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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1994 Commission File Number 0-14587
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GENETICS INSTITUTE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2718435
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
87 CambridgePark Drive, Cambridge, MA 02140
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (617) 876-1170
--------------------------
None
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(Former name, former address and former fiscal year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___________
26,516,278 shares of Common Stock, par value $.01 (including 10,515,538 shares
represented by Depositary Shares) were outstanding on November 1, 1994.
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GENETICS INSTITUTE, INC.
INDEX
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Page
PART I - FINANCIAL INFORMATION Number
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Item 1 - Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1994 and November 30, 1993 1
Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 1994 and August 31, 1993 2
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 30, 1994 and August 31, 1993 3
Notes to Consolidated Condensed Financial Statements 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
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<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 1994 AND NOVEMBER 30, 1993
(unaudited - in thousands except share data)
<CAPTION>
September 30, November 30,
1994 1993
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ASSETS:
Cash and cash equivalents $ 18,235 $ 5,859
Marketable securities 253,704 285,625
Accounts receivable 22,382 24,434
Inventories:
Materials and supplies 5,028 3,924
Work in progress 1,190 406
Finished goods 10,563 11,150
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16,781 15,480
Other current assets 5,085 5,426
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Total Current Assets 316,187 336,824
Property, plant and equipment 162,493 138,682
Less - accumulated depreciation
and amortization (51,961) (42,245)
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Net Property, Plant and Equipment 110,532 96,437
Other assets 5,508 7,476
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$ 432,227 $ 440,737
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LIABILITIES:
Accounts payable $ 9,798 $ 7,309
Accrued expenses 22,154 19,733
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Total Current Liabilities 31,952 27,042
SHAREHOLDERS' EQUITY:
Common stock, par value $.01;
authorized 50,000,000 shares 265 262
Additional paid-in capital 592,658 585,636
Accumulated deficit (192,648) (172,203)
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Total Shareholders' Equity 400,275 413,695
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$ 432,227 $ 440,737
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND AUGUST 31, 1993
(unaudited - in thousands except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
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September 30, August 31, September 30, August 31,
1994 1993 1994 1993
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REVENUE:
Product sales $ 10,716 $ 9,072 $ 34,452 $ 25,881
Royalties 12,554 6,683 31,893 19,182
Collaborative research and development 27,920 10,318 36,582 27,585
---------- ---------- ----------- ------------
Total Revenue 51,190 26,073 102,927 72,648
OPERATING EXPENSES:
Cost of sales 7,675 5,998 22,066 14,143
Research and development 26,766 25,416 79,295 72,517
General and administrative 4,924 4,615 13,710 16,888
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Total Operating Expenses 39,365 36,029 115,071 103,548
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INCOME (LOSS) FROM OPERATIONS 11,825 (9,956) (12,144) (30,900)
OTHER INCOME (EXPENSE), NET:
Investment income 3,578 5,320 10,662 16,249
Other, net (2,760) (912) (5,469) (1,909)
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Total Other Income, Net 818 4,408 5,193 14,340
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NET INCOME (LOSS) $ 12,643 $ (5,548) $ (6,951) $ (16,560)
========== ========== =========== ============
DIVIDENDS ON PREFERRED STOCK $ - $ (1,144) $ - $ (3,436)
========== ========== =========== ============
NET INCOME (LOSS) APPLICABLE TO
COMMON SHARES $ 12,643 $ (6,692) $ (6,951) $ (19,996)
========== ========== =========== ============
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 27,551 25,320 26,401 24,728
========== ========== =========== ============
NET INCOME (LOSS) PER COMMON
SHARE $ .46 $ (.26) $ ( .26) $ (.81)
========== ========== =========== ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND AUGUST 31, 1993
(unaudited - in thousands)
<CAPTION>
September 30, August 31,
1994 1993
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OPERATING ACTIVITIES:
Net loss $ (6,951) $ (16,560)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities -
Depreciation and amortization 9,141 8,420
Equity in net loss of affiliates 3,410 1,092
Compensation related to incentive plans 520 910
Changes in assets and liabilities (2,174) 2,177
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Net cash provided by (used in) operating
activities 3,946 (3,961)
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INVESTING ACTIVITIES:
Purchase of marketable securities (136,435) (266,722)
Proceeds from sale/maturity of
marketable securities 157,058 266,613
Additions to property, plant and
equipment (29,849) (24,610)
Investments in affiliates (3,410) (1,092)
Other investing activities (127) (534)
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Net cash used in investing activities (12,763) (26,345)
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FINANCING ACTIVITIES:
Stock issuances 5,196 4,002
Preferred stock dividends - (3,436)
Redemption of preferred stock - (445)
Proceeds from sale-leaseback 987 -
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Net cash provided by financing activities 6,183 121
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Net decrease in cash and cash equivalents (2,634) (30,185)
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Cash and cash equivalents, beginning of the
period 20,869 64,623
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Cash and cash equivalents, end of the period $ 18,235 $ 34,438
=========== ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Significant Accounting Policies
BASIS OF PRESENTATION. The accompanying consolidated condensed
financial statements are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of these financial
statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily
indicative of results for a full year. Certain amounts in the prior
period financial statements have been reclassified to conform to the
current period presentation. The consolidated condensed financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and related footnotes for the year
ended November 30, 1993.
CHANGE IN FISCAL YEAR. The Company changed its fiscal year end from
November 30 to December 31 effective January 1, 1994. Financial
information for the preceding fiscal year has not been restated
because the information is reasonably comparable with the current year
periods.
MARKETABLE SECURITIES. The Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115") effective January 1,
1994. Accordingly, at January 1, 1994, the Company's cash equivalents
were classified as held-to-maturity (recorded at amortized cost) and
its marketable securities were classified as available-for-sale
(recorded at fair value). The cumulative effect of implementing SFAS
No. 115 was to record a net unrealized gain of $2.6 million on
available-for-sale securities. Under SFAS No. 115, such net
unrealized holding gains or losses are recorded in shareholders'
equity. For periods prior to fiscal 1994, marketable securities are
recorded at cost which approximates market. In computing realized
gain or loss, the cost of securities sold is based on average cost.
The estimated fair value of marketable securities is based primarily
on market quotations.
2. Transactions with American Home Products Corporation
On September 19, 1991, the Company and American Home Products
Corporation ("AHP") entered into an Agreement and Plan of Merger (the
"AHP Transaction") that was consummated on January 16, 1992. In
connection with the AHP Transaction, the Company issued 9,466,709 new
shares of Common Stock to AHP for an aggregate purchase price of
approximately $300.0 million and, for shares of common stock owned,
the Company's shareholders received a combination of cash and
Depositary Shares subject to a call option. Under the terms of the
call option, AHP has the right but not the obligation, to purchase the
outstanding Depositary Shares that it does not own, in whole but not
in part, at any time until December 31, 1996, acall price of $70.26
per share for the period October 1, 1994 to December 31, 1994 and
increasing by approximately $1.84 on a quarterly basis to $85.00 per
share for the quarter ending December 31, 1996.
Independent of its right to call the Depositary Shares, AHP is
permitted by the terms of the agreements with the Company to acquire
additional Depositary Shares through open market purchases or
privately negotiated purchases, provided that its aggregate holdings
do not exceed 75% of the Company's outstanding equity, subject to
certain exceptions. As of September 30, 1994, AHP had purchased
947,000 additional Depositary Shares through such purchases. In
addition, in connection
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GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
with the call for redemption of the Company's Convertible Exchangeable
Preferred Stock (the "Preferred Stock") on July 15, 1993, holders of
Preferred Stock elected to convert 1,136,815 shares, or approximately
99% of the outstanding shares of such stock, into 1,624,021 shares of
Genetics Institute Common Stock which, pursuant to the AHP
Transaction, were exchanged for the same combination of cash and
Depositary Shares received by holders of Genetics Institute Common
Stock in the AHP Transaction. Pursuant to agreements with AHP, the
Company issued to AHP 14,864 shares of Common Stock, the proceeds of
which funded the cash required for the redemption of the 8,490 shares
of Preferred Stock not converted. As of September 30, 1994, such
transactions have brought AHP's total ownership position in the
Company to approximately 64%.
Effective July 8, 1994, the Company and AHP entered into an agreement
to form a joint venture to develop and commercialize recombinant human
interleukin-twelve (rhIL-12), an immune system modulatory protein, on
a worldwide basis except for Japan. In connection with this
agreement, the Company recognized $21.2 million of collaborative
research and development revenue in the third quarter of fiscal 1994
of which $20.0 million represented initial milestone and signature
payments and $1.2 million represented funding of certain development
costs incurred during the quarter. Collaborative research and
development revenue also includes $1.5 million and $5.5 million,
respectively, for the three months ended September 30, 1994 and August
31, 1993 and $4.4 million and $10.4 million, respectively, for the
nine months ended September 30, 1994 and August 31, 1993, relating to
collaborations with AHP in the area of cellular adhesion proteins and
the commercialization of recombinant human interleukin-eleven
(rhIL-11), a blood cell growth factor, in certain Pacific Basin
territories.
3. Investments in Debt Securities
The Company's portfolio of debt securities consists of cash
equivalents classified as held-to-maturity and marketable securities
classified as available-for-sale. Aggregate fair value, amortized
cost and average maturity for marketable securities held at September
30, 1994 are presented below. The average maturities presented below
include estimates of the effective life for certain securities whose
actual maturities will differ from contractual maturities because the
borrowers have the right to call or prepay the obligations without
call or prepayment penalties.
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Fair Gross Unrealized Amortized
Value Holding Gains and (Losses) Cost
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(in thousands)
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U.S. Government and Agency
securities (average maturity
of 3.0 years) $135,927 $156 $(5,497) $141,268
Corporate and other debt securities
(average maturity of 2.9 years) 117,777 73 (3,854) 121,558
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$253,704 $229 $(9,351) $262,826
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</TABLE>
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GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
The fair value of cash equivalents approximated the amortized cost of
$18.2 million at September 30, 1994. Realized gains and losses on
sales of marketable securities for the three and nine month periods
ended September 30, 1994 were not material.
