply to
InterMune at least ninety percent (90%) of InterMune's binding
forecasted requirements of PRODUCT (or actual orders, if less) that
are due for delivery by the designated delivery date during the
then-current calendar quarter; or (b) to repeatedly (maximum two (2)
times) materially violate against cGMP, as described in Sections 5.6
and 5.7.
1.32. PRODUCT shall mean a finished product consisting of formulated
INTERFERON GAMMA 1b filled into the designated containers for clinical
supply and for market supply, as described in EXHIBIT 7, or shall mean
a finished product of formulation buffer filled into the designated
containers for clinical supply (placebo).
1.33. PROJECT MANAGER means the responsible person designated by each Party
to be responsible for the communication of all information concerning
this Agreement. As of the Effective Date, the person designated as
InterMune's PROJECT MANAGER and the person designated as BI Austria's
PROJECT MANAGER are listed in EXHIBIT 8. Either Party may
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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change its own designated PROJECT MANAGER by providing written notice
thereof to the other Party.
1.34. PRODUCT SPECIFICATIONS mean the specifications for the PRODUCT as set
forth in EXHIBIT 9, or as otherwise agreed by the Parties in writing.
1.35. PROJECT TEAM means the team as listed in EXHIBIT 8 and described in
Section 6.1.
1.36. QUALITY ASSURANCE REQUIREMENTS mean InterMune's quality assurance
requirements as set forth in EXHIBIT 10, as may be amended from time
to time by written agreement of the Parties.
1.37. RELEASE means the release of the PRODUCT by BI Austria to InterMune or
its designee.
1.38. SERVICES mean the services to be performed by BI Austria and BI Pharma
KG in connection with establishing comparability between the GENENTECH
PRODUCT and the BI PRODUCT for cGMP purposes, and preparing BI Austria
to be approved by the FDA as a cGMP manufacturer of the PRODUCT, as
further described in EXHIBIT 11. EXHIBIT 11 also includes the costs
for the SERVICES. The timeline within which BI Austria and BI Pharma
KG intend to perform the SERVICES is described in EXHIBIT 12.
1.39. STEERING COMMITTEE means the committee as listed in EXHIBIT 13 and as
further described in Section 6.2.
1.40. TERRITORY means the US, Japan and all additional territories,
including but not limited to Canada, as to which InterMune has or may
acquire the right to manufacture, use or sell INTERFERON GAMMA 1b
products during the term of this Agreement.
1.41. US means the United States of America.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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2. DATA TRANSFER AND PRODUCT COMPARISON
2.1. INTERMUNE'S TASKS AND RESPONSIBILITIES
2.1.1. DOCUMENTATION
InterMune shall provide BI Austria with the relevant
documentation that is reasonably available to InterMune
concerning the GENENTECH PRODUCT and its manufacture by
Genentech, including amendments and currently used batch
records and testing procedures and all material correspondence
with the HEALTH AUTHORITIES in the US as listed in EXHIBIT 14.
The Parties acknowledge that BI Austria is already in receipt
of most of the relevant documentation.
2.1.2. MATERIAL
InterMune shall provide BI Austria with original [ * ]
vials from Genentech and samples of BBS manufactured by
Genentech, as well as of the final labeled product
ACTIMMUNE-Registered Trademark-, in such reasonable amounts
and at such times as agreed by the Project Team. InterMune
shall also supply BI Austria, as reasonably requested and
in reasonable amounts, with reference material, antibodies
and reagents for analytical testing, and all other material
reasonably available to InterMune and reasonably requested
by BI Austria that may be suitable as a basis for
comparison between the GENENTECH PRODUCT and the BI PRODUCT.
2.1.3. DATA
InterMune shall also provide to BI Austria, as reasonably
requested, all technical data and equipment specifications
reasonably available to InterMune that are used in the
manufacture of the GENENTECH PRODUCT in the US.
2.1.4. SUPPORT
InterMune shall timely send all documentation, and otherwise
timely provide all information and other assistance,
reasonably requested by BI Austria for use under this
Agreement. InterMune shall provide such reasonable technical
support at its own
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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expense, which support shall include access to InterMune's
expert personnel upon reasonable notice and at such reasonable
times as the Parties may agree.
2.1.5. CONTACT WITH HEALTH AUTHORITIES
2.1.5.1. InterMune, as the license holder for the
GENENTECH PRODUCT in the US, shall have the
overall responsibility regarding all contacts
with the HEALTH AUTHORITIES and shall be solely
responsible for filing all regulatory documents
required by any HEALTH AUTHORITIES, such as any
amendments to the BLA for the GENENTECH PRODUCT.
BI Austria shall support InterMune in all
matters regarding the manufacturing and quality
control of PRODUCT as reasonably requested by
InterMune, but InterMune shall be the leading
Party, responsible for co-ordination of all
regulatory matters.
2.1.5.2. InterMune will notify BI Austria in due time,
but in no event later than five (5) business
days in advance of any meeting with any HEALTH
AUTHORITIES with regard to manufacture, supply
and quality control of the PRODUCT manufactured
by BI Austria or BI Pharma KG under this
Agreement. BI Austria shall have the right to
participate in such meetings with such HEALTH
AUTHORITIES during the portion of such meetings
relating to BI Austria's or BI Pharma KG's
manufacture, supply and quality control of the
PRODUCT.
2.1.5.3. BI Austria will be responsible for drawing up
the annual report required by the HEALTH
AUTHORITIES reasonably in advance of the due
date, and will be responsible of matters
regarding the manufacture of PRODUCT. InterMune
shall submit such report to the HEALTH
AUTHORITIES and shall provide BI Austria with a
copy of the finally submitted report.
2.1.6. SHIPMENT OF MATERIAL BY INTERMUNE
All material, e.g. samples, sent by InterMune to BI Austria
shall be made by shipment from InterMune's or Genentech's
facility to BI Austria's facility in Vienna. Shipping costs
including insurance will be borne by InterMune, and risk of
loss in transit shall lie with InterMune.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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2.2. BI AUSTRIA'S TASKS AND RESPONSIBILITIES
2.2.1. COMPARISON OF DOCUMENTATION AND MATERIALS
2.2.1.1. BI Austria shall evaluate and compare all
documentation and other materials relating to
the manufacture and testing of the GENENTECH
PRODUCT with all relevant documentation and
other materials relating to the manufacture and
testing of the BI PRODUCT that is necessary to
demonstrate comparability between such Genentech
documentation, as listed in EXHIBIT 14, and such
BI Austria documentation.
2.2.1.2. BI Austria shall also carry out an analytical
comparison of BBS and GENENTECH PRODUCT
manufactured by Genentech and of BBS and BI
PRODUCT manufactured by BI Austria and BI Pharma
KG based on a mutually agreed protocol as listed
in EXHIBIT 15.
2.2.2. PRODUCTION RUNS
Subject to Section 2.2.3, BI Austria shall carry out three (3)
production runs of PRODUCT in order to obtain APPROVAL in the
US as a cGMP manufacturer of BBS, and to have BI Pharma KG
obtain APPROVAL in the US as a cGMP manufacturer of PRODUCT.
BBS and PRODUCT derived from these runs shall be used for
evidencing comparability between the GENENTECH PRODUCT and the
BI PRODUCT. The costs of these runs are listed in EXHIBIT 11
and shall be borne by InterMune.
2.2.3. ADDITIONAL RUNS
If any HEALTH AUTHORITIES request further analytical testing
and/or production runs in addition to those described in
EXHIBIT 11, BI Austria shall perform such testing and/or
production runs as requested by InterMune. The cost of such
additional testing and/or production runs will be borne by
InterMune, subject to InterMune's prior written approval of
such costs, unless the additional analytical testing and/or
production runs are due to negligence on BI Austria's or BI
Pharma KG's part.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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2.2.4. ADDITIONAL DOCUMENTATION
If any HEALTH AUTHORITIES request that InterMune or BI Austria
provide, in connection with BI Austria's and/or BI Pharma KG's
receipt of approval as a manufacturer of PRODUCT hereunder,
further documentation regarding the manufacture of PRODUCT in
addition to the documentation as foreseen under the SERVICES
(e.g. certain reports), BI Austria will provide such
documentation to InterMune for provision to such HEALTH
AUTHORITIES as soon as reasonably possible. Such additional
documentation may be either (a) product and/or process-related
or (b) facility-related (e.g. infrastructure, utilities,
personnel, training etc.). The cost of such additional product
and/or process-related documentation shall be borne by
InterMune unless such additional documentation is due to
negligence on BI Austria's or BI Pharma KG's part. The cost of
such additional facility-related documentation shall be borne
by BI Austria.
2.2.5. REGULATORY SUPPORT
2.2.5.1. BI Austria shall provide all site-relevant
documentation (both from itself and from BI
Pharma KG) and all data relevant for compiling
the CMC section necessary for InterMune's
drafting of the BLA supplement required by the
FDA due to the change of manufacturer for the
GENENTECH PRODUCT. BI Austria agrees to
co-operate with InterMune in obtaining and
maintaining all US governmental approvals and
registrations relevant to the CMC section of the
registration dossier (and their foreign
equivalents) as requested by InterMune.
2.2.5.2. The Parties shall consult with each other
concerning the scope and content of all
regulatory filings, and shall jointly define the
requirements for the necessary PRODUCT
registration with the FDA so that BI Austria
shall be able to fulfill its obligations under
this Agreement with respect to the CMC portion
of such PRODUCT registration.
2.2.6. FORMAT AND CONTENT OF DOCUMENTS
BI Austria's Quality Management System demands a special
format for certain documents (i.e. batch records, testing
procedures, technical reports) which is binding.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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For those documents where a binding format is not obligatory
the Parties shall agree in writing on a master format. With
respect to the dates contained in these documents, and in
particular in all reports and when dates occur in connection
with signatures, the European writing style shall apply. The
order shall be as follows: dd / mm / yy (day/month/year).