4. Contingencies
The Company has been engaged in legal proceedings relating to the
amount of damages payable by the Company as a result of the holding of
the U.S. Court of Appeals for the Federal Circuit that the Company
infringed a U.S. patent of Amgen Inc. ("Amgen") relating to
recombinant erythropoietin ("EPO"). On May 11, 1993, the Company and
Amgen announced that they had agreed to settle all then outstanding
claims of Amgen against the Company in the United States relating to
recombinant EPO.
In August 1991, Ortho Pharmaceutical Corporation ("Ortho"), a licensee
of Kirin-Amgen, Inc.'s recombinant EPO patents, initiated infringement
proceedings against the Company in the U.S. District Court for the
District of Massachusetts. Ortho moved to consolidate the case with
the infringement suit brought by Amgen. Upon motion by the Company
and Amgen, Ortho's claims were dismissed and Ortho has appealed the
District Court's decision. A decision on the Ortho appeal is pending.
The Company and Amgen also jointly moved to dismiss similar claims
brought by Ortho against the Company in the U.S. District Court for
the Central District of California in 1989, and the court granted the
motion in March 1994.
In June 1994, the Company sued Ortho in the U.S. District Court of
Delaware. The Company's suit claims that Ortho's manufacture, use and
sale of EPO in the U.S. infringes a patent covering pharmaceutical
compositions containing homogeneous EPO that was issued to the Company
by the U.S. Patent and Trademark Office on June 21, 1994 (the '837
patent). The Company can provide no assurances as to the outcome of
these disputes with Ortho.
In September 1994, Amgen sued the Company in U.S. District Court in
Massachusetts. Amgen's suit asks the court to declare that the
Company's '837 patent is invalid and not infringed by Amgen and to
declare that any dispute over the patent was resolved by the prior
litigation. The Company believes that the '837 patent is valid and
enforceable with respect to Amgen's manufacture, use and sale of EPO
in the United States. However, the Company can provide no assurances
as to the outcome of this dispute with Amgen.
The Company and its licensees are engaged in various patent litigation
proceedings in Europe related to EPO. Beginning in 1991, Ortho and
certain Ortho affiliates initiated patent infringement litigation in
Europe against Boehringer Mannheim, the Company's European EPO
licensee, based on a European recombinant EPO patent issued to
Kirin-Amgen, Inc. ("Kirin- Amgen"), its licensor. The suits have
included requests for damages and/or injunctive relief. Boehringer
Mannheim filed suits against Ortho and/or its affiliates in Europe for
infringement of the Company's European EPO patents. This litigation
has expanded into many of the European Community countries in
Boehringer Mannheim's territory. In some countries, where the
patentee is a legally necessary party to a suit to enforce a patent,
the Company has joined as a plaintiff. The Company is also a
defendant in suits in the United Kingdom, Germany, Italy and the
Netherlands brought by an Ortho affiliate seeking to invalidate and
revoke the Company's EPO patents in the United Kingdom, the former
East Germany, Italy and the Netherlands, respectively. The revocation
suit in Germany was dismissed in May 1994, however, it is subject to
further appeal. In June 1994, the Company's European patent covering
homogeneous EPO compositions (the '539 patent) was upheld by the
Opposition Division of the
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GENETICS INSTITUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
European Patent Office. This decision of the Opposition Division has
been appealed. In September 1994, an appellate hearing was held
before the Board of Technical Appeals (the "Board") of the European
Patent Office relating to the Company's and other parties' oppositions
to Kirin-Amgen's European recombinant EPO patent. A decision by the
Board is pending. The Company can provide no assurance as to the
outcome of these European proceedings. If the courts ultimately rule
in Ortho's favor in these European proceedings, including issuing an
injunction against the future manufacture or sale of recombinant EPO
by Boehringer Mannheim, or if this litigation is otherwise concluded
in a manner adverse to Boehringer Mannheim or the Company, future
royalty income from EPO in Europe, which totaled $7.5 million in
fiscal 1993 and $8.9 million for the nine months ended September 30,
1994, could be reduced or eliminated.
The Company is engaged in a patent interference proceeding among the
Company, Genentech, Inc. and Chiron Corporation concerning the Factor
VIII patent rights which are cross-licensed between Baxter (the
Company's licensee) and Genentech, Inc. While the Company believes it
or Genentech should prevail in the interference, no assurance can be
given as to the outcome of this interference. Any disposition of this
proceeding in a manner unfavorable to the Company or its licensee
could have a material adverse effect on the Company's future
consolidated results of operations.
In September 1994, the Company's U.S. patent directed to the use of
vitamin K as a culture medium supplement in the manufacture of
recombinant Factor IX was put into a patent interference proceeding
among the Company, Transgene, Inc., Zymogenetics, Inc. and British
Technology Group, Ltd. ("BTG"). BTG has licensed its Factor IX patent
rights to the Company. In addition, in late October 1994, the
Company's U.S. patent covering recombinant BMP-2 was put into a
patent interference proceeding between the Company and Stryker
Corporation, the assignee of Creative BioMolecules, Inc. The Company
can provide no assurance as to the outcome of these proceedings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Genetics Institute, Inc. is principally engaged in discovering, developing and
commercializing protein-based therapeutic products using recombinant DNA and
related technologies. Significant volatility has been associated with the
business and operations of biopharmaceutical companies. Developments involving
the Company or its competitors concerning technological innovations, new
commercial products, results of clinical trials, patents, proprietary rights
and related infringement disputes, results of litigation and the expense and
time associated with obtaining requisite government approvals may have a
significant impact on the Company's business.
The Company's consolidated results of operations have fluctuated from period to
period and may continue to fluctuate in the near-term as a result of the
timing of production and shipment of bulk protein products, changes in the
timing and composition of funding under its collaborative research and
development agreements, the ability to consummate new collaborative agreements,
royalty income (and the impact of infringement litigation on royalty income),
interest income and the amount of expenditures committed to self-funded
research and development programs.
The Company and American Home Products Corporation ("AHP") entered into a
transaction (the "AHP Transaction") through which AHP acquired a majority
interest in the Company effective January 16, 1992 (see Note 2 of Notes to
Consolidated Condensed Financial Statements).
The Company changed its fiscal year to a calendar year effective January 1,
1994. Financial information for the preceding fiscal year has not been
restated because the information is reasonably comparable with the current year
periods.
RESULTS OF OPERATIONS
Three and Nine months Ended September 30, 1994 and August 31, 1993. The
Company reported net income of $12.6 million for the third quarter ended
September 30, 1994 compared with a net loss of $5.5 million for the third
quarter of fiscal 1993. For the nine month periods ended September 30, 1994
and August 31, 1993, the Company reported a net loss of $7.0 million and $16.6
million, respectively. The net income for the third quarter of 1994 as
compared with the net loss for the third quarter of fiscal 1993 and the
decrease in the net loss for the nine month periods are due to increases in
revenue, including $21.2 million recognized in the third quarter of 1994 in
connection with a joint venture formed with AHP as discussed below. The
increases in revenue were partly offset by increases in operating and other
expenses. With four products presently in clinical trials and one other
anticipated to enter clinical trials within the next six months, the Company
expects to incur an operating loss for the fourth quarter and the full fiscal
year.
The Company's revenues include product revenue from the supply of recombinant
human antihemophilic factor concentrate ("rhAHF"), royalties resulting from the
sale of products by marketing partners and collaborative research and
development revenue relating to the Company's agreements with its various
collaborative partners, including AHP. Revenues increased 96%, or $25.1
million, from the third quarter of fiscal 1993 to the third quarter of fiscal
1994 and 42%, or $30.3 million, from the first nine months of fiscal 1993 to
the first nine months of fiscal 1994.
Product revenue represents commercial sales of the Company's rhAHF product to
Baxter Healthcare Corporation ("Baxter") for Baxter's sale of finished rhAHF
product. Product revenue recorded in the first six months of fiscal 1993
included $5.8 million of manufacturing profit related to shipments of rhAHF to
Baxter made prior to the December 1992 commercial approval date. Pre-
commercial shipments of rhAHF were originally billed to Baxter at cost. The
increase in product revenue for the three and nine month
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
periods, excluding the manufacturing profit recognized in fiscal 1993 relating
to shipments made to Baxter prior to commercial product approval of rhAHF in
December 1992, is due to increases in the volume of rhAHF shipped to Baxter.
The increase in royalty revenue for the three and nine month periods is
principally due to increases in the volume of collaborative partners' sales of
finished drug products. In addition, royalty revenue in the third quarter of
1994 includes a $2.2 million payment of recombinant EPO royalties earned prior
to 1994. Such royalties were initially withheld in escrow by the Company's
collaborative partner, Boehringer Mannheim, to fund the Company's estimated
share of the cost of EPO patent litigation in Europe and were released to the
Company in the third quarter of 1994 in connection with an agreement between
the Company and Boehringer Mannheim which specified the terms for such cost
sharing.
The significant increase in collaborative research and development revenue for
the three and nine month periods is principally due to $21.2 million recognized
in the third quarter of 1994 in connection with an agreement between the
Company and AHP to form a joint venture to develop and commercialize
recombinant human interleukin-twelve (rhIL-12), an immune system modulatory
protein, worldwide (except Japan). Of the amount recognized, $20.0 million
represented initial milestone and signature payments. The Company also
recorded $3.0 million in milestone and signature payments in the third quarter
of 1994 in connection with an agreement between the Company and GI-Yamanouchi,
Inc., a joint venture between the Company and Yamanouchi Pharmaceutical Co.,
Ltd., to develop and commercialize rhIL-12 in Japan.
Operating expenses increased 9%, or $3.3 million, from the third quarter of
fiscal 1993 to the third quarter of fiscal 1994 and 11%, or $11.5 million, from
the nine month period ended August 31, 1993 to the nine month period ended
September 30, 1994. The increases were primarily attributable to higher
staffing levels in the discovery research, product development and
manufacturing areas of the Company and higher cost of sales relating to
increased commercial shipments of rhAHF to Baxter. These increases were partly
offset by increased absorption of manufacturing costs due to increased
production of rhAHF in 1994, as well as lower litigation costs in fiscal 1994.