2.2.7. STANDARD OF PERFORMANCE
BI Austria shall diligently perform the SERVICES, and shall
ensure that BI Pharma KG diligently performs the SERVICES, in
a manner consistent with good scientific / regulatory /
business practices. InterMune acknowledges that the SERVICES
are of biological nature and therefore neither success nor
commercial exploitability can be guaranteed by BI Austria.
3. MANUFACTURE AND SUPPLY
3.1. GENERAL
3.1.1. BI Austria shall exclusively supply to InterMune for use and
sale in the TERRITORY, BBS or PRODUCT for use in the treatment
or prevention of any human disease or condition except for the
treatment or prevention of any type of cardiac or
cardiovascular disease or condition. BI Austria shall not
supply BBS or PRODUCT for use in the treatment of any human
disease or condition, except for the treatment or prevention
of any type of cardiac or cardiovascular condition, to any
third party for use and/or sale in the TERRITORY without
InterMune's prior written consent. InterMune shall exclusively
purchase from BI Austria, all of InterMune's clinical trial
supply, and from the time BI Austria and BI Pharma KG are
approved by the HEALTH AUTHORITIES also its market
requirements for PRODUCT in the TERRITORY for the term of
this Agreement, subject to Section 3.7.
3.1.2. All BBS manufactured by BI Austria hereunder, and all
PRODUCT manufactured and supplied to InterMune by BI
Austria hereunder, shall be manufactured and supplied in
accordance with the BBS SPECIFICATIONS and PRODUCT
SPECIFICATIONS, the cGMP requirements, the QUALITY
ASSURANCE REQUIREMENTS as listed in EXHIBIT 10 and all
applicable laws, regulations and ordinances of the
jurisdiction in which such manufacture occurs.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.1.3. BI Austria shall manufacture BBS according to the BULK
SPECIFICATIONS. Until the FILLING SITE CHANGE is complete,
BI Austria shall manufacture PRODUCT according to PRODUCT
SPECIFICATIONS for clinical supply only. Upon completion of
the FILLING SITE CHANGE and upon receipt of FDA APPROVAL of
BI Austria's facility as well as BI Pharma KG's facility,
BI Austria shall also manufacture PRODUCT for market
supply. BBS for clinical and market supply shall be
manufactured at BI Austria and transferred to BI Pharma KG
for vialing, labeling (but only for market supply) and
packaging. Manufacturing and filling of vials, labeling
(but only for market supply) as well as the packaging and
storing of PRODUCT shall be in accordance with the PRODUCT
SPECIFICATIONS, the cGMP requirements, the QUALITY
ASSURANCE REQUIREMENTS as listed in EXHIBIT 10 and all
applicable laws, regulations and ordinances of the
jurisdiction in which such manufacturing and/or filling
occurs. Notwithstanding the fact that BI Austria takes BI
Pharma KG as a toll manufacturer for filling, labeling (for
market supply) and packaging of PRODUCT, BI Austria takes
responsibility for the manufacture and supply of PRODUCT to
InterMune in accordance with the terms and conditions of
this Agreement.
3.2. FORECASTS
3.2.1. [ * ] prior to the first delivery date of PRODUCT for
market supply and [ * ] prior to the first delivery date of
PRODUCT for clinical supply, unless otherwise agreed,
InterMune shall provide a rolling forecast for the next
[ * ]. The first [ * ] of such forecast shall be firm
(EXHIBIT 16, [ * ]). For [ * ] InterMune can reduce its
forecast by [ * ], and may increase its forecast [ * ] will
constitute a non-binding forecast [ * ]. After the first
forecast has been submitted by InterMune to BI Austria,
successive forecasts shall be submitted on a quarterly
basis at the latest on every first day of every new
calendar quarter. InterMune agrees to order the PRODUCT in
filling lot quantities or multiples thereof (available lot
sizes are [ * ], or any other then available lot sizes).
Following BI Austria's and BI Pharma KG's FDA approval to manufacture
PRODUCT for market supply, InterMune shall order the requested amounts
of PRODUCT. In any case the [ * ].
3.2.2. If InterMune requires more PRODUCT than is set forth in the
current firm forecast, BI Austria shall use commercially
reasonable efforts in good faith to supply InterMune with
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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PRODUCT as requested; PROVIDED THAT for the amounts of
PRODUCT in excess of such forecast which BI Austria is
unable to supply, despite such commercially reasonable
efforts, InterMune may use a secondary source manufacturer
in accordance with the procedures set forth in Section 3.7.
3.2.3. If InterMune reduces the forecast for [ * ]by an amount in
excess of [ * ] percent (net of any increases in actual
orders for these [ * ]), then InterMune shall be [ * ]
which was [ * ] of the [ * ] at the [ * ] of the [ * ] of
the [ * ].
3.2.4. Notwithstanding the provisions stated in 3.2.1. for
planning purposes at BI Pharma KG InterMune shall provide
BI Austria [ * ]prior to the first delivery date of PRODUCT
as not agreed otherwise a rolling forecast for the next
[ * ] upon completion of the FILLING SITE CHANGE. InterMune
will be immediately informed by BI Austria of date of
completed FILLING SITE CHANGE. For all further requirements
all terms and conditions as stated in 3.2.1. shall apply.
3.2.5. In the event that the FDA approval process for the PRODUCT
is unexpectedly delayed, and/or the PRODUCT fails to pass
clinical trials, InterMune shall have no further ordering
and purchase obligations under Sections 3.2.1. and 3.2.3.
Only in this event even firm forecasts can be canceled,
provided that InterMune shall remain responsible for those
reasonable, documented, financial obligations which BI
Austria and/or BI Pharma KG have incurred due to (a) the
timely allocation of resources for the manufacture of BBS
and PRODUCT, (b) equipment for manufacture of BBS / PRODUCT
already ordered and not otherwise cancelable, or (c) other
non-refundable amounts already expended by BI Austria
and/or BI Pharma KG in good faith reliance on the cancelled
forecast.
3.3. PURCHASE ORDERS
3.3.1. All purchases of PRODUCT hereunder shall be made pursuant
to written purchase orders provided to BI Austria by
InterMune. To the extent that the terms of a purchase order
or of BI Austria's or BI Pharma KG's "GENERAL CONDITIONS OF
SALE" are inconsistent with the terms of this Agreement,
this Agreement shall prevail.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.3.2. BI Austria shall guarantee that at the date of FINAL
RELEASE all PRODUCT supplied to InterMune shall have a
minimum residual shelf life of not less than [ * ] of
PRODUCT shelf life, provided that InterMune shall strictly
fulfill its contractual timelines regarding FINAL RELEASE
as set forth in Sections 3.5 and 5.3.
3.3.3. BI Austria shall ship all PRODUCT as set forth in Section
3.4 by the date and in the quantities specified in the
applicable purchase order. BI Austria shall be obligated to
accept any purchase order within the range of permitted
variation in the forecasted quantities as set forth in
Section 3.2.1. and 3.2.2. Any other purchase order shall be
binding on BI Austria only if it is accepted by BI Austria,
which acceptance shall not be unreasonably withheld. If BI
Austria does not accept such a purchase order, then
InterMune may use a secondary source manufacturer for such
purchase order in accordance with the procedures set forth
in Section 3.7.
3.3.4. InterMune shall be obligated to buy and BI Austria shall be
obligated to sell only the quantities of PRODUCT which are
subject to a purchase order accepted by BI Austria. Any
purchase order (or portion thereof) for which InterMune has
not received a written rejection from BI Austria within
fifteen (15) business days of BI Austria's receipt of such
purchase order shall be deemed accepted by BI Austria.
3.4. SHIPMENT OF PRODUCT AND MATERIAL BY BI AUSTRIA
3.4.1. The PRODUCT and all material (e.g. samples) shall be
shipped [ * ] either BI Pharma KG, FRG-88397 Biberach an
der Riss, Germany or BI Austria's facility in Vienna,
Austria, as the case may be, to InterMune or as directed by
InterMune, in accordance with Incoterms 1990 as published
by the International Chamber of Commerce. InterMune's
designated carrier shall be used to ship PRODUCT to the
site designated by InterMune. Risk of loss in transit by
InterMune's designated contract carrier shall lie with
InterMune, except where such loss is caused by BI Austria's
or BI Pharma KG's negligence.
3.4.2. BI Austria will provide or will have provided assistance to
InterMune regarding necessary procedures for exportation
and/or importation of PRODUCT.
3.5. TESTING AND REJECTION
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.5.1. Within [ * ] business days of its receipt of PRODUCT at
such destination as may be designated by InterMune,
InterMune may perform such tests and samplings as are
appropriate to determine whether such PRODUCT meets the
applicable PRODUCT SPECIFICATIONS. If InterMune refuses
acceptance of PRODUCT, then InterMune shall inform BI
Austria in writing within [ * ]further business days of any
aspect in which such PRODUCT fails to conform to the
PRODUCT SPECIFICATIONS. If BI Austria does not receive such
a notice within [ * ] business days of InterMune's receipt
of such PRODUCT, then InterMune shall be deemed to have
accepted the PRODUCT; provided that InterMune shall have
the right to revoke its acceptance of such goods if it
later discovers latent defects not reasonably discoverable
at the time of receipt.
3.5.2. If BI Austria receives a notice from InterMune pursuant to
Section 3.5.1 that InterMune does not accept any PRODUCT
supplied hereunder, then BI Austria shall immediately start
re-testing the PRODUCT using the retained samples in order
to evaluate process issues and other reasons for such
non-compliance.
3.5.3. Regardless of whether BI Austria agrees with InterMune's
rejection of such PRODUCT, if requested in writing by
InterMune, BI Austria shall use reasonable efforts to
promptly replace such allegedly defective PRODUCT, the
costs of which shall be borne as set forth in Section 3.5.4.
3.5.4. In the event that BI Austria's re-testing does not verify
InterMune's reasons for rejecting such PRODUCT, the Parties
shall mutually agree on an independent laboratory that
shall determine by applying validated product-specific
analytical methods whether such PRODUCT meets the PRODUCT
SPECIFICATIONS. The conclusions of this independent
laboratory shall be binding upon both Parties. If such
laboratory determines that such PRODUCT does meet the
PRODUCT SPECIFICATIONS, then InterMune shall bear the costs
for such independent laboratory and for any replacement
PRODUCT manufactured and supplied to InterMune by BI
Austria pursuant to Section 3.5.3. If such laboratory
determines that such PRODUCT does not meet the PRODUCT
SPECIFICATIONS, then BI Austria shall bear the costs for
such independent laboratory and for any such replacement of
PRODUCT.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.5.5. Neither Party may destroy any PRODUCT alleged not to meet
the PRODUCT Specifications until the independent laboratory
determines whether such PRODUCT meets the applicable
PRODUCT SPECIFICATIONS and provides written notification to
the Parties with respect to such determination, unless BI
Austria accepts InterMune's basis for such rejection.
Thereafter, BI Austria shall have the obligation to destroy
or have destroyed, at its cost, all such rejected PRODUCT.
Upon BI Austria's written request and at BI Austria's cost,
InterMune shall either destroy or return to BI Austria any
rejected PRODUCT. The Parties agree that in the event of
destruction of PRODUCT, the method of such destruction
shall be in compliance with all applicable laws, rules and
regulations.
3.5.6. Claims on account of quantity, loss or damages to PRODUCT
(other than claims that such PRODUCT does not meet the
PRODUCT SPECIFICATIONS and latent defects not reasonably
detectable upon inspection) will be dispatched by InterMune
in writing within [ * ] business days following receipt
thereof. BI Austria shall use reasonable efforts to replace
the quantity of goods which such claims apply, which
replacement shall be at InterMune's expense unless such
claims are due to the negligence of BI Austria.
3.6. INCREASE OF MANUFACTURING CAPACITY
3.6.1. At BI Austria's facility an additional production line is
currently under construction. Validation of this separated
cGMP fermentation production lines within a completely
separated containment is intended to be completed by [ * ]
for any reason including but not limited to the amount of
BBS to be manufactured, when to have the [ * ].
3.6.2. BI Austria guarantees to have manufactured at BI Pharma KG
a minimum of [ * ] vials per year. InterMune presumes that
the amount of vials requested per year might exceed [ * ]
vials. Should it become at any time apparent that a higher
PRODUCT demand is necessary InterMune will notify BI
Austria thereof. BI Austria shall inform as soon as
reasonably possible InterMune of the respective costs for
guaranteeing the appropriate reserved capacity for
manufacturing the amount exceeding [ * ] vials. Upon
agreement on the costs BI Austria shall reserve the
capacity needed for the increased demand of PRODUCT.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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Should it become at any time apparent that manufacturing
capacity at BI Austria for cell paste and BBS equivalent to
at least [ * ] vials per year would not be feasible, BI
Austria will notify InterMune thereof.
3.7. SECOND SOURCE MANUFACTURER
3.7.1. BI Austria acknowledges that it is critical that InterMune
be ensured continuity of supply of PRODUCT for use in
clinical trials and market supply. BI Austria shall ensure
continuity of supply of PRODUCT for use in clinical trials
and market supply. Nevertheless, due to the potentially
growing market demand of PRODUCT, BI Austria's ability to
manufacture and supply PRODUCT shall be carefully observed.
Should at any time BI Austria have any indication that
continuity of supply can not be ensured, BI Austria shall
immediately inform InterMune thereof in writing. In this
event the matter would be immediately forwarded to the
STEERING COMMITTEE to discuss second source manufacture of
PRODUCT reasonably and in good faith.
3.7.2. In the event the STEERING COMMITTEE decides that it is
appropriate for InterMune to establish a second source
manufacturer, InterMune agrees to provide the first
opportunity to qualify as a second source manufacturer for
PRODUCT to a BI Austria AFFILIATE. If such an AFFILIATE is
- as foreseeable - unable to supply InterMune's PRODUCT
requirements then InterMune shall be free to choose an
alternate supplier. In this case BI Austria shall assist
InterMune in transferring the MANUFACTURING PROCESS to a
third party supplier by providing reasonable technical
assistance and documentation as necessary for a transfer to
a party well skilled in the manufacture of such biotech
products at InterMune's cost.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.8. MATERIAL SUPPLY BREACH
3.8.1. In the event of a MATERIAL SUPPLY BREACH, InterMune shall
provide BI Austria written notification of such MATERIAL
SUPPLY BREACH. Upon BI Austria's receipt of such notice and
failure to cure such MATERIAL SUPPLY BREACH within the
timetable and activity plan agreed upon the Parties to cure
such MATERIAL SUPPLY BREACH, InterMune shall have the right
to purchase from a second source manufacturer, to be agreed
upon within the STEERING COMMITTEE in accordance with
Section 3.7, such amounts of PRODUCT as necessary to offset
BI Austria's shortfall in fulfilling InterMune's purchase
orders for such PRODUCT (or the anticipated shortfall, in
the event of repeated (maximum two (2) times) material
violation against cGMP).
In the event, that
i) a BI Austria AFFILIATE can not qualify as a
second source manufacturer for PRODUCT or
ii) in the event such a BI Austria AFFILIATE is - as
foreseeable -unable to supply InterMune's
PRODUCT requirements and
iii) provided that PRODUCT supply as requested by
InterMune by a different second source
manufacturer, a company experienced in
manufacturing of biopharmaceuticals derived from
microbial fermentation technology, and selected
by InterMune could demonstrably take place
earlier than a MATERIAL SUPPLY BREACH by BI Austria
could be remedied, BI Austria shall assist
InterMune as requested in transferring the
MANUFACTURING PROCESS to such a second source
supplier, to be selected by InterMune by providing
reasonable technical assistance and documentation
relating to the manufacture, testing and supply
of BBS and the PRODUCT as necessary at BI Austria's
cost. Such second source manufacturer would bear
responsibility for putting the MANUFACTURING
PROCESS in place. The total financial commitment
for reasonable technical assistance shall not
exceed the costs equivalent to one (1) FTE
(full time equivalent) for the period of
six (6) months.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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3.8.2. In the event that BI Austria reasonably anticipates that
there is a substantial likelihood that a MATERIAL SUPPLY
BREACH will occur, BI Austria shall promptly notify
InterMune in writing thereof. Upon receipt of such notice,
the Parties shall promptly confer to discuss the
circumstances and magnitude of such potential MATERIAL
SUPPLY BREACH, and to determine in good faith whether there
are any reasonable steps that BI Austria could take to
avoid such MATERIAL SUPPLY BREACH. If InterMune is not
reasonably satisfied that BI Austria will be able to avoid
such MATERIAL SUPPLY BREACH, then InterMune shall forward
this issue to the STEERING COMMITTEE to determine whether
it is necessary or desirable to establish a second source
manufacturer in accordance with Section 3.7.
4. PRICES AND PAYMENT
4.1. The prices to be paid by InterMune for the SERVICES and PRODUCT
provided hereunder have been agreed to by the Parties and are listed
in EXHIBIT 11 and EXHIBIT 17, respectively. The price for the
SERVICES and PRODUCT will be adjusted year by year in accordance
with the [ * ]. (By way of example, the [ * ].) All payments
hereunder shall be made in Austrian Shilling or in Euro. If the
Austrian Shilling is replaced by the Euro and therefore no longer
available, payments becoming due thereafter shall be made in Euro
calculated at the official exchange rate.
4.2. [ * ] will be [ * ] which are [ * ] at the time such [ * ] to have
any such [ * ] selected by [ * ] which [ * ] shall [ * ]on
verification concerning the [ * ] shall provide [ * ] with [ * ]
days' notice of any [ * ].
4.3. The price for the SERVICES and purchase price for PRODUCT shall be
paid to BI Austria no later than [ * ] days after the date that BI
Austria's invoice is received by InterMune.
4.3.1. Payment of the invoice amounts shall be made in Austria,
[ * ], into an account with such Austrian credit
institution as shall be notified by BI Austria to InterMune
from time to time.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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4.3.2. All payments owed to BI Austria by InterMune on the basis of
accounts rendered shall be made in such a way that [ * ] shall
be [ * ] that are [ * ] on such [ * ]. In the event of a
default in payment for whatever reason, default interest at a
rate of [ * ] p.a. shall be payable on the outstanding amount
due. BI Austria reserves the right to claim any damage
exceeding such amount that shall have been caused by such
delay, subject to Section 11.1.
4.4. As security for payment for the SERVICES, InterMune shall deliver to
BI Austria within twenty (20) business days of the Effective Date an
abstract Standby Letter of Credit issued by a renowned European credit
institution with a term starting Feb 1, 2000 until April 30, 2001 in
the amount of ATS 7,563,800 (seven million five hundred sixty three
thousand eight hundred Austrian Shillings) which is in accordance with
a fifth of the payment obligation for the SERVICES as listed in
EXHIBIT 11. InterMune shall provide such Standby Letter of Credit at
its own cost. BI Austria shall be entitled to draw upon such Standby
Letter of Credit to cover any payment obligation arising with respect
to the SERVICES.
5. QUALITY ASSURANCE AND COMPLIANCE WITH LAW
5.1. RELEASE OF PRODUCT
5.1.1. BI Austria shall be responsible for the RELEASE of PRODUCT
according to the PRODUCT SPECIFICATIONS, the cGMP
requirements, the QUALITY ASSURANCE REQUIREMENTS as listed in
EXHIBIT 10 and all applicable Austrian and German laws. BI
Austria shall certify in writing that each shipment lot of
PRODUCT was produced and tested in compliance with (i) the
SPECIFICATIONS, (ii) the cGMP requirements (iii) QUALITY
ASSURANCE REQUIREMENTS and (iv) all applicable laws,
regulations and ordinances of the jurisdiction in which such
manufacture occurs.