Cost of sales includes royalties payable to third parties upon the receipt of
certain royalty revenues from collaborative partners. Such third party
royalties totaled $1.2 million and $0.7 million for the three month periods
ended September 30, 1994 and August 31, 1993, respectively, and $3.5 million
and $1.6 million for the fiscal 1994 and fiscal 1993 nine month periods,
respectively. Cost of sales, excluding third party royalties, as a percentage
of product sales (and excluding the $5.8 million of one-time manufacturing
profit recognized in fiscal 1993 discussed above), was 60% for each of the
three month periods ended September 30, 1994 and August 31, 1993, and 54% and
62% for the nine months ended September 30, 1994 and August 31, 1993,
respectively. The decrease from fiscal 1993 was due to lower unit
manufacturing costs.
Other income, net decreased 81% or $3.6 million from the third quarter of
fiscal 1993 to the third quarter of fiscal 1994 and 64% or $9.1 million from
the fiscal 1993 to the fiscal 1994 nine month periods. The decreases reflect
(i) lower investment income due to lower investments in cash equivalents and
marketable securities and (ii) an increase in the Company's equity in the net
losses of its Japanese joint venture, GI-Yamanouchi, Inc., due to expansion of
rhBMP-2 and rhIL-11 development activities in Japan. The Company expects the
level of investment income to continue to decrease as cash is used to fund
capital expenditures and working capital requirements.
LEGAL PROCEEDINGS
The Company is engaged in a number of legal proceedings. See Note 4 of Notes
to Consolidated Condensed Financial Statements which is incorporated by
reference herein.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities totaled $271.9 million at September 30, 1994, a
decrease of $19.5 million from November 30, 1993. This decrease includes a
non-cash net unrealized loss on marketable securities of $9.1 million and a net
use of cash and marketable securities of $10.4 million for the ten month period
(which includes the one month transition period of December 1993 and the nine
months ended September 30, 1994). The net use of cash and marketable
securities primarily reflects capital expenditures of $34.5 million, partly
offset by $10.9 million of proceeds from the sale-leaseback of certain
equipment, $6.4 million from issuances of stock and $5.7 million provided by
operating activities. In connection with a major facilities expansion and
improvement program which began in fiscal 1993, facilities and related
equipment with a cost of $51.6 million have been placed into service as of
September 30, 1994, including a central energy plant completed in the first
quarter of 1994 and a research and development facility substantially completed
in the third quarter of 1994. This program is expected to cost approximately
$55.0 million in the aggregate and will be fully completed by the end of 1994.
The Company expects that its available cash and marketable securities, together
with investment income, operating revenues and lease and debt financing
arrangements, will be sufficient to finance its working capital and capital
requirements for the foreseeable future. Over the next several years, the
Company's cash requirements will be subject to change depending upon numerous
factors including the level of capital expenditures, the amount of expenditures
committed to self-funded research and development programs, the results of
research and development activities, competitive and technological
developments, the levels of resources which the Company devotes to the
expansion of its clinical testing, manufacturing and marketing capabilities
and the timing and cost of obtaining required regulatory approvals for new
products.
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Part II - Other Information
---------------------------
Item 1. Legal Proceedings
- - ------- -----------------
See Note 4 of Notes to the Consolidated Condensed Financial Statements
provided in Part I of this Quarterly Report on Form 10-Q, which Note
is hereby incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
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(a) The Exhibits filed as part of this Form 10-Q are listed
on the Exhibit Index immediately preceding such
Exhibits, which Exhibit Index is incorporated herein by
reference.
(b) No reports were filed on Form 8-K during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENETICS INSTITUTE, INC.
------------------------
(Registrant)
Date: November 10, 1994 By: /s/ Garen G. Bohlin
----------------- -------------------
Garen G. Bohlin,
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
-11-
<PAGE> 14
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- - ----------- ----------- ----
10.1 Agreement among Genetics Institute, Inc.,
Hoffmann-La Roche Inc. and F. Hoffmann-La Roche
Ltd. dated July 7, 1994.(1)
10.2 Letter Agreement among Genetics Institute, Inc.,
American Home Products Corporation and
Wyeth-Ayerst Laboratories dated July 8, 1994.(1)
10.3 IL-12 Joint Development Agreement and License
Agreement between Genetics Institute, Inc. and
GI-Yamanouchi, Inc. dated August 4, 1994.(1)
11 Computation of Earnings Per Share
27 Financial Data Schedules
-12-
____________________
(1)Confidential treatment requested.
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
AGREEMENT
AMONG
GENETICS INSTITUTE, INC.
HOFFMANN-LA ROCHE INC.
AND
F.HOFFMANN-LA ROCHE LTD
Dated: July 7, 1994
<PAGE> 2
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
<TABLE>
TABLE OF CONTENTS
-----------------
ARTICLE 1 - DEFINITIONS
-----------------------
<CAPTION>
Page
----
<S> <C> <C>
1.01 Affiliated Company 3
1.02 Term of the Collaboration 4
1.03 Term of the Agreement 4
1.04 Licensed Patents 5
1.05 Interleukin-12 5
1.06 Collaborative Invention 6
1.07 Collaborative Improvement Patents 7
1.08 Valid Claim 8
1.09 Materials 8
1.10 Permitted Sublicensee 9
1.11 Know-How 9
1.12 Non-Licensed Pre-Existing Know-How 9
1.13 Licensed Pharmaceutical Product 10
1.14 Territory 11
1.15 Net Sales 11
1.16 Orphan Drug Rights 14
1.17 Collaboration 14
1.18 Gene Therapy 15
1.19 Vaccine Adjuvant Therapy 15
ARTICLE 2 - PATENT CONFLICTS
----------------------------
2.01 Interferences 15
2.02 Evidence 16
2.03 Priority 17
2.04 Filing of Agreement 19
ARTICLE 3 - WARRANTIES & INDEMNIFICATION
----------------------------------------
3.01 Authority 19
3.02 ****** 20
3.03 Wistar 22
3.04 ******* Responsibilities to Wistar 23
3.05 Wistar Sublicense 24
3.06 Product Liability Indemnification 24
ARTICLE 4 - PATENT AND KNOW-HOW LICENSES
----------------------------------------
4.01 Grant to Licensed Patents 25
4.02 Grant to Improvement Patents 27
4.03 Orphan Drug Rights 28
4.04 Sublicenses 29
4.05 Research Quantities 31
</TABLE>
<PAGE> 3
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
<TABLE>
ARTICLE 5 - PATENT AND KNOW-HOW ROYALTIES
-----------------------------------------
<CAPTION>
Page
----
<S> <C> <C>
5.01 Royalties 32
5.02 Reports and Payment 33
5.03 Foreign Royalties 34
5.04 Taxes 34
5.05 Records 35
ARTICLE 6 - EXCHANGE OF LICENSED COLLABORATIVE KNOW-HOW AND DATA
----------------------------------------------------------------
6.01 Exchange 36
6.02 Pre-Clinical Data 36
6.03 ********** *** **** ***** 37
ARTICLE 7 - PATENT PROSECUTION AND INFRINGEMENT
-----------------------------------------------
7.01 Collaborative Improvement Patents 39
7.02 Prosecution 42
7.03 Infringement 43
7.04 Third Party Patents 45
7.05 Representation 45
ARTICLE 8 - PROPRIETARY INFORMATION
-----------------------------------
8.01 Treatment of Information 45
8.02 Release from Restrictions 46
ARTICLE 9 - TERMINATION
-----------------------
9.01 Termination for Cause 48
9.02 Termination as of Right 48
9.03 Further Obligations 48
9.04 Use of Licensed Know-How After Termination 49
9.05 Remedies 50
ARTICLE 10 - MISCELLANEOUS PROVISIONS
-------------------------------------
10.01 Assignability 50
10.02 Press Release 50
10.03 Law 50
10.04 Severability 51
10.05 Captions 51
10.06 Reliance 51
10.07 Notices 51
10.08 Entire Agreement 52
</TABLE>
<PAGE> 4
AGREEMENT
---------
THIS AGREEMENT (together with any appendices or exhibits attached
hereto, collectively the "Agreement") effective as of May 4, 1992, by and among
GENETICS INSTITUTE, INC., a Delaware corporation, having a principal place of
business at 87 CambridgePark Drive, Cambridge, MA 02140, U.S.A. ("GI"), on the
one part, and HOFFMANN-LA ROCHE INC., a New Jersey Corporation having a
principal place of business at 340 Kingsland Street, Nutley, New Jersey 07110,
U.S.A. ("Roche-Nutley") and F.HOFFMANN-LA ROCHE LTD, a Swiss Corporation,
located at CH-4002 Basle, Switzerland ("Roche-Basle"), on the other part
(Roche-Nutley and Roche-Basle collectively "Roche").
WHEREAS, Roche and GI each possess proprietary information relating to
Interleukin-12 (as defined below);
WHEREAS, Roche and GI each independently filed for worldwide patent
protection relating to Interleukin-12;
WHEREAS, certain of GI's Licensed Patents (as defined below) were
acquired and based on a collaboration with The Wistar Institute of Anatomy and
Biology, a Pennsylvania non-profit corporation, having a principal place of
business at 36th and Spruce Streets, Philadelphia, PA 19104, U.S.A.
("Wistar");
<PAGE> 5
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 2
WHEREAS, GI and Wistar entered into an agreement dated June 30, 1992,
as amended December 22, 1992, which sets forth the terms and conditions between
GI and Wistar with regard to GI's development and commercialization of
Interleukin-12 ("GI-Wistar Agreement, as amended");
WHEREAS, because of the worldwide patent protection independently
sought by GI and Roche, each party possesses rights that in the absence of the
licenses in this Agreement may preclude the other party from developing and
commercializing Interleukin-12 throughout the world;
WHEREAS, both GI and Roche desire to resolve any patent conflicts on a
worldwide basis as expeditiously as possible to avoid or diminish the expense
and uncertainty associated with contests of priority and to ensure that each
party has freedom to conduct research and development and to commercialize and
market Interleukin-12;
WHEREAS, GI and Roche entered into a Heads of Agreement, effective as
of **** ** **** ("Heads of Agreement"), under which the parties agreed to
resolve their patent conflicts, as more particularly provided for in this
Agreement; having thus resolved the patent conflicts, to engage in a
preclinical collaboration; to enter into a cross license; and to discuss in
good faith a further
<PAGE> 6
Page 3
collaboration in the development and commercialization of Interleukin-12;
WHEREAS, the parties have discussed in good faith the possibility of a
further collaboration and have determined that it is in their interests to
independently develop, commercialize and market Interleukin-12 and to confirm
entering into a cross license as described below; and
WHEREAS, the parties desire that the Heads of Agreement be replaced
and superseded by this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
-----------------------
1.01 "Affiliated Company" or "Affiliates" shall mean:
(a) a business entity which owns, directly or indirectly,
a controlling interest (fifty percent (50%) or
greater) in either party, by stock ownership or
otherwise; or,
(b) a business entity in which a controlling interest
(fifty percent (50%) or greater) is owned by either
<PAGE> 7
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 4
party, either directly or indirectly, by stock
ownership or otherwise; or,
(c) a business entity, the majority ownership (fifty
percent (50%) or greater) of which is directly or
indirectly common to the majority ownership of either
party.