5.1.2. BI Austria shall provide to InterMune, through BI Pharma KG,
QUALITY ASSURANCE REQUIREMENTS as listed in EXHIBIT 10
including but not limited to a COA and COC signed by the
appropriate personnel as defined in BI Austria's Quality
Management System for each shipment lot of PRODUCT from BI
Pharma KG's manufacture site in Biberach, Germany, in order to
prove BI Austria's compliance with the Article 5.1.1.
5.2. STORAGE OF RECORDS AND BATCH SAMPLES
5.2.1. BI Austria shall maintain in compliance with cGMP standards
all batch samples and all records required by law or as
otherwise mutually agreed in writing by the Parties (i.e.
batch records, analytical raw data) necessary to evidence
compliance with all its
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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obligations under this Agreement and relating to the
manufacture of the BBS and of PRODUCT. The documentation
concerning manufacture of BBS shall be stored at BI Austria
and concerning manufacture of PRODUCT shall be stored in
Biberach upon completion of FILLING SITE CHANGE. Storage of
retained samples of BBS as well as PRODUCT shall be at BI
Austria.
5.2.2. Copies of all documentation and information relating to the
manufacture, processing, packaging and shipping of PRODUCT
and/or required to support InterMune's BLA or other regulatory
submissions, including but not limited to information relating
to batch records, methods, equipment and the facility, will be
provided by BI Austria to InterMune for review and inclusion
as necessary in InterMune's regulatory submissions.
5.2.3. All such samples and records shall be maintained for a period
not less than five (5) years from the date of expiration of
each batch of PRODUCT to which such samples and records
pertain, or such longer period as may be required by local law
and the rules or regulations of the FDA or other applicable
HEALTH AUTHORITIES. Following the expiration of such required
retention period, prior to the destruction of any such sample
or record, BI Austria shall give written notice thereof to
InterMune, and InterMune shall have the right to request,
receive and retain such samples and records with no further
compensation to BI Austria.
5.3. FINAL RELEASE
FINAL RELEASE of PRODUCT supplied by BI Austria and/or BI Pharma KG
hereunder for use in humans shall solely be made by and under the
responsibility of InterMune.
5.4. THIRD PARTY SERVICES
Except as specifically provided for herein, BI Austria will not
contract out to any third party any part of the SERVICES or the
manufacture and testing of BBS or PRODUCT, without prior written
approval from InterMune, which shall not be unreasonably withheld.
5.5. CONSENT TO CHANGES
BI Austria will not make any changes to BI Austria's, and shall ensure
that BI Pharma KG shall not make any changes to BI Pharma KG's,
respective manufacturing facilities, equipment,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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testing procedures, validation, suppliers of raw materials and
components or documentation systems that are solely related to
the PRODUCT and having a non-trivial impact on the PRODUCT,
without the prior written consent of InterMune and solely as
is permitted by cGMP. In the event that a supplier of raw
material is unable to deliver the respective raw material in
time for scheduled manufacturing BI Austria is free to choose
another supplier, provided that such supplier supplies such
raw material that fully meets the respective raw material
specification, and subject to BI Austria's providing InterMune
prior written notice thereof.
5.6. INSPECTIONS BY HEALTH AUTHORITIES
5.6.1. BI Austria shall secure that during APPROVAL inspections at BI
Austria's and/or BI Pharma KG's facilities by any applicable
HEALTH AUTHORITIES, BI Austria shall give InterMune prior
written notice thereof promptly following BI Austria's receipt
of notice of such inspection, so that representatives of
InterMune may attend and participate in such inspections, for
example, to answer PRODUCT and clinical trial related
questions.
5.6.2. BI Austria shall advise, and shall ensure that BI Pharma KG
shall advise, InterMune in writing immediately of any requests
by any applicable HEALTH AUTHORITIES for inspections at either
of BI Austria's or BI Pharma KG's facilities, but in any
event, no later than ten (10) business days prior to the
scheduled date of such inspection. Upon reasonable notice,
InterMune or its representatives may attend only such portions
of such inspections or audits that deal with PRODUCT related
issues, due to BI Austria's other secrecy obligations. Access
to such facilities may be subject to reasonable restrictions
customarily placed upon visitors to the site.
5.6.3. BI Austria also agrees to notify InterMune within four (4)
business days of any written or oral inquiries, notifications,
or inspection activity by any HEALTH AUTHORITIES (or any third
party authorized by the HEALTH AUTHORITIES) in regard to
PRODUCT. BI Austria shall provide a reasonable description to
InterMune of any such inquiries, notifications or inspections
promptly (but in no event later than ten (10) business days)
after such visit or inquiry. BI Austria shall furnish to
InterMune (a) within four (4) business days after receipt, any
report or correspondence issued by the HEALTH AUTHORITIES (or
a third party authorized by a HEALTH AUTHORITIES)
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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in connection with such visit or inquiry, including but not
limited to, any FDA Form 483 (List of Inspectional
Observations) or warning letter, and (b) not later than five
(5) business days prior to the time it provides to a HEALTH
AUTHORITY, copies of any and all proposed written responses or
explanations relating to items set forth above (each, a
"Proposed Response"), in each case purged only of trade
secrets or other confidential or proprietary information of BI
Austria that are unrelated to its obligations under this
Agreement or are unrelated to PRODUCT. BI Austria shall
discuss with InterMune any comments provided by InterMune on
the Proposed Response; provided that InterMune shall have the
final decision with respect to those portions of the final
written response or explanation to be provided to the HEALTH
AUTHORITIES that relate to PRODUCT manufactured hereunder.
After the filing of a response with the appropriate HEALTH
AUTHORITIES, BI Austria will notify InterMune of any further
contacts with the HEALTH AUTHORITIES relating to BI Austria's
manufacture of PRODUCT hereunder.
5.6.4. BI Austria shall promptly correct, and shall ensure that BI
Pharma KG shall promptly correct, any facility-related
violations or deficiencies promptly at its own expense.
Equipment, system and process-related violations or
deficiencies that are solely PRODUCT-related shall be
corrected promptly by BI Austria or BI Pharma KG,
respectively, at InterMune's cost.
In the event such corrections will not only be necessary for
PRODUCT but as well for BI PRODUCT the appropriate allocation
of the related costs between the Parties shall be determined
by the PROJECT TEAM.
5.7. AUDITS BY INTERMUNE
5.7.1. InterMune shall have the right to inspect and audit both of BI
Austria's and BI Pharma KG's manufacturing facilities and
records for regulatory compliance. These audits shall occur
annually upon reasonable notice, and more frequently for good
and reasonable cause. BI Austria shall respond in writing to
InterMune regarding any items of non-compliance with cGMP
identified by InterMune during such audits, whether with
respect to the BI Austria or the BI Pharma KG facility, within
[ * ] business days of InterMune's
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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notice thereof, and without delay remedy any such agreed upon
items of non-compliance with cGMP.
5.7.2. If BI Austria can not remedy such non-compliance, whether with
respect to the BI Austria or the BI Pharma KG facility, within
[ * ] business days of notice thereof BI Austria's response
shall include a written plan and timetable including
reasonable timelines. Considering the fact that BI Austria is
dependent on certain third parties to supply services to it,
BI Austria shall use best efforts to assign such timelines to
these third parties accordingly in order to meet all timelines
for such remedy. Such plan and timetable shall be subject to
InterMune's approval, which shall not unreasonably be
withheld. In the event that BI Austria does not respond with a
plan and timetable as described above within such [ * ] day
period, or InterMune does not approve such proposed plan and
timetable for good reason, the issue shall be forwarded to the
STEERING COMMITTEE for resolution. In the event InterMune
approves such plan and timetable, but BI Austria fails to
remedy such non-compliance in accordance with such plan and
timetable, then InterMune shall have the right to terminate
this Agreement pursuant to Section 13.2.1.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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5.8. MANUFACTURING FACILITIES
BI Austria represents and warrants that it and BI Pharma KG shall
obtain all relevant APPROVALS required by the relevant HEALTH
AUTHORITIES for each of their respective manufacturing facilities and
that each of their respective manufacturing facilities conform, and
will during the term of this Agreement conform, to the cGMP.
5.9. COMPLIANCE WITH LAW
5.9.1. BI Austria shall comply, and shall ensure that its
subcontractor BI Pharma KG shall comply with, all local
applicable rules, laws and regulations (including without
limitation cGMP) in performing its obligations under this
Agreement. InterMune shall comply with all applicable rules,
laws and regulations in performing its obligations under this
Agreement.
5.9.2. All costs in connection with maintaining BI Austria's and BI
Pharma KG's compliance with all applicable local regulatory
requirements and cGMP in performing under this Agreement,
including but not limited to the maintenance and upgrading of
all technical facilities and infrastructure and the training
of personnel, shall be borne by BI Austria. BI Austria shall
obtain and maintain, and shall ensure that BI Pharma KG
obtains and maintains, all permits and licenses necessary to
its performance under this Agreement at their own expense. All
costs resulting out of the SERVICES carried out at BI Austria
or BI Pharma KG, respectively, related to compliance with
regulatory requirements that were not in effect as of the
Effective Date concerning equipment and systems solely
PRODUCT-related shall be at InterMune's expense.
5.10. ENVIRONMENTAL
BI Austria shall, and shall ensure that BI Pharma KG shall, properly
dispose of any and all hazardous waste materials involved with the
manufacture of BBS and PRODUCT that are generated or resulting from the
activities performed hereunder, if any, in full compliance with all
applicable local laws and regulations at BI Austria's sole liability
and expense.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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6. CO-OPERATION AND CO-ORDINATION BETWEEN THE PARTIES
6.1. PROJECT TEAM
6.1.1. The day-to-day responsibilities of the Parties with respect to
the SERVICES shall be overseen by the PROJECT TEAM, which
shall be responsible for deciding operational and scientific
issues arising out of the SERVICES and unanimously agreeing in
good faith with respect to the monitoring of the SERVICES.
6.1.2. The PROJECT TEAM shall consist of a team consisting of equal
numbers of people, if feasible, each appointed by InterMune
and BI Austria and notified to the other, which appointees may
be changed from time to time by the appointing Party on
written notice to the other Party. Each member of the PROJECT
TEAM shall be a person of appropriate skill and experience.
Either Party may change its own designated PROJECT TEAM
members provided, however that the total number of members of
the PROJECT TEAM may not be changed if feasible, nor the
number of members representing InterMune decreased, without
the Parties' prior written agreement. InterMune's and BI
Austria's respective members of the PROJECT TEAM as of the
Effective Date are listed in EXHIBIT 8.
6.1.3. During the term of this Agreement, the PROJECT TEAM shall meet
regularly to communicate updates and provide a forum for
decision-making and rapid resolution of issues arising under
this Agreement. Meetings of the PROJECT TEAM may be conducted
by telephone conference, videoconference or face-to-face
meetings as agreed by the PROJECT TEAM, provided that the
PROJECT TEAM shall meet at least once a year in a face-to-face
meeting at a mutually agreed location.
6.1.4. Decisions of the PROJECT TEAM shall be reflected in the
approved minutes. Meeting minutes shall be prepared jointly by
the PROJECT MANAGERS to record all issues discussed and
decisions. Minutes that have not been objected to in writing
by a Party within six (6) business days of receipt thereof
shall be deemed approved by such Party and followed by
issuance of two (2) copies of the minutes duly executed by the
Parties' PROJECT MANAGER.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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6.1.5. In the event that the PROJECT TEAM is unable to reach
agreement on any issue and is unable to make decisions arising
out of operational and scientific issues within ten (10)
business days, each Party may call in an expert of its own
choice to render advice to the PROJECT TEAM. Based on the
advice of such expert(s) and the team members' know-how, the
PROJECT TEAM will try to resolve such issue. In the event that
the PROJECT TEAM fails to reach agreement on an issue within
thirty (30) business days of first undertaking resolution of
such issue, such issue shall then be referred to the STEERING
COMMITTEE for immediate resolution.
6.2. STEERING COMMITTEE
6.2.1. The Parties shall create a STEERING COMMITTEE consisting of
the PROJECT MANAGER of each Party and authorized
representatives who shall be appointed by InterMune and by BI
Austria in equal numbers, if feasible, and notified to the
other Party. The STEERING COMMITTEE shall be responsible for
unanimously agreeing in good faith all issues on which the
PROJECT TEAM has been unable to reach agreement and, where
possible, make decisions arising out of such issues as well as
carry out the specific functions, including but not limited to
decisions with an impact on costs and timelines of the
SERVICES to be carried out under this Agreement. Each Party
may change its own designated STEERING COMMITTEE members by
providing written notice thereof to the other Party; provided,
however that the total number of members of the STEERING
COMMITTEE may not be changed, if feasible, nor the number of
members representing InterMune decreased, without the Parties'
prior written agreement. The members of the STEERING COMMITTEE
are listed in EXHIBIT 13.
6.2.2. The STEERING COMMITTEE shall attempt in good faith to
expeditiously and fairly resolve all issues before it. In the
event that the STEERING COMMITTEE is unable to resolve any
issue before it within fifteen (15) business days from the
date that such issue is referred to it, such issue shall be
referred to the Chief Executive Officer of InterMune and the
Chief Executive Officer of BI Austria for prompt, good faith
resolution. If such individuals do not reach agreement on such
issue within fifteen (15) days of such referral, then each
Party shall be free to pursue all available legal and/or
equitable remedies.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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6.3. LIMITATION OF POWERS
The powers of the PROJECT TEAM and the STEERING COMMITTEE are limited
to those expressly set forth in this Agreement. Without limiting the
generality of the foregoing, neither the PROJECT TEAM nor the STEERING
COMMITTEE shall have the right to amend this Agreement. The actions of
the PROJECT TEAM and/or the STEERING COMMITTEE shall not substitute for
either Party's ability to exercise any right, nor excuse the
performance of any obligation, set forth herein.
7. INTELLECTUAL PROPERTY AND LICENSES
7.1. The ownership of INTERMUNE'S TECHNOLOGY shall remain with InterMune
and shall not vest in BI Austria.
7.2. The ownership of BI AUSTRIA'S TECHNOLOGY shall remain with BI Austria
and shall not vest in InterMune.
7.3. BI Austria shall retain ownership of BI AUSTRIA'S IMPROVEMENTS. BI
Austria hereby grants to InterMune a non-exclusive, perpetual,
sublicenseable, royalty-free license under BI AUSTRIA'S IMPROVEMENTS to
develop, use, make, have made, import, offer for sale and sell products
containing INTERFERON GAMMA 1b in the TERRITORY, whereby InterMune
shall assume the costs to be paid by BI Austria for awards to inventors
of BI AUSTRIA'S IMPROVEMENTS, as such awards are set forth in written
agreements between BI Austria and such inventor or in an applicable
industry labor contract.
7.4. The Parties shall each have an undivided one-half ownership interest in
any INFORMATION jointly conceived of or reduced to practice by the
Parties pursuant to this Agreement ("JOINT INFORMATION"). InterMune
shall [ * ] of any JOINT INFORMATION that comprises (a) any regulatory
filing (or documentation and raw data relating thereto) relating to
PRODUCT manufactured hereunder, or (b) any manufacturing documentation
(including without limitation batch records) relating to PRODUCT
manufactured hereunder ("PRODUCT INFORMATION"). Upon request by
InterMune, without additional consideration, BI Austria agrees to
promptly execute documents, testify and take other acts at InterMune's
expense as
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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InterMune may deem necessary or desirable to procure, maintain,
perfect, and enforce the full benefits, enjoyment, rights, title and
interest of the PRODUCT INFORMATION, on a worldwide basis. In the event
InterMune is unable for any reason, after reasonable effort, to secure
BI Austria's signature on any document needed in connection with the
actions specified in this Section 7.4, BI Austria hereby irrevocably
designates and appoints InterMune and its duly authorized officers and
agents as its agent and attorney in fact, which appointment is coupled
with an interest, to act for and in its behalf to execute, verify and
file any such documents and to do all other lawfully permitted acts to
further the purposes of this Section 7.4 with the same legal force and
effect as if executed by BI Austria.
7.5. InterMune hereby grants to BI Austria (with the right to sublicense
solely to BI Pharma KG) a non-exclusive, nontransferable license to use
INTERMUNE'S TECHNOLOGY solely for the purpose of (a) comparison of
PRODUCT documentation and comparison of BBS and PRODUCT and (b)
manufacturing PRODUCT for InterMune, as provided in this Agreement. The
license granted under this Section shall automatically terminate upon
the expiration or termination of this Agreement.
7.6. NEW INDICATIONS
7.6.1. In the event that InterMune receives approval in the TERRITORY
to commercially sell PRODUCT for indications other than
Chronic Granulomatous Disease, and provided that InterMune has
the right to grant a license to BII in the BI TERRITORY to
make, use and sell PRODUCT for such additional indications (a
"NEW INDICATIONS LICENSE"), InterMune shall provide BII
written notice thereof.
7.6.2. BII shall notify InterMune in writing within thirty (30) days
of InterMune's notice (the "NOTIFICATION PERIOD") whether BII
desires to obtain a NEW INDICATIONS LICENSE. If InterMune does
not receive written notice from BII during the NOTIFICATION
PERIOD that BII desires to obtain a NEW INDICATIONS LICENSE,
then InterMune shall have no further obligations under this
Section 7.6. If InterMune does receive written notice from BII
that BII desires to obtain a NEW INDICATIONS LICENSE, then BII
and InterMune shall engage in good faith negotiations for
sixty (60) business days thereafter regarding the reasonable
commercial terms upon which InterMune would be willing to
grant such a license. If at the end of such sixty (60)
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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business day period, BII and InterMune have not entered into a
written agreement under which InterMune grants a NEW
INDICATIONS LICENSE to BII, then InterMune shall have no
further obligation under this Section 7.6.
8. COMPLAINTS; ADVERSE EVENTS; RECALLS
8.1. InterMune shall inform BI Austria of any complaints, adverse
reaction reports, safety issues or toxicity issues relating to any
PRODUCT of which it becomes aware, regardless of the origin of such
information, within the time frame required by cGMP but in no event
later than two (2) days from the initial complaint or report.
8.1.1. InterMune shall retain and manage complaints in accordance
with cGMP. The Parties hereby agree to cooperate with one
another and with any HEALTH AUTHORITY in the evaluation and
investigation of any complaint, claim or adverse reaction
report related to the manufacture of such PRODUCT with the
intention of complying with cGMP.
8.1.2. If any such event occurs, BI Austria shall retain any unused
supplies of such PRODUCT and its associated components, and
all associated batch and other production records in such
manner as InterMune may reasonably direct, and at InterMune's
expense, except to the extent such event is caused by BI
Austria's wrongful act or omission. BI Austria agrees to
respond to InterMune in respect to such complaint
investigations involving BI Austria's manufacturing of a
PRODUCT or SERVICES rendered hereunder as soon as reasonably
possible but in any case within thirty (30) days from receipt
by BI Austria of the report of such complaint and sample (if
available), or in the case of a serious adverse event, within
ten (10) days from receipt of the report of such complaint and
sample (if available). InterMune and/or its designee shall
serve as the sole point of contact with the FDA or other
applicable HEALTH AUTHORITY concerning any complaints, adverse
reaction reports, safety issues or toxicity issues with
respect to PRODUCT.
8.2. If either Party becomes aware at any time of any defect or the
possibility of any defect associated with any PRODUCT manufactured by
BI Austria hereunder, such Party will notify the other Party
immediately and confirm the notification as soon as possible in
writing.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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8.3. InterMune shall notify BI Austria promptly if any PRODUCT manufactured
by BI Austria hereunder is the subject of a recall, market withdrawal
or correction, and InterMune and/or its designee shall have the sole
responsibility for the handling and disposition of such recall, market
withdrawal or correction. In the event that a recall is required in
connection with BI Austria's breach of any of its warranties set forth
in Section 10.2 hereof, BI Austria shall reimburse InterMune for the
purchase price of such PRODUCT and all other reasonable costs and
expenses associated with such PRODUCT recall, market withdrawal or
correction, but only to the extent that the foregoing costs and
expenses are attributable to BI Austria's breach of its warranties
hereunder. In all other events of a recall, all costs and expenses
incurred in connection with such PRODUCT recall shall be borne by
InterMune. InterMune and/or its designee shall serve as the sole point
of contact with the FDA or other applicable HEALTH AUTHORITY concerning
any recall, market withdrawal or correction with respect to the
PRODUCT.