For the purposes of this Agreement, Genentech, Inc., ("Genentech") a
Delaware corporation, shall not be considered an Affiliated Company of Roche
unless Roche, in its sole discretion, notifies GI that Genentech shall be so
considered an Affiliated Company, and Genentech agrees to be bound by the terms
and obligations of this Agreement.
1.02 "Term of the Collaboration" shall be a period of time which
commenced on **** ** **** and ended on **** ** ****.
1.03 "Term of the Agreement" shall mean a period of time commencing
on ********** and continuing until there are no payments due between the
parties to this Agreement, unless this Agreement is terminated sooner in
accordance with the provisions of Article 9.
<PAGE> 8
Page 5
1.04 "Licensed Patents" shall mean the patent applications
identified on Appendix A and patents issuing from such applications. Licensed
Patents also shall include any divisions, patents of additions, continuations,
continuations-in-part, extensions, supplementary protection certificates,
renewals, inventor's certificates, utility models, reexaminations and reissues
of all above patents and patent applications, and confirmation patents, patents
of additions, importation patents and registration patents of all above patents
and patent applications, and patents and/or patent applications based upon or
which claim the priority under the Paris Convention of any of the foregoing
patents or patent applications.
1.05 "Interleukin-12" shall mean
(a) the proteins, peptides or polypeptides which are
described or claimed in the Licensed Patents as of
the effective date of this Agreement ("Protein");
(b) the subunits of the Protein or combination of such
subunits to form the Protein;
(c) the polynucleotides ("PNs") which encode the subunits
of the Protein and/or subsequences thereof;
<PAGE> 9
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 6
(d) any chemically modified forms of the Protein; or
(e) naturally occurring allotypic variant forms of the
Protein or of the PNs noted above.
1.06 (a) "Collaborative Invention" shall mean any invention,
development, discovery, process, modification, enhancement, or improvement
which (i) is reasonably required for making, having made, using or selling of
Interleukin-12 and (ii) 1) was conceived or first reduced to practice by a
representative of a party, either solely or jointly with a representative of
the other party, (as all these terms are defined under the United States patent
laws) during the Term of the Collaboration, or 2) to which rights were acquired
from a third party during the Term of the Collaboration, or 3) to which rights
were acquired from a third party during the Term of the Agreement and relate to
the making, having made or using the **** *** **** **** (as described in
Appendix E), provided such rights under clauses 2) or 3) can be, in good faith,
made available to the other party.
(b) "Use Invention" shall mean any invention, development, discovery,
modification, enhancement, or improvement ("Use") resulting in indications for
the prophylaxis or treatment of disease with Interleukin-12 or in the in vitro
diagnostic use of Interleukin-12, and (i) which is conceived or first reduced to
<PAGE> 10
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 7
practice by a representative of a party, either solely or jointly with a
representative of the other party, (as all these terms are defined under the
United States patent laws) during the Term of the Agreement but commencing
after **** ** **** or (ii) to which rights were acquired from a third party
during the Term of the Agreement but commencing after **** ** ****, provided
such rights can be, in good faith, made available to the other party.
Notwithstanding anything to the contrary, any Use Invention shall not include a
Use in Gene Therapy or Vaccine Adjuvant Therapy.
(c) By "representative" the parties mean to include, without
limitation, employees or agents of a party hereto from whom a party hereto
receives rights regarding Interleukin-12. In particular, representative shall
include Wistar.
1.07 (a) "Collaborative Improvement Patents" shall mean the patent
applications which result from Collaborative Inventions and all patents issuing
therefrom. Collaborative Improvement Patents also shall include any divisions,
patents of additions, continuations, continuations-in-part, extensions,
supplementary protection certificates, renewals, inventor's certificates,
utility models, reexaminations and reissues of all above patents and patent
applications, and confirmation patents, patents of additions, importation
patents and registration patents of all above patents and patent applications,
and patents and/or patent applications
<PAGE> 11
Page 8
based upon or which claim the priority under the Paris Convention of any of the
foregoing patents or patent applications.
(b) "Improvement Use Patents" shall mean the patent applications which
result from Use Inventions and all patents issuing therefrom. Improvement Use
Patents also shall include any divisions, patents of additions, continuations,
continuations-in- part, extensions, supplementary protection certificates,
renewals, inventor's certificates, utility models, reexaminations and reissues
of all above patents and patent applications, and confirmation patents, patents
of additions, importation patents and registration patents of all above patents
and patent applications, and patents and/or patent applications based upon or
which claim the priority under the Paris Convention of any of the foregoing
patents or patent applications.
1.08 "Valid Claim" shall mean a claim in any unexpired Licensed Patent
which has not been disclaimed or held invalid by a decision beyond the right of
review.
1.09 "Materials" shall mean any biological or other material,
including without limitation, any DNA sample (including without limitation the
human or mouse cDNA), genes or gene products, recombinant proteins, receptors,
antagonists, transfected cells and cell lines, monoclonal antibodies, transgenic
animals and all
<PAGE> 12
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 9
progeny of any of the foregoing, and reagents, all to the extent required for
making, having made, using and selling Interleukin-12 for any use. For
example, Materials shall include the **** ***** and ********** identified in
Appendices D and E, as required for making, having made, using and selling
Interleukin-12.
1.10 "Permitted Sublicensee" shall have the meaning assigned to the
term in Section 4.04.
1.11 "Know-How" shall have its usual and accepted meaning such as,
inter alia, all factual knowledge and proprietary information held as trade
secrets, including without limitation (i) all preclinical, chemical,
biochemical, manufacturing, formulation and scientific research information,
whether or not capable of precise separate description but which alone or when
accumulated gives to the one acquiring it an ability to study, test, produce,
formulate, manufacture or market something which one otherwise would not have
known how to study, test, produce, formulate, manufacture or market in the same
way and (ii) Materials.
1.12 (a) "Non-Licensed Pre-Existing Know-How" shall mean the Know-How
related to making, having made, using and selling Interleukin-12, only as
identified in Appendix B, which was generated by a party prior to the effective
date of this Agreement.
<PAGE> 13
Page 10
(b) "Licensed Pre-Existing Know-How" shall mean Know-How relating to
making, having made, using and selling Interleukin-12, except for that
identified in Appendix B, which was generated by a party prior to the effective
date of this Agreement.
(c) "Licensed Collaborative Know-How" shall mean Know-How to the
extent required, as reasonably demonstrated by the requesting party, for making,
having made, using and selling Interleukin-12 for any use, which is in the
possession and control of Roche or GI, their Affiliated Companies, or Permitted
Sublicensees and which was generated and/or used by a party during the Term of
the Collaboration in performance of the Collaboration. Each party hereby
confirms that the deliverables contained on Appendices D and E constitute the
remaining Licensed Collaborative Know-How to be exchanged by the parties, as
soon as reasonably practicable. In no event shall Licensed Collaborative
Know-How include Non-Licensed Pre-Existing Know-How.
(d) "Licensed Know-How" shall mean (i) Licensed Collaborative Know-How
and (ii) Licensed Pre-Existing Know-How.
1.13 (a) "Licensed Pharmaceutical Product" shall mean a product
consisting of or containing Interleukin-12, used in indications for the
prophylaxis (including without limitation use in vaccines and in gene therapy)
or treatment of disease (including
<PAGE> 14
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 11
without limitation use in vaccines and in gene therapy), the making, using, or
selling of which, except for this Agreement, would infringe a Valid Claim or
uses Licensed Know-How.
(b) "Licensed Diagnostic Product" shall mean a product consisting of
or containing Interleukin-12 which is used for in vitro diagnostics, the making,
using or selling of which, except for this Agreement, would infringe a Valid
Claim or uses Licensed Know-How.
(c) "Licensed Product" shall mean individually and collectively
Licensed Pharmaceutical Product and Licensed Diagnostic Product.
1.14 "Territory" shall mean all countries of the world.
1.15 "Net Sales" shall mean the Adjusted Gross Invoice Price less
***************** of Adjusted Gross Invoice Price in lieu of sales deductions
(e.g., freight, transportation insurance, packing materials for dispatch of
goods, custom duties), sales expenses (e.g., sales discounts granted later than
at the time of invoicing) and cash discounts. The Adjusted Gross Invoice Price
shall mean the gross invoice price of sales of Licensed Product to unrelated
third parties (i.e., wholesalers, distributors or customers) less deductions for
returns (including withdrawals and recalls), rebates
<PAGE> 15
Page 12
(price reductions, including Medicaid and similar types of rebates), volume
(quantity) discounts granted at the time of invoicing, chargebacks, sales taxes
and other taxes directly related to sales. For sales of Licensed Product in
countries outside the United States of America where the currency is other than
U.S. Dollars, the Adjusted Gross Invoice Price shall be computed in accordance
with the procedures a party utilizes for computing royalties and converting
currencies for purposes of paying royalties.
In accordance with Roche's present procedures, for sales of Licensed
Products made outside the United States of America and made in currencies other
than Swiss Francs, the Adjusted Gross Invoice Price is converted from the
currency of sale into Swiss Francs using the monthly average rates between that
currency and the Swiss Franc as reported by Reuters. At the end of each month,
sales made in Swiss Francs and those sales converted into Swiss Francs are
converted into United States Dollars using the average rate of exchange between
the United States Dollar and the Swiss Franc for that month as reported by
Reuters.
In accordance with GI's present procedures, at the end of each month,
sales of Licensed Products made outside the United States of America are
converted from the currency of sale into United States Dollars using the
month-end rate of exchange between that currency
<PAGE> 16
Page 13
and the United States Dollar Equivalent as reported by the Wall Street Journal.