8.4. INSURANCE
During the term of this Agreement, the Parties shall maintain product
liability insurance in such amounts and with such scope of coverage as
are adequate to cover the Parties' obligations under this Agreement
and as appropriate for companies of like size, taking into account the
scope of activities contemplated herein. Notwithstanding the foregoing
the Parties shall maintain minimum limits of liability of [ * ] US$
per occurrence and in the aggregate annually. The Parties shall
provide to each other within ten (10) business days of execution of
this Agreement and thereafter, once a year upon the other Party's
request, a certificate of insurance evidencing the respective Party's
product liability insurance. In addition to the foregoing coverage,
the Parties shall maintain Comprehensive General Liability Insurance
for limits of not less than [ * ] US$ combined single limit for bodily
injury and broad form property damage.
9. REPRESENTATIONS AND WARRANTIES
9.1. Each Party hereby represents and warrants to the other Party that: (a)
the person executing this Agreement is authorized to execute this
Agreement; (b) this Agreement is legal and valid and the obligations
binding upon such Party are enforceable by their terms; and (c) the
execution, delivery and performance of this Agreement does not
conflict with any agreement, instrument
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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or understanding, oral or written, to which such Party may be bound,
nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it.
9.2. BI Austria represents and warrants that:
9.2.1. All BBS manufactured hereunder shall conform to BULK
SPECIFICATIONS;
9.2.2. All PRODUCT manufactured and supplied hereunder shall - at the
date of shipment - conform to the PRODUCT SPECIFICATIONS;
9.2.3. All BBS and PRODUCT manufactured and supplied hereunder shall
be manufactured in accordance with the MANUFACTURING PROCESS;
9.2.4. All BBS and PRODUCT manufactured hereunder shall be
manufactured, handled, stored, labeled, packaged and
transported (from BI Austria to BI Pharma KG) in accordance
with the cGMP requirements, the QUALITY ASSURANCE REQUIREMENTS
as listed in EXHIBIT 10 and all applicable laws, regulations
and ordinances of the jurisdiction in which such manufacture
occurs.
9.2.5. No PRODUCT manufactured and supplied to InterMune hereunder
shall be (i) adulterated or misbranded by BI Austria within
the meaning of the FD&C Act, or (ii) an article that may not
be introduced into interstate commerce under the provisions of
Sections 404 or 505 of the FD&C Act; and
9.2.6. BI Austria shall not use and shall secure that BI Pharma KG
shall not use in any capacity the services of any persons
debarred under 21 U.S.C. sections 335 (a) and 335 (b) in
connection with the manufacture of the PRODUCT under this
Agreement.
9.3. BI Austria represents and warrants that it has in place, and that BI
Pharma KG has in place, a program designed to ensure that each will be
Year 2000 Compliant (as defined below) or that its failure to be Year
2000 Compliant will not materially affect its performance under this
Agreement. For purposes of this Section, "Year 2000 Compliant" means
that the computer systems used in connection with the performance of
work under this Agreement shall operate and function without (i) any
failure of such computer systems properly to record, store, process,
calculate or present calendar dates falling after (and if applicable,
spans of time including)
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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January 1, 2000 as a result of the occurrence, or use of data
consisting of, such dates; (ii) any failure of such computer systems to
calculate any information dependent on or relating to dates after
January 1, 2000 in the same manner, and with the same functionality,
data integrity and performance, as such computer system records,
stores, processes, calculates and presents calendar dates on or before
December 31, 1999, or information dependent on or relating to such
dates; or (iii) any loss of functionality or performance with respect
to the introduction of records or processing of data containing dates
falling after January 1, 2000. Upon Effective Date of this Agreement BI
Austria and BI Pharma KG have not observed any Year 2000 incompliance.
9.4. Except as expressly provided for herein, BI Austria makes no further
warranties of the merchantability or fitness of the PRODUCT or any
warranties of any other nature, express or implied.
10. INDEMNIFICATION
10.1. Subject to Section 10.3., BI Austria shall indemnify, defend and hold
harmless InterMune and its officers, directors, employees and agents
from and against all third party costs, claims, (including death and
bodily injury) suits, expenses (including reasonable attorneys' fees),
liabilities and damages (collectively, "LIABILITIES") arising out of
or resulting from any willful or negligent act or omission by BI
Austria or BI Pharma KG relating to the subject matter of this
Agreement, or any defect in the manufacture or any failure to deliver
PRODUCT in accordance with BI Austria's warranties (except to the
extent such LIABILITIES arose or resulted from any negligent act or
omission by InterMune).
10.2. Subject to Section 10.3, InterMune shall indemnify, defend and hold
harmless BI Austria and its officers, directors, employees and agents
from and against all LIABILITIES arising out of or resulting from any
willful or negligent act or omission by InterMune relating to the
subject matter of this Agreement, or the use by or administration to
any person of a PRODUCT that arises out of this Agreement (except to
the extent such LIABILITIES arose or resulted from any negligent act
or omission by BI Austria or BI Pharma KG or any defect in the
manufacture of PRODUCT or any failure to deliver PRODUCT in accordance
with BI Austria's warranties).
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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10.3. A Party and its directors, officers, employees and agents which intends
to claim indemnification under this Article 10 (each, an "INDEMNITEE")
shall promptly notify the other Party (the "INDEMNITOR") in writing of
any action, claim or other matter in respect of which the INDEMNITEE
intend to claim such indemnification; PROVIDED, HOWEVER, that the
failure to provide such notice within a reasonable period of time shall
not relieve the INDEMNITOR of any of its obligations hereunder except
to the extent that the INDEMNITOR is prejudiced by such failure. The
INDEMNITEE shall permit the INDEMNITOR at its discretion to settle any
such action, claim or other matter, and the INDEMNITEE agrees to the
complete control of such defense or settlement by the INDEMNITOR.
Notwithstanding the foregoing, the INDEMNITOR shall not enter into any
settlement that would 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, without
INDEMNITEE's prior written consent, which shall not be unreasonably
withheld or delayed. No such action, claim or other matter shall be
settled without the prior written consent of the INDEMNITOR, which
shall not be unreasonably withheld or delayed. The INDEMNITOR shall not
be responsible for any attorneys' fees or other costs incurred other
than as provided herein. The INDEMNITEE shall cooperate fully with the
INDEMNITOR and its legal representatives in the investigation and
defense of any action, claim or other matter covered by the
indemnification obligations of this Article 10. The INDEMNITEE shall
have the right, but not the obligation, to be represented in such
defense by counsel of its own selection and at its own expense.
11. LIMITATIONS ON LIABILITY
11.1. Except with respect to each Party's indemnification obligations under
Article 10, in no event shall either Party be liable to the other
Party for any consequential, incidental, special or indirect damages
arising in connection with this Agreement.
11.2. Except with respect to BI Austria's indemnification obligations under
Article 10, BI Austria 's total liability under this Agreement shall
not to exceed the total amounts paid to BI Austria by InterMune under
this Agreement.
12. CONFIDENTIALITY
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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12.1. Each Party shall treat confidentially all CONFIDENTIAL INFORMATION of
the other Party, and shall not use or disclose such CONFIDENTIAL
INFORMATION other than it is expressly permitted under this Agreement.
Each Party will take steps to protect the other Party's CONFIDENTIAL
INFORMATION that are at least as stringent as the steps such Party
uses to protect its own CONFIDENTIAL INFORMATION, but in no event
shall be less than reasonable. Each Party may disclose the other
Party's CONFIDENTIAL INFORMATION to employees, contractors and agents
who are bound by written obligations of confidentiality and non-use
consistent with those set forth in this Agreement.
12.2. Each Party may disclose Confidential Information of the other Party
hereunder to the extent that such disclosure is reasonably necessary
for prosecuting or defending litigation, complying with applicable
government regulations, conducting preclinical or clinical trials or
obtaining marketing approval for the PRODUCT, provided that if a Party
is required by law or regulation to make any such disclosure of the
other Party's CONFIDENTIAL INFORMATION it will, except where
impracticable for necessary disclosures, for example in the event of
medical emergency, give reasonable advance notice to the other Party of
such disclosure requirement and will use its best efforts assist such
other Party to secure a protective order or confidential treatment of
such CONFIDENTIAL INFORMATION required to be disclosed.
12.3. Neither Party shall disclose CONFIDENTIAL INFORMATION of the other
Party in any patent filings without the prior written consent of such
other Party.
12.4. The Parties agree that, except as may otherwise be required by
applicable laws, regulations, rules, or orders, including without
limitation the rules and regulations promulgated by the US Securities
and Exchange Commission, and except as may be authorized in Section
12.2, no material information concerning this Agreement and the
transactions contemplated herein shall be made public by either Party
without the prior written consent of the other. The Parties agree that
the public announcement of the execution of this Agreement shall be by
one or more press releases mutually agreed to by the Parties. A failure
of a Party to return a draft of a press release with its proposed
amendments or modifications to such press release to the other Party
within five (5) business days of such Party's receipt of such press
release shall be deemed as such Party's approval of such press release
as received by such Party. Each Party agrees that it shall cooperate
fully and in a timely manner with the other with respect to all
disclosures to the Securities and Exchange Commission and any other
governmental and regulatory agencies,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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including requests for confidential treatment of CONFIDENTIAL
INFORMATION of either Party included in any such disclosure.
12.5. This confidentiality obligations of this Article 12 shall survive the
termination or expiration of this Agreement for a period of five (5)
years.
13. DURATION AND TERMINATION
13.1. DURATION
This Agreement shall be effective as of the Effective Date and shall
continue in force until December 31, 2006. This Agreement shall
automatically renew for successive four (4) year periods, provided,
however, that either Party may elect not to renew this Agreement by
providing the other Party written notice of such election at least
eighteen (18) months prior to the date of expiration of the
then-current term.
13.2. EARLY TERMINATION
13.2.1. In the event that a Party materially breaches its obligations
under this Agreement (including without limitation a MATERIAL
SUPPLY BREACH), the non-breaching Party may terminate this
Agreement upon thirty (30) days prior written notice to the
breaching Party, unless the breaching Party cures such breach
to the non-breaching Party's reasonable satisfaction during
such thirty day period. Notwithstanding the preceding
sentence, in the event that a Party materially breaches its
obligations under this Agreement more than two (2) times in
any consecutive twenty-four (24) month period, the
non-breaching Party may terminate this Agreement immediately
without providing the breaching Party an opportunity to cure
such breach, by giving the breaching Party written notice
thereof.
13.2.2. Each Party may terminate this Agreement by notice in writing
to the other Party, for cause, if such other Party is
adjudicated to be insolvent or files a petition in bankruptcy.
13.2.3. InterMune may immediately terminate this Agreement by notice
in writing if InterMune should be prevented by the HEALTH
AUTHORITIES from using PRODUCT in clinical
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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trials or from distributing PRODUCT on the market. In such
event, InterMune shall be liable to BI Austria for the
reasonable, non-cancelable costs which BI Austria has already
incurred in fulfilling any firm order from InterMune (e.g.
costs in connection with manufacture of intermediate products
like inactivated cell paste, BBS and PRODUCT) that are not
otherwise recoverable by BI Austria through the manufacture of
INTERFERON GAMMA 1b for its own use; provided that InterMune
shall have no liability to BI Austria under this Section
13.2.3 in the event that such HEALTH AUTHORITY action is
solely due to any breach of BI Austria's warranties under this
Agreement or any negligence or willful misconduct by BI
Austria or BI Pharma KG.
13.2.4. Either Party may terminate this Agreement upon twelve (12)
months written notice in the event that the other Party
assigns this Agreement pursuant to Section 14.3.
13.2.5. All payments in connection with early termination shall be
due within thirty (30) days after receipt by BI Austria of
the notice of early termination from InterMune and receipt
by InterMune of the respective invoice from BI Austria.
13.3. EFFECT OF TERMINATION
13.3.1. In the event of any termination of this Agreement (other than
for BI Austria's material breach):
13.3.1.1. InterMune agrees to purchase, and BI Austria agrees
to sell, any PRODUCT manufactured by BI Austria and
held by BI Austria against the requirements of a
binding purchase order on the effective date of
termination at the applicable purchase price, subject
to InterMune's acceptance of such PRODUCT pursuant to
Section 3.5.
13.3.1.2. At the request of InterMune, BI Austria shall
fulfill any outstanding binding purchase orders for
PRODUCT using, at BI Austria's option, materials on
hand or on order by BI Austria for such purchase
order, in accordance with the terms of this
Agreement. In such event, such PRODUCT shall be
purchased by InterMune at the applicable purchase
price, subject to InterMune's acceptance of such
PRODUCT pursuant to Section 3.5. Alternatively,
InterMune agrees to purchase any raw materials and
components which have been ordered by BI
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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Austria pursuant to a non-cancelable purchase order
and unutilized for such purchase order, at cost only
if they can not be used by BI Austria otherwise.
13.3.2. In the event of any termination or expiration of this
Agreement, at the request of InterMune, BI Austria shall
either (i) destroy all material, including but not limited to
samples and all documentation received from InterMune under
this Agreement, or (ii) deliver the same to InterMune or a
party nominated by InterMune, at InterMune's cost (except in
the case of termination by InterMune for BI Austria's material
breach, in which case such destruction or delivery shall be at
BI Austria's expense).
13.3.3. BI Austria shall promptly return all of InterMune's
CONFIDENTIAL INFORMATION to InterMune, except for a single
copy and/or sample of each item for documentation purposes
only. BI Austria's responsibility to keep and store all other
materials provided by InterMune in the course of this
Agreement shall terminate six (6) months after expiration or
termination of this Agreement (except as otherwise provided in
Section 5.2).
13.3.4. InterMune shall promptly return all of BI Austria's
CONFIDENTIAL INFORMATION to BI Austria, except for a single
copy and/or sample for documentation purposes only.
13.3.5. The following provisions shall survive termination of this
Agreement: Sections 3.8.1, 5.2.3, 7.1, 7.2, 7.3, 7.4, 7.5, 8,
10, 11, 12, 13.2.3, 13.2.5, 13.3 and 14. Termination of this
Agreement shall not relieve either Party of any liability
which accrued hereunder prior to the effective date of such
termination, nor preclude either Party from pursuing all
rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement, nor
prejudice either Party's right to obtain performance of any
obligation.
14. MISCELLANEOUS
14.1. PERFORMANCE BY AFFILIATES
`
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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The Parties recognize that each Party may perform some or all of its
obligations under this Agreement through one or more of its AFFILIATES,
provided, however, that each Party shall remain responsible for such
performance by its AFFILIATES and shall cause its AFFILIATES to comply
with the provisions of this Agreement in connection with such
performance. Each Party hereby expressly waives any requirement that
the other Party exhaust any right, power or remedy, or proceed against
an AFFILIATE, for any obligation or performance hereunder prior to
proceeding directly against such Party.
14.2. FORCE MAJEURE
Neither Party shall be liable for any failure or delay in performance
or non-performance caused by circumstances beyond the reasonable
control of such Party, including but not limited to acts of God,
explosion, fire, flood, labor strike or labor disturbances, sabotage,
order or decree of any court or action of any governmental authority
(except where such order, decree or action is a direct result of BI
Austria's breach of its obligations hereunder), or other causes,
whether similar or dissimilar to those specified which cannot
reasonably be controlled by the Party who failed to perform (each such
event, a "FORCE MAJEURE EVENT"). A Party affected by a FORCE MAJEURE
EVENT shall give notice of such to the other Party as soon as is
reasonably possible, and shall resume performance hereunder as soon as
is reasonably possible. Each Party shall have the right to terminate
this Agreement in the event that a FORCE MAJEURE EVENT continues for
more than thirty (30) business days upon written notice thereof.
14.3. ASSIGNMENT
14.3.1. Except as expressly provided for herein neither this Agreement
nor any rights or obligations hereunder may be assigned by
either Party except to an AFFILIATE of either one of the
Parties without the prior written consent of the other Party
which shall not be unreasonably withheld or delayed. Any
subsequent assignee or transferee shall be bound by the terms
of this Agreement. Any assignment of this Agreement that is
not in conformance with this Section 14.3 shall be null, void
and of no legal effect.
14.3.2. Notwithstanding the foregoing, InterMune shall have the right
to assign this Agreement in case of a merger, acquisition or
sale of substantially all of its assets that relate to this
Agreement after due written notification of BI Austria.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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14.3.3. In the event that either Party assigns this Agreement as
permitted under this Section, the other Party shall have the
right to terminate this Agreement upon twelve (12) months
written notice.
14.4. NOTICES
Any notice required or permitted to be given hereunder by either Party
shall be in writing and shall be (i) delivered personally, (ii) sent by
registered mail, return receipt requested, postage prepaid or (iii)
delivered by facsimile and confirmed by certified or registered mail to
the addresses or facsimile numbers set forth below:
If to InterMune: InterMune Pharmaceuticals, Inc.
3400 West Bayshore Road
Palo Alto, CA 94303 USA
Facsimile: +1 - 650 - 858 - 2937
Attention: Peter Van Vlasselaer
If to BI Austria: Boehringer Ingelheim Austria GmbH
Dr. Boehringer-Gasse 5 - 11
A-1121 Vienna, Republic of Austria
Facsimile: +43 - 1 - 801 05 - 2440
Attention: Monika Henninger
Business Support Biotech
with a copy to: Boehringer Ingelheim GmbH
Binger Strasse 173
D-55 216 Ingelheim am Rhein
Facsimile: +49 - 61 32 77 - 98 287
Attention: Rolf G. Werner
Head of Industrial Biopharmaceuticals
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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14.5. DISPUTE RESOLUTION; GOVERNING LAW
14.5.1. In the event of any controversy or claim arising out of,
relating to or in connection with any provision of this
Agreement, or the rights or obligations of the Parties
hereunder, the Parties first shall try to settle their
differences amicably between themselves by referring the
disputed matter to the Chief Executive Officer of InterMune
and the Chief Executive Officer of BI Austria for discussion
and resolution. Either Party may initiate such informal
dispute resolution by sending written notice of the dispute to
the other Party, and within ten (10) days of such notice the
Chief Executive Officer of InterMune and the Chief Executive
Officer of BI Austria shall meet for attempted resolution by
good faith negotiations. If such personnel are unable to
resolve such dispute within thirty (30) days of initiating
such negotiations, each Party may thereafter pursue any and
all rights and remedies it may have at law or equity. If
mutually agreeable, the Parties may explore alternative forms
of dispute resolution, such as mediation.
14.5.2. This Agreement shall be governed by and construed in
accordance with the laws of the place of domicile of the
defendant party.
14.5.3. The Parties expressly exclude the application of the United
Nations Convention on Contracts for the International Sale of
Goods to this Agreement.
14.6. INDEPENDENT CONTRACTOR
Each of the Parties hereto is an independent contractor and nothing
herein contained shall be deemed to constitute the relationship of
partners, joint venture, nor of principal and agent between the Parties
hereto. Neither Party shall have the authority to bind the other Party.
14.7. WAIVER
Any delay in enforcing a Party's rights under this Agreement or any
waiver as to a particular default or other matter shall not constitute
a waiver of such Party's rights to the future enforcement of its rights
under this Agreement, excepting only as to an express written and
signed waiver as to a particular matter for a particular period of
time.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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14.8. SEVERABILITY
If any of the provisions of this Agreement or parts thereof should be
or become invalid, the remaining provisions will not be affected. The
Parties shall undertake to replace the invalid provision or parts
thereof by a new provision which will approximate as closely as
possible the intent of the Parties.