Should a party, in good faith, modify its present procedures, it shall
notify the other party of such modifications, and the modified procedure shall
become effective for Net Sales occurring after the beginning of the next
reporting period following such notice. In the event a party makes such
modification and it results in an inequitable loss or increase of Net Sales
during the first reporting period following the transition to the modified
procedure, the parties agree to discuss and agree on an equitable adjustment to
avoid any economic unfairness to a party arising out of such transition.
Sales between (a) a party and its Affiliated Companies or (b) a party
and its Permitted Sublicensee, or (c) two Affiliated Companies or (d) an
Affiliated Company and a Permitted Sublicensee or (e) two Permitted Sublicensees
shall not be included within Net Sales. In such event Net Sales shall be based
on the gross invoice price of sales of Licensed Product received from the first
unrelated third party by the Affiliated Company or Permitted Sublicensee.
If a Licensed Product is sold as part of a unit, system, package or
combination product wherein other components are capable
<PAGE> 17
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 14
of being sold as separate products not dependent on the Licensed Products, the
Net Sales for purposes of calculating the royalty due shall be calculated by
multiplying the Net Sales of the combination product by a fraction of A/A+B,
where "A" is the Net Sales of the Licensed Product when sold separately and "B"
is the Net Sales of the other product or products when sold separately. In no
event shall the fraction determined by A/A+B be less than ***** ******* *****.
In the event either A or B is not sold separately, then the parties shall
mutually agree on an equitable adjustment to the Net Sales of the combination
product to reflect the relative contributions of the components; provided that
the adjustment shall not exceed ***** ******* *****.
1.16 "Orphan Drug Rights" shall mean the designation of Orphan Drug
status and the award of exclusive marketing approval with respect to a Licensed
Product by the United States Food and Drug Administration pursuant to 21 CFR 316
(or any successor laws or regulations) or any designation or award by other
governments or regulatory authorities which provides for marketing exclusivity
to promote the development and commercialization of orphan drugs with restricted
patient populations for a given indication.
1.17 "Collaboration" shall mean the research and development activities
relating to Interleukin-12 which (i) were conducted by a party or its
representatives during the Term of the Collaboration
<PAGE> 18
Page 15
and (ii) are identified in the preclinical Research Plan as found in Appendix C.
1.18 "Gene Therapy" means the genetic modification of cells by the
introduction of exogenous DNA or RNA into cells for the purpose of expressing
Interleukin-12 in vivo for the prophylaxis or treatment of disease or genetic
defect.
1.19 "Vaccine Adjuvant Therapy" means the use of Interleukin-12 in
combination with an immunogen (e.g., viral proteins, parasite proteins, or
miscellaneous antigens) or polynucleotides encoding an immunogen to enhance,
suppress or otherwise modulate the immune system response to disease. For the
purpose of this definition, "combination" shall mean use in conjunction with,
simultaneous with (combined or uncombined) or sequentially with an immunogen.
1.20 In the definitions, the singular shall include the plural and
vice versa as appropriate.
ARTICLE 2 - PATENT CONFLICTS
----------------------------
2.01 INTERFERENCES. One or more interferences may be declared by the
United States Patent and Trademark Office between certain subject matter
relating to Interleukin-12 as contained in Licensed Patents. With respect to
the United States, the parties wish to
<PAGE> 19
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 16
settle any and all potential interferences involving Licensed Patents in a
manner such that priority of invention in the United States would be awarded to
the first and true inventor(s) in accordance with the laws and regulations of
the United States. Moreover, with regard to countries outside the United
States, the parties wish to resolve all patent conflicts on a country by
country basis in accordance with the laws and regulations of the given country
but also with the laws and regulations of the European Community if applicable
in such country. Accordingly, the parties, as soon as reasonably possible,
shall in good faith resolve all issues which might arise with regard to such
potential interferences in the United States and/or patent conflicts in
countries outside the United States after a full and fair disclosure of all
pertinent facts as provided in this Article.
2.02 EVIDENCE. (a) With respect to the United States, within
*************** after the date that both parties have executed this Agreement or
another time agreeable to the parties, the attorney for each of GI and Roche
shall present to each other such party's documentary evidence of priority of
invention concerning all of the Licensed Patents potentially involved in an
interference. Should a question be raised regarding such evidence of priority,
the party which presented such evidence shall be afforded a reasonable
opportunity to respond to such question. Such response may include
<PAGE> 20
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 17
submission of additional documentary evidence relating to its response to such
question.
(b) In accordance with United States laws and regulations, the
attorneys for each of GI and Roche shall make a good faith effort to resolve all
issues, including issues of priority, with respect to each of the Licensed
Patents within ***** ********* after the exchange of the evidence provided for
in Section 2.02 (a), above, or such other reasonable period of time as shall be
agreed upon by the parties. Should at that time, an interference have been
declared, the parties agree to stipulate reasonable extensions of time to
provide the time necessary to comply with the terms of this Agreement for
settlement of all issues, including priority in any interference.
2.03 PRIORITY. (a) If, under Section 2.02 above, the attorneys for
each of GI and Roche can determine in good faith which party should be awarded
priority based on applicable United States laws and regulations for the subject
matter any of the Licensed Patents in any potential interference, the party who
would not be awarded priority with respect to the Licensed Patents in any
potential interference shall take such actions with respect to pending claims in
its U.S. patent applications as to reflect the loss of priority including, where
appropriate, the need to file a
<PAGE> 21
Page 18
Request for Adverse Judgment under 37 CFR 1.662, which joint motion shall be
filed within a reasonable time after such determination.
(b) If, under Section 2.02 above, the attorneys for each of GI and
Roche cannot determine in good faith which party should be awarded priority
based on applicable United States laws and regulations for the subject matter
any of the Licensed Patents in any potential interference, the parties shall
jointly select one independent patent counsel to review the proffered evidence
of priority and to make a determination of priority which shall be final and
binding on the parties. Such determination shall be conducted in accordance
with the rules of the American Arbitration Association then in effect and Title
35, United States Code and applicable rules and regulations thereto. The cost
of services for such independent patent counsel for reviewing evidence and
determining which of the application(s) from GI or Roche should be awarded
priority shall be evenly shared between GI and Roche. If after the passing of a
reasonable time period the parties cannot agree on the independent patent
counsel, a party, upon prior written notice to the other, may make a request of
the American Arbitration Association to appoint the independent patent counsel
from the National Panel of Patent Arbitrators of the American Arbitration
Association.
<PAGE> 22
Page 19
2.04 FILING OF AGREEMENT. While each of GI or Roche may file this
Agreement with the United States Patent and Trademark Office so as to comply
with the requirements of 35 USC 135(c), whoever shall be awarded priority under
Section 2.03 hereinabove, shall be obligated to file a copy thereof in
compliance with the requirements of 35 USC 135(c). Whoever files this Agreement
shall notify the other of such filing, and shall file such agreement with a
request for confidential treatment pursuant to 35 USC 135(c), in a form
reasonably satisfactory to patent counsel for each party.
ARTICLE 3 - WARRANTIES & INDEMNIFICATION
----------------------------------------
3.01 AUTHORITY. (a) Each party warrants and represents that it has
the full and unconditional right and authority (i) to settle any and all
potential interference proceedings in the United States of America involving
Licensed Patents, and (ii) to resolve any and all patent conflicts involving
Licensed Patents which may exist between Roche on the one hand and GI and Wistar
on the other hand in all countries outside the United States.
(b) Each party warrants and represents that it has the full right and
authority to enter into this Agreement, and that it is not aware of any
impediment that would inhibit its ability to perform its obligations under this
Agreement. Each party further warrants and represents that to the best of its
knowledge, (i) it
<PAGE> 23
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 20
has the right to grant the rights and licenses set forth herein on the terms
set forth herein, and (ii) it is not aware of any ***** ******* ******* ******
or claiming ****** to Interleukin-12 (other than ******) or ****** ****** or
****** which would ******** a ***** from ******** ****** to the ***** *****
********** **** the terms of this Agreement.
(c) As of the signing of this Agreement, each party warrants and
represents that it has identified on Appendices A and F all of the patents or
patent applications that it owns or controls which, in its reasonable opinion,
would preclude the other party from making, having made, using or selling
Interleukin-12 for any use.
3.02 ******. (a) GI has informed Roche that prior to the effective
date of this Agreement, ****** had certain rights of first refusal to license
Interleukin-12 from GI under the terms of a ***** of ***** ******* *********, a
redacted, partial non- confidential copy of which has been furnished to Roche.
(b) ** ******** and ********** that ****** has ** ***** for
*********** with **** ******* to ***** **** and ******* the terms and
obligations contemplated by this Agreement. ** ******* ******** and **********
that ****** has ******** ** **** any and all of ******** ****** and ***********
with regard to Interleukin-
<PAGE> 24
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 21
12 in so far as such ****** ** *********** would effect **** ******* to *****
**** this Agreement and from ******** ****** to ***** consistent with the terms
of this Agreement.
** ****** ** *** ***** ********* ****** ******* and **** ********
***** *** ********** ********* and ********* ************ ******* any and ***
******* ****** ******** ********* **** ****** *********** directly or
indirectly ********* from ******* ******** and/or ********* ********** (i) to
the extent they are based on ** ********** ********** on the ***************
set forth in Subparagraph 3.02 (a) or (b) ***** *****; or (ii) which arise out
of ******** ****** with regard to Interleukin-12 and would ********* with ****
******* to ***** ****** *** ********** ********* *** ********* ************ the
****** ***** or contemplated by this Agreement; or (iii) which are incurred as
a result of ****** ******** ** ********* ****** ** *********** from ** relating
to Interleukin-12; provided that ** is given written notice of any of the
****** within a reasonable time of the date of notice to ****** *** **********
********* ** ********* ************ and ** is ***** ************ **********
*********** *** ***** ********* to ****** ****** ****** any of the ******.
******* ********** to ** shall be at **** ******* ******** *** **** for *******
************* expenses. ***** may, at its option and expense, be ***********
in *** ******* on ******* of any ******.
<PAGE> 25
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Exchange Commission. Asterisks denote omissions.