14.9. ENTIRE AGREEMENT
This Agreement and the Exhibits set forth the entire agreement between
the Parties, and supersede all previous agreements, negotiation and
understanding, written or oral, regarding the subject matter hereof.
This Agreement may be modified or amended only by an instrument in
writing duly executed on behalf of the Parties.
14.10. HEADINGS
The section headings appearing herein are included solely for
convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
14.11. AMBIGUITIES
Ambiguities, if any, in this Agreement shall not be strictly construed
against either Party, regardless of which Party is deemed to have
drafted the provision at issue.
14.12. COUNTERPARTS
The Agreement may be executed in two or more counterparts, each of
which shall be an original and all of which shall constitute the same
document.
14.13. ENGLISH LANGUAGE
The English language will govern any interpretation of or dispute in
connection with this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the Effective Date.
<TABLE>
<S> <C>
Vienna, Austria Palo Alto, California
BOEHRINGER INGELHEIM INTERMUNE. PHARMACEUTICALS, INC
AUSTRIA GMBH
BY: /s/ Irmfried Aringer BY: /s/ W. Scott Harkonen
----------------------------------- -----------------------------------
NAME: Mag. DI Irmfried Aringer NAME: Scott Harkonen, Ph.D.
TITLE: Head of Production and Engineering TITLE: Chief Executive Officer
DATE: 27 January 2000 DATE: February 3, 2000
BY: /s/ Rolf G. Werner BY: /s/ Peter Van Vlasselaer
----------------------------------- -----------------------------------
NAME: Prof. Dr. Rolf G. Werner NAME: Peter Van Vlasselaer, Ph.D.
TITLE: Head of Industrial Biopharmaceuticals TITLE: Sen. Vice President Techn. Operations
DATE: 27 January 2000 DATE: February 3, 2000
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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TABLE OF EXHIBITS
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT
Exhibit 1 BI Territory
Exhibit 2 BBS SPECIFICATION
Exhibit 3 COA
Exhibit 4 COC
Exhibit 5 DNA sequence of INTERFERON GAMMA 1 b
Exhibit 6 MANUFACTURING PROCESS
Exhibit 7 PRODUCT
Exhibit 8 PROJECT MANAGER and PROJECT TEAM
Exhibit 9 PRODUCT SPECIFICATION
Exhibit 10 QUALITY ASSURANCE REQUIREMENTS
Exhibit 11 SERVICES
Exhibit 12 Timeline
Exhibit 13 STEERING COMMITTEE
Exhibit 14 Documentation to be supplied from Genentech
Exhibit 15 Protocol comparing BBS and PRODUCT
Exhibit 16 Forecast model
Exhibit 17 Prices for PRODUCT and placebo
Exhibit 18 Payment Schedule
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 1
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
BI TERRITORY:
World-wide except USA, Canada, Japan
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
46 of 66
<PAGE>
EXHIBIT 2
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
BBS SPECIFICATIONS:
[ * ]
Note: Differences between the specifications are marked in blue
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
47 of 66
<PAGE>
EXHIBIT 3
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
CERTIFICATE OF ANALYSIS (COA):
Each COA shall certify with respect to each shipment and lot (identified by
batch or lot number) that the BBS and/or PRODUCT was manufactured in accordance
with the Specifications and the Master Batch Record and in conformance with
cGMPs.
Attached is a specimen.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
BOEHRINGER
INGELHEIM
Boehringer Ingelheim Austria GmbH
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
49 of 66
<PAGE>
EXHIBIT 4
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
CERTIFICATE OF COMPLIANCE (COC):
Claudia Gogg
PT
PTS
Company
Attention to:
Address Date 2000
Address
Boehringer Ingelheim
Austria GmbH
Dr. Boehringer-Gasse 5-11
A-1121 Vienna
Phone ++ 43-1-80 105-5130
Telefax ++43-1-80 105-2487
E-Mail claudia.gogg@
Vie.boehringer-Ingelheim.com
Compliance Certificate Product Name
Boehringer Ingelheim Austria (BIA) has manufactured
Product Name
Lot No.: B XXXXXX
In a GMP facility and in accordance with BIA Standard Operating Procedures.
Appropriate cGMP Guidelines were followed and no outstanding non-conformances
or deviations remain un-resolved.
H. Syrowatka K. Wagner C. Gogg
Quality Control Production Quality Assurance
BOEHRINGER INGELHEIM
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
AUSTRIA GmbH
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 5
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
DNA SEQUENCE OF INTERFERON GAMMA 1b
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
52 of 66
<PAGE>
EXHIBIT 6
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
MANUFACTURING PROCESS
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 7
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
PRODUCT:
[ * ]
LABELING AND PACKAGING:
- - for CLINICAL TRIAL SUPPLY: [ * ]
[ * ]
- - for MARKET SUPPLY: [ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
54 of 66
<PAGE>
EXHIBIT 8
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
PROJECT MANAGER AND PROJECT TEAM:
BI AUSTRIA AND BI PHARMA KG
Project Manager: Dr. Monika Henninger, Business Support Biotech
Project Team: Anton Vollbauer, Fermentation
Piotr Krauze, Purification
Dr. Herbert Syrowatka, QC
Claudia Gogg, QA
Dr. Volker-Ingo Glaesel, Head of Lyophilisation
INTERMUNE
Project Manager: Peter Van Vlasselaer, Ph.D., Senior VP Technical Operations
Project Team: Staci Ellis, Regulatory
(position to be filled), QA/QC
(position to be filled, Jim Cahill), Manufacturing
(position to be filled), Administrative help
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
55 of 66
<PAGE>
EXHIBIT 9
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
PRODUCT SPECIFICATIONS:
[ * ]
EXHIBIT 9 CONTINUING
[ * ]
Note: Differences between the specifications are marked in blue
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
56 of 66
<PAGE>
EXHIBIT 10
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
INTERMUNE'S QUALITY ASSURANCE REQUIREMENTS FOR ACTIMMUNE:
- - FOR THE FIRST THREE CONFORMANCE LOTS:
1. Client copy of manufacturing batch production record
2. Client copy of filling batch production record
3. Client copy of packaging batch production record
4. Client copies of all deviations and their investigations
5. Client copy of certificate of analysis (COA) with the pre-set product
specifications and the lot test results
6. Client copy of analytical test data (one batch only)
7. Certificate of Compliance (COC)
- - AFTER THE FIRST THREE CONFORMANCE LOTS:
All documents listed above (point 1 - 7) are available for InterMune's
inspection upon prior notice or during audits of both BI production sites. The
procedure for manufacturer qualification and the scope of batch related
documentation to be finally submitted to InterMune will be discussed and defined
between the Parties during the course of this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 11
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
SERVICE FOR US REGISTRATION OF rIFN-GAMMA:
1. CARRIED OUT BY BI AUSTRIA
[ * ]
EXHIBIT 11 continuing
2. CARRIED OUT BY BI PHARMA KG
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 12
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
TIMELINE / PROJECT PLAN:
See attachment
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
59 of 66
<PAGE>
EXHIBIT 13
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
STEERING COMMITTEE
BI Austria: Prof. Rolf Werner (Head Industrial Biopharmaceuticals,
BI Headquarters)
Dr. Kurt Konopitzky (Head of Production and Engineering)
DI. Karl Wagner (Head of Biotech Production)
Dr. Monika Henninger (Project Manager / Reporter)
InterMune: Dr. Scott Harkonen (President and CEO)
(position to be filled)
(position to be filled)
Dr. Peter Van Vlasselaer (Project Manager / Reporter)
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 14
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
DOCUMENTATION, MATERIAL AND DATA:
A. DOCUMENTATION AND DATA SUPPLIED BY GENENTECH
[ * ]
Exhibit 14 continuing
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
61 of 66
<PAGE>
EXHIBIT 15
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
PROTOCOL COMPARING BBS AND PRODUCT
Scope
This protocol is established to show equivalence of rIFN-gamma bulk biological
substance (BBS) and finished product produced by Genentech and the rIFN-gamma
BBS produced by Boehringer Ingelheim Austria, Vienna, and finished product
filled by Boehringer Ingelheim Pharma KG, Germany, Biberach.
Background and History
[ * ]
Production process and quality control
[ * ]
Stability
[ * ]
Structure of the protocol and testing scope
1. COMPARISON OF BBS PRODUCED AT GENENTECH AND BIA
[ * ]
2. COMPARISON OF FINISHED PRODUCT PRODUCED AT GENENTECH AND BI PHARMA KG
[ * ]
3. COMPARISON OF REFERENCE MATERIAL
[ * ]
REMARK:
This protocol will be up-dated in order to include the FDA recommendation given
in the meeting, Washington 7 Dec 99.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE>
EXHIBIT 16
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
FORECAST MODEL; FIRM ORDERS AND FORECAST REGULATION
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
63 of 66
<PAGE>
EXHIBIT 17
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
Prices for PRODUCT and placebo
A) Price of PRODUCT
[ * ]
B) Price for placebo
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
64 of 66
<PAGE>
EXHIBIT 18
TO THE DATA TRANSFER, CLINICAL TRIAL AND MARKET SUPPLY AGREEMENT DATED 27 JAN
2000
Between InterMune and BI Austria
PAYMENT SCHEDULE:
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
65 of 66
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 28,
2000, except for the last paragraph in note 6 to the financial statements
regarding deferred compensation and the paragraphs in note 12 to the financial
statements regarding stock option grants and stock plans as to which the date is
February 29, 2000, in Amendment No. 4 to the Registration Statement (Form S-1
No. 333-96029) and related Prospectus of InterMune Pharmaceuticals, Inc. for the
registration of 5,500,000 shares of its common stock.
/S/ ERNST & YOUNG LLP
Palo Alto, California
March 22, 2000