Page 22
3.03 WISTAR. (a) GI has informed Roche that GI entered into an
agreement with Wistar dated March 11, 1988, pursuant to which GI and Wistar
performed research relating to the molecular cloning of the Interleukin-12
gene, and the expression and characterization of a factor which activates
natural killer cells. The agreement with Wistar was replaced by another
agreement dated June 30, 1992, which then was amended on December 22, 1992 and
has been referred to in this Agreement as the GI-Wistar Agreement, as amended.
** ******** *** ********** that such GI-Wistar Agreement, as amended ** ***
**** *********** ********* relating to Interleukin-12, between GI and Wistar,
other than ******** and ************* to the ******** **** of the GI-Wistar
Agreement, as amended, which were made and effective after the Term of the
Collaboration. GI further warrants and represents that it has notified Wistar
that under United States laws, rules and regulations, Roche might be awarded
priority in one or more interferences that might be declared involving Licensed
Patents by the U.S. Patent and Trademark Office.
(b) GI acknowledges that it promptly will inform Roche if (i)
Wistar notifies GI that a breach of the GI-Wistar Agreement, as amended has
occurred, and GI will further notify Roche as to when such breach has been or is
intended to be cured; and (ii) GI notifies Wistar that a breach of the GI-Wistar
Agreement, as amended has occurred, and GI will further notify Roche as to when
such breach has been or is intended to be cured.
<PAGE> 26
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Exchange Commission. Asterisks denote omissions.
Page 23
(c) ** ****** * *** **** *********, ******, ******** *** ****
******** ****** *** ********** ********* *** ********* ************ ******* any
and all ******* ****** ******** ********* **** and/or *********** directly or
indirectly ********* **** ******* ******** ****** ********* ********** which are
******** or ******** during the term of the GI-Wistar Agreement, as amended, as
a result of ****** ******** or ********* rights or obligations ******* *****
based upon the ********* ********** ** ******** provided that ** is given
written notice of any of the ****** within a reasonable time of the date of
notice to ****** *** ********** ********* ** ********* ************ and ** is
***** ************ ********** *********** *** ***** ********* to ****** ******
****** any of the ******. ***** may, at its option and expense, be ***********
in *** ******* on ******* of ******. ******* ********** to ** shall be at ****
******* ******* *** ***** for ******* *********** expenses.
3.04 ******* RESPONSIBILITIES TO WISTAR. (a) ***** makes no
********* ** ****************** that ***** is responsible to or liable to Wistar
for any monies, fees, rights (patentable or otherwise), or any other obligations
that may exist under the GI- Wistar Agreement, as amended. ** ******** ***
********** that any and all obligations under the ********* ********* ** *******
are the **** ************** of *** except for ******* obligations to **
<PAGE> 27
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Exchange Commission. Asterisks denote omissions.
Page 24
under Section 4.02(d) to make ******* payments under ******** Improvement Use
Patents acquired ** **.
(b) Nothing in this Agreement shall be construed as an acceptance or
endorsement by Roche of any responsibility for the GI-Wistar Agreement, as
amended. In no event shall the reference to Roche or any Roche property in the
GI- Wistar Agreement, as amended be construed:
(i) to be binding on or an estoppel to Roche on account of Roche's
status as a sublicensee under the GI-Wistar Agreement, as amended or having
entered into this Agreement;
(ii) to grant Wistar, directly or indirectly, any rights to Roche
property whatsoever; or
(iii) to create any obligations whatsoever between Wistar and Roche;
except for GI's right to grant Wistar a sublicense under Section 3.05 of this
Agreement.
3.05 WISTAR SUBLICENSE. GI shall have the right to grant to Wistar a
royalty-free sublicense under GI's rights to Roche's Licensed Patents and
Licensed Know-How, solely for Wistar's non-commercial academic research
purposes.
3.06 PRODUCT LIABILITY INDEMNIFICATION. A party ("Indemnifying
Party") will defend, indemnify, and hold harmless
<PAGE> 28
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the other party, the other party's managers, directors, officers, employees,
and agents ("Indemnified Party") from and against any and all losses, costs,
damages, expenses, fees and/or liabilities directly or indirectly resulting
from claims, lawsuits and/or judgments ("Claims"), except for patent
infringement or patent validity related matters, which are incurred or asserted
as a result of the Indemnifying Party's use, manufacture, promotion, sale or
other disposition of any Licensed Product by such party or its Affiliated
Company or Permitted Sublicensee. The foregoing indemnification shall not
apply to the extent that any actual or alleged Claims are specifically and
proximately due to the Indemnified Party's negligence.
ARTICLE 4 - PATENT AND KNOW-HOW LICENSES
----------------------------------------
4.01 Grant to Licensed Patents.
-------------------------
(a) GI grants Roche-Nutley and Roche-Nutley grants GI, with the limited
right to sublicense as provided for in Section 4.04:
(i) a non-exclusive right and license in the United States of
America under the Licensed Patents; and
(ii) a non-exclusive right and license to use the Licensed
Know-How in the United States of America.
<PAGE> 29
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Both of such rights and licenses are for the sole and exclusive purpose of
making, having made, using, and selling Licensed Products in the United States
of America.
(b) GI grants Roche-Basle and Roche-Basle grants GI, with the limited
right to sublicense as provided for in Section 4.04:
(i) a non-exclusive right and license in the Territory except for
the United States of America under the Licensed Patents; and
(ii) a non-exclusive right and license to use the Licensed
Know-How in the Territory except for the United States of America.
Both of such rights and licenses are for the sole and exclusive purpose of
making, having made, using and selling Licensed Products in the Territory
except for the United States of America.
(c) The rights and licenses granted pursuant to Sections 4.01(a)(i)
and (b)(i) shall continue in effect, on a country-by-country basis, until the
expiration of the last patent of the Licensed Patents licensed to a party
hereunder in the given country, subject to Article 5 and Article 9. The rights
and
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Exchange Commission. Asterisks denote omissions.
Page 27
licenses granted to each party pursuant to Sections 4.01(a)(ii) and (b)(ii)
shall be perpetual, subject to Article 5 and Article 9.
4.02 GRANT TO IMPROVEMENT PATENTS. (a) GI grants Roche-Nutley and
Roche-Nutley grants GI a royalty-free (subject to Section 4.02 (c)),
non-exclusive right and license in the United States of America under
Improvement Use Patents and Collaborative Improvement Patents to make, have
made, use and sell Licensed Product, with the limited right to grant sublicenses
as provided for in Section 4.04.
(b) GI grants to Roche-Basle and Roche-Basle grants to GI a
royalty-free (subject to Section 4.02 (c)), non- exclusive right and license in
the Territory except for the United States of America under Improvement Use
Patents or Collaborative Improvement Patents to make, have made, use and sell
Licensed Product, with the limited right to grant sublicenses as provided for in
Section 4.04.
(c) Notwithstanding anything to the contrary, the parties
agree that the grants under Sections 4.02 (a) and (b) above are (i) solely for
the purpose of making, having made, using and selling Licensed Product under
Improvement Use Patents and Collaborative Improvement Patents, and in
particular, are not for making, having made, using or selling any other
product(s) (including without limitation *********** ********** ********** and
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*************** ***** ****** for the foregoing) which may infringe a claim of
such Improvement Use Patents or Collaborative Improvement Patents; and (ii)
limited solely to rights under such Improvement Use Patents and Collaborative
Improvement Patents and shall not include the grant of any rights or licenses
to receive or use Know-How generated after *************.
(d) Should a party be obligated ("obligated party") to make royalty
payments to a third party under the third party's Improvement Use Patent or
Collaborative Improvement Patent on account of the other party's sales of
Licensed Product, at the option of the obligated party, the other party, upon
receiving written notice and reasonable documentation from the obligated party,
shall assume responsibility for making such payments directly to the third party
or to reimburse the obligated party for having made such payments.
(e) Any rights that a party may have acquired under Collaborative
Improvement Patents and/or Improvement Use Patents from a third party are set
forth in Appendix G. Each party shall update Appendix G as to the rights
acquired on a timely basis during the Term of the Agreement.
4.03 ORPHAN DRUG RIGHTS. If either party (or an Affiliated Company or
Permitted Sublicensee) receives Orphan Drug Rights for
<PAGE> 32
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Exchange Commission. Asterisks denote omissions.
Page 29
a Licensed Product, it hereby agrees to consent to the approval of the other
party's (or an Affiliated Company's or Permitted Sublicensee's) marketing
approval application notwithstanding such rights, or to otherwise immediately
take such action or grant such rights as are necessary so that the other party
is not blocked or delayed by the designation or award of such Orphan Drug
Rights, including but not limited to the submission of a consent letter to the
U.S. Food and Drug Administration or applicable foreign agency, with respect to
the other party or an Affiliated Company or a Permitted Sublicensee at the time
a request for Orphan Drug Rights is submitted, or the prompt execution of any
other documents, notices or agreements that may be necessary to carry out the
intent of this Section.
4.04 SUBLICENSES. (a) Under Sections 4.01 and 4.02, each party
shall have the right to grant sublicenses to:
(i) their respective Affiliates in any field of use; and, in
addition to such Affiliates,
(ii) in the field of Gene Therapy, up to ***** *** unrelated
third parties in the Territory as part of a developmental collaboration with
the third party in such field; and
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(iii) in the field of Vaccine Adjuvant Therapy, up to ***** ***
unrelated third parties in the Territory as part of a developmental
collaboration with the third party in such field; (the third parties of (ii) and
(iii) above individually and collectively referred to as "Permitted
Sublicensees");
provided that the total number of Permitted Sublicensees of a party does not
exceed **** ***.
Notwithstanding anything to the contrary in this Agreement, a party shall not
grant a Permitted Sublicensee a sublicense to make **** ******** ******* other
than *** of Sections ******* and in part ******* under the rights and licenses
received pursuant to this Agreement. However, the above sentence is not
intended to preclude Roche or GI from selling bulk or finished Licensed Product
to a distributor or other third party for formulation, filling and finishing,
use and sale under applicable patent rights.
(b) In connection with the grant of any such sublicense under this
Section 4.04 to an Affiliated Company or Permitted Sublicensee, each party shall
have the right to provide its Affiliated Companies and Permitted Sublicensees
with a consent under the Orphan Drug Rights of either party. Upon request, each
party shall immediately provide a consent to the applicable regulatory
authorities and/or the requesting party under its Orphan
<PAGE> 34
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Drug Rights for the benefit of an Affiliated Company or a Permitted Sublicensee
of the requesting party. Each party shall remain primarily liable for the
payment of royalties on, and reporting of, all Net Sales of any Affiliated
Company or Permitted Sublicensee.
(c) A party shall not have any additional sublicensing rights,
including but not limited to the other party's Licensed Patents, Licensed
Know-How, Improvement Use Patents and Collaborative Use Patents, other than as
described in this Section 4.04. In particular, an Affiliate or Permitted
Sublicensee shall not otherwise have the right to sublicense a third party to
any right or license received under this Agreement.
4.05 RESEARCH QUANTITIES. (a) The parties recognize that from
time to time, they may be asked to provide research quantity samples of
Interleukin-12 to third parties for non-commercial, non-clinical research.
Each party and its Affiliates shall have the royalty free right to send
research quantity samples of Interleukin-12 to third parties only for such
non-commercial, non- clinical research purposes.
(b) In addition to the sublicense rights under Section 4.04, each
party shall have the right to grant sublicenses under the rights and licenses of
Sections 4.01 and 4.02 to unrelated third parties that in turn solely supply
Licensed Product to third
<PAGE> 35
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Exchange Commission. Asterisks denote omissions.
Page 32
party researchers solely for such researchers' non-commercial, non-clinical,
academic research purposes.
ARTICLE 5 - PATENT AND KNOW-HOW ROYALTIES
-----------------------------------------
5.01 ROYALTIES. GI shall pay Roche, and Roche shall pay GI, earned
royalties at the following rates on all Net Sales by the selling party, its
Affiliated Companies, and its Permitted Sublicensees of Licensed Products:
Licensed Product Royalty Rate
---------------- ------------
Licensed Pharmaceutical Product **
Licensed Diagnostic Product **
The above earned royalties shall continue to be owed and payable for so
long as the Licensed Product would infringe a Valid Claim in the country where
such Licensed Product is made, used or sold by a party. In the event that no
Valid Claim would be infringed by the making, using or selling of a Licensed
Product in any country in which the Licensed Product is made, used or sold by a
party, then the above royalty rates shall be reduced by ***** ************* and
the royalty obligation shall expire in such event ************** after the date
of the first commercial sale of a Licensed Product in any such country. The
above royalties shall be
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Exchange Commission. Asterisks denote omissions.
Page 33
payable on a country-by-country basis with respect to Net Sales for each
country in the Territory where the Licensed Products are sold.
In the event the GI-Wistar Agreement, as amended is terminated and **
*** ***** ***** ****** ***** ******* **** of such agreement to ****** ***
********** thereunder, ***** may deduct from any payment due ** under this
Agreement any ******* (except for payments under Section 4.02(b) of the
GI-Wistar Agreement, as amended) which may be due Wistar from ***** as a result
of **** ********.
5.02 REPORTS AND PAYMENT. Each party shall deliver to the other
party within ninety (90) days after the end of each fiscal quarter a written
report showing its computation of royalties due under this Agreement upon Net
Sales by such party, Affiliated Companies, and its Permitted Sublicensees
during such fiscal quarter. A party shall not be required to deliver a report
under this Section for any fiscal quarter which occurs prior to such party's
first sale of Licensed Product. All Net Sales shall be segmented in each such
report according to sales by each party, its Affiliated Companies, and its
Permitted Sublicensees, as well as on a country-by-country basis, including the
rates of exchange used to convert such royalties to United States Dollars in
accordance with each party's procedures for converting currencies as described
in Section 1.15. Simultaneously with the delivery of each such
<PAGE> 37
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report, each party shall tender payment in United States Dollars of all
royalties shown to be due thereon. GI and Roche shall notify each other to
whom such reports and payments are to be made and whether such payments shall
be made by check or wire transfer.
5.03 FOREIGN ROYALTIES. Where royalties are due hereunder for
sales of Licensed Products in a country in the Territory where, by reason of
currency regulations or taxes of any kind, it is impossible or illegal for a
party, its Affiliated Company, or a Permitted Sublicensee to transfer royalty
payments payable on account of Net Sales in such country to the other party,
such royalties shall be deposited (in whatever currency is allowable) by the
person or entity not able to make the transfer for the benefit or credit of the
other party in an accredited bank in that country in the Territory that is
acceptable to the other party.
5.04 TAXES. Any and all taxes imposed on a party, which taxes are
levied on account of royalties payable under this Agreement, shall be borne by
that party. Further, if a law or governmental regulation requires withholding
of said taxes, such taxes will be deducted from such remittable royalty by the
party owing the royalty and will be paid to the proper taxing authority, and
proof of payment will be secured and sent to the party owed the royalty by the
party owing the royalty or its Affiliated Company or Permitted Sublicensee as
evidence of such payment in such form as
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required by the tax authorities having jurisdiction over the party owed the
royalty.
5.05 RECORDS. Each party shall keep, and shall require its
Affiliated Companies and Permitted Sublicensees to keep, full, true and
accurate books of accounts and other records containing all information and
data in accordance with generally accepted accounting principles which may be
necessary to ascertain and verify the royalties payable to the other party
hereunder. During the Term of the Agreement and for a period of three (3)
years following its termination, the other party shall have the right from time
to time during normal business hours (not to exceed once during each calendar
year) to have an independent certified public accountant, reasonably acceptable
to the other party, inspect in confidence, such books, records and supporting
data, the sole purpose being to verify the accuracy of the reports, at the
expense of the auditing party.
Such accountant shall not disclose to the party requesting the
verification any information or data other than the information or data
relating to the accuracy of reports and payments made under this Agreement.
Particular information and data from which the accountings required hereunder
have been prepared need not be retained more than one (1) year after the
completion of an audit thereto if an audit had been requested; nor more than
three (3)
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Exchange Commission. Asterisks denote omissions.
Page 36
years from the date of their origin; nor more than one (1) year after the date
of termination of this Agreement, whichever occurs earlier.
ARTICLE 6 - EXCHANGE OF LICENSED COLLABORATIVE KNOW-HOW AND DATA
- - ----------------------------------------------------------------
6.01 EXCHANGE. Under the Collaboration, considerable Licensed
Collaborative Know-How has been exchanged and shared by the parties. In
addition, some of the Licensed Collaborative Know-How has not yet been
delivered by one party to the other, and other portions of the Licensed
Collaborative Know-How have not been reduced to written form. In the interest
of avoiding the possibility of disputes, the parties have prepared and agreed
upon lists of deliverables, which are attached as Appendices D and E. These
lists describe all of the outstanding Licensed Collaborative Know-How which
remains to be delivered to each party and the agreed upon delivery date in
accordance with Section 1.12(c), including final reports for preclinical
studies. The parties agree that no other Licensed Collaborative Know-How
remains to be delivered except as identified in Appendices D and E.
6.02 PRE-CLINICAL DATA. During the Term of the Collaboration, GI
and Roche each conducted preclinical research studies of Interleukin-12 under
the Research Plan. For a period of ******** years after the effective date of
this Agreement, each party agrees
<PAGE> 40
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Exchange Commission. Asterisks denote omissions.
Page 37
that they shall maintain their research records and data in accordance with a
party's procedures for complying with the regulatory requirements related to
the use of such studies in support of a clinical program and product license
application in the United States. For a period of ******** years after the
effective date of this Agreement, each party also agrees to make the raw data
and records of such preclinical research available to the other party or for
inspection and audit by the applicable regulatory authorities to the extent
necessary for the other party to rely on such data in its regulatory filings.
Before the end of the above ******** year period(s), a party may
request in writing the other party to provide specific original records and
data of the other party as covered under this Section 6.02. Upon receiving
such request, the other party shall either provide such specified records and
data to the requesting party or notify the requesting party that it shall
continue to retain such specified records and data.
6.03 **************************. Each party will deliver to the
other party the respective ********** and **** ***** (hereinafter "**** *****")
as set forth on Appendices D and E as soon as reasonably practicable. Each
party ******** and ********** that its respective **** ***** which will be
delivered, will be ****** and are the **** ***** which one identified in
Appendices D
<PAGE> 41
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Exchange Commission. Asterisks denote omissions.
Page 38
and E. The ********** and any ********* ******** (or references therefor)
described in Appendices D and E for ********* ********* and ******** *******
shall be sent with each of the **** ***** ("***************").
If any of the **** ***** are determined not to be meet the
***************, by the party receiving the **** **** ("Receiving Party"), the
party sending the **** **** ("Sending Party") shall resend an additional
quantity of the **** **** to the Receiving Party. Should there be continued
disagreement as to whether a **** **** meets the ***************, the parties
will attempt, in good faith, to reasonably resolve the disagreement. Should
the parties be unable to resolve the disagreement, the parties will submit the
**** **** in question, *********, and ********* ******** (if any or references
thereof), under confidence, to i) the American Type Culture Collection, 12301
Parklawn Avenue, Rockville, Maryland 20852 ("ATCC") or ii) an independent third
party acceptable to both parties. Determination that the **** **** meets the
*************** by the ATCC or independent third party will be final and
binding on the parties. The party whose position as to the meeting the
*************** was not confirmed shall be responsible for all costs related to
the testing. If the **** **** has been determined to meet the *************,
the Receiving Party shall notify the Sending Party in writing and no other ****
**** need be sent. If the **** **** has been determined not to meet the
<PAGE> 42
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Exchange Commission. Asterisks denote omissions.
Page 39
***************, the Sending Party shall send the **** **** meeting the
***************** to the Receiving Party after the determination.
ARTICLE 7 - PATENT PROSECUTION AND INFRINGEMENT
-----------------------------------------------
7.01 COLLABORATIVE IMPROVEMENT PATENTS. (a) Should any
Collaborative Inventions be conceived or first reduced to practice by a party
whose representatives were the sole inventors under U.S. law, the Collaborative
Improvement Patents emanating therefrom shall be owned by that party ("Sole
Inventions").
As soon as reasonably possible after a Sole Invention has been
identified, the party owning the Sole Invention shall (i) notify the other
party of the Sole Invention and, (ii) at its discretion, file a priority patent
application in the appropriate patent office. All costs related to the
preparation, filing, prosecution, and maintenance of this patent application
shall be the responsibility of the party who owns the Sole Invention. Should
the party who owns the Sole Invention not wish to file a priority patent
application, then the other party, at its cost, may file the priority
application, upon notice to the party who owns the Sole Invention.
<PAGE> 43
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Unless agreed otherwise, the party who owns the Sole Invention will
also file for any patent term extensions (including but not limited to
Supplementary Patent Certificates), where appropriate for Sole Invention.
(b) Should any Collaborative Inventions be conceived or first
reduced to practice in which representatives of both parties are joint
inventors under U.S. law ("Joint Inventions"), each party shall retain the
rights under the Collaborative Improvement Patents emanating from the Joint
Inventions which it derives from arrangements with such representatives.
As soon as reasonably possible after a Joint Invention has been
identified, the parties shall meet to determine which party should draft and
file the priority patent application for filing in the appropriate patent
office. Unless agreed upon otherwise, all costs related to the preparation,
filing, prosecution, and maintenance of this patent application shall be
equally shared by the parties.
Within nine (9) months after the filing of the priority patent
application on a Joint Invention, the parties, through their respective
attorneys, shall identify in which countries corresponding patent applications
should be filed under the terms of the Paris Convention. The party who
prepared and filed the
<PAGE> 44
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priority patent application shall be responsible for the preparation, filing
and prosecution of the patent application(s) filed in the identified countries.
Unless agreed upon otherwise, all costs related to the preparation, filing,
prosecution and maintenance of these patent applications shall be equally
shared by the parties.
Should the parties be unable to agree upon all countries in which
corresponding patent applications should be filed, patent applications shall be
filed in those countries in which the parties have agreed by the party who
filed the priority patent application. With regard to those countries where
agreement was not reached, either party, upon notice to the other, may file
corresponding patent application(s) in those countries at that party's cost;
provided, however, should a party elect not to share in the filing costs for a
Joint Invention, it shall assign its interest in the Joint Invention in such
country solely to the filing party, and shall waive any license rights in such
country under the Joint Invention it would otherwise receive under this
Agreement. The parties shall execute any document reasonably necessary to file
the patent applications under the Paris Convention.
The parties will also determine who shall file for any patent term
extensions (including but not limited to Supplementary Patent Certificates),
where appropriate for Joint Inventions.
<PAGE> 45
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(c) All Sole and Joint Inventions to the extent presently
known are identified on Appendix F of this Agreement. In the event an
additional Sole or Joint Invention is identified subsequent to the signing of
this Agreement, each such Inventions shall be added to Appendix F.
7.02 PROSECUTION. (a) The party not performing the patent
prosecution of a Licensed Patent, a Sole Invention or a Joint Invention shall
be authorized by the other party to have access to the files in the patent
offices, if it so requests, and shall be kept reasonably informed of the
development of such prosecution. A party may not discontinue prosecution of a
patent application on a Licensed Patent, Sole Invention or a Joint Invention or
maintenance of a patent obtained thereon, without providing the other party
with ninety (90) days advance notice and the opportunity for the other party to
take over such prosecution or maintenance.
(b) The party not performing the patent prosecution under
Section 7.01 agrees to issue all necessary documents for the other party, to
render all signatures which may be necessary for such patent prosecution and to
assist the other party in all other ways which are necessary, for prosecution
and the issuance of the patents involved as well as for the maintenance of such
patents.
<PAGE> 46
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(c) In accordance with each party's standard procedures
for receiving rights to inventions conceived by its representatives, each party
will cause its representatives to assign all Inventions and Improvement Patents
to that party, which then shall be subject to the grant of rights between the
parties set forth in this Agreement.
7.03 INFRINGEMENT. (a) In the event that a party becomes aware of
an infringement or potential infringement by a third party of a Licensed
Patent, the party shall inform the other in writing of all evidence and details
available to the party concerning said infringement. The parties shall then
consult with each other as to the best manner in which to proceed. The owner
of the Licensed Patent shall have the first right but not the obligation to
bring, defend and maintain any appropriate suit or action, and to control the
conduct thereof against the third party.
Should the other party agree to share all expenses, the other party
shall also share the recoveries due to any such suit or action. Should the
other party not agree to share all expenses, the owner of the Licensed Patent
will receive all recoveries due to any such suit or action. Should the owner
of the Licensed Patent request the other party to join in bringing such suit or
action, the other party shall execute all papers and perform such other acts as
may be reasonably required, unless it has compelling legal
<PAGE> 47
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or business reason not to join in such suit. Should the owner of the Licensed
Patent lack standing to bring an action, then such owner may ask the other
party to bring such suit. If, as requested, the other party brings suit, the
owner of the Licensed Patent shall cooperate with the other party in conducting
the suit. If the other party does not agree to share all expenses, the owner
of the Licensed Patent will receive all recoveries due to any such action.
(b) If the owner of the Licensed Patent fails to bring
legal action or to terminate an infringing activity within six (6) months of
notification of infringing activity, the other party shall have the right but
not the obligation to bring suit against the third party. If the other party
elects to bring suit, the owner of the Licensed Patent shall cooperate with the
other party in conducting the suit, and the owner shall, upon request, be a
named party to such action where legally necessary for the other party to bring
suit. The other party shall be responsible for all of its and the owner's
expenses and shall retain all recoveries.
(c) The party not bringing the patent suit under this
Section 7.03 agrees to issue all necessary documents to the other party, to
render all signatures which may be necessary for such patent litigation, and to
assist the other party in all other ways which are necessary for conducting the
litigation.
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Exchange Commission. Asterisks denote omissions.
Page 45
7.04 THIRD PARTY PATENTS. In the event that either or both parties
are sued or threatened with suit by a third party who claims that the making,
using or selling of the Licensed Product is an infringement of one or more
claims of a patent owned or controlled by the third party, the parties shall
consult and discuss with each other whether it would be reasonable to bring or
defend any suit or proceeding concerning an alleged infringement of a third
party's patent or whether other measures should be undertaken to avoid the time
and expense in any such suit or proceeding.
7.05 REPRESENTATION. In any proceeding under Sections 7.03 or
7.04, a party can participate and be represented by counsel of its choice at
such party's cost.
ARTICLE 8 - PROPRIETARY INFORMATION
-----------------------------------
8.01 TREATMENT OF INFORMATION. (a) For the Term of the Agreement
or ******** years after termination, whichever is longer, (i) each party hereto
shall maintain the Licensed Know-How and the Non-Licensed Pre-Existing Know-How
furnished by the other party ("such Know-How") as it maintains its own
proprietary information and shall not disclose, divulge or otherwise
communicate such Know-How to others, except Affiliated Companies and Permitted
Sublicensees, or use it for any purpose, except as is reasonably
<PAGE> 49
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Page 46
necessary for a party to develop, have developed, make, have made and sell
Licensed Product in accordance with the terms and obligations of this
Agreement, and (ii) each party hereby agrees to exercise reasonable precaution
to prevent and restrain the unauthorized disclosure of such Know-How by any of
its directors, officers, employees, consultants, subcontractors, wholesalers,
distributors, Affiliated Companies, Permitted Sublicensees or agents,
including, but not limited to, obtaining their agreement to hold such
information proprietary.
(b) For the Term of the Agreement or ******** years after
termination, whichever is longer, and subject to Section 8.02 below, a party
shall not utilize the Non-Licensed Pre-Existing Know-How except as was
contemplated to satisfy the obligations under the Research Plan of the
Collaboration.
(c) GI shall also have the right to disclose to Wistar
any Licensed Know-How reasonably necessary, as reasonably demonstrated by
Wistar, for Wistar's use in non-commercial academic research, provided that
Wistar agrees to maintain such information in a manner consistent with this
Section 8.01.
8.02 RELEASE FROM RESTRICTIONS. The provisions of Section 8.01
shall not apply to any Licensed Know-How or Non-Licensed Pre-Existing Know-How
disclosed hereunder which:
<PAGE> 50
Page 47
(a) was known to or used by the receiving party or its
Affiliates or Permitted Sublicensees prior to its date of disclosure to the
receiving party by the disclosing party; or
(b) either before or after the date of the disclosure to
the receiving party is lawfully disclosed to the receiving party, its
Affiliates or Permitted Sublicensees by an independent, unaffiliated third
party rightfully in possession of such Licensed Know-How or Non-Licensed
Pre-Existing Know-How; or
(c) either before or after the date of the disclosure to
the receiving party becomes published, generally known to the public or
otherwise enters the public domain through no fault or omission on the part of
the receiving party, its Affiliates or Permitted Sublicensees; or
(d) is required to be disclosed by the receiving party,
its Affiliates or Permitted Sublicensees to comply with applicable laws, to
defend or prosecute litigation or to comply with governmental regulations,
provided that the receiving party, its Affiliates or Permitted Sublicensees
provides prior written notice of such disclosure to the other party and takes
reasonable and lawful actions to avoid and/or minimize the degree of such
disclosure.
<PAGE> 51
Page 48
ARTICLE 9 - TERMINATION
-----------------------
9.01 TERMINATION FOR CAUSE. A party may terminate the rights and
licenses granted to another party under Article 4 of this Agreement at any time
for "cause" in a given country upon ninety (90) days prior written notice to
the other party, as provided below. Such termination may be on a
country-by-country basis, at the option of the non-breaching party. Such
notice shall state with particularity the basis for the termination and the
proposed remedy. "Cause" shall mean breach by either party of a material term
or obligation under this Agreement which is capable of being cured. Where such
breach is capable of being cured but is not remedied for a given country within
the ninety (90) day notice period, the right and license shall terminate at the
end of such notice period in the given country.
9.02 TERMINATION AS OF RIGHT. Upon ninety (90) days prior written
notice to the other party, a party may terminate a right and license it
receives hereunder (a) on a country-by-country basis, if such party, its
Affiliated Companies and Permitted Sublicensees no longer sells Licensed
Product in the given country; or (b) for the entire Territory.
9.03 FURTHER OBLIGATIONS. Upon termination, neither party will
have any further obligations under this Agreement, except:
<PAGE> 52
Page 49
(a) a party shall continue to be obligated to comply with
all obligations of this Agreement to the extent it retains any surviving rights
and licenses under Article 4, including, without limitation, Sections 4.01,
4.02 and 4.03;
(b) in any countries where license rights are terminated,
the terminated party shall be liable for all liabilities accrued through the
date of termination; and
(c) all other obligations which by their terms survive
termination, including but not limited to the applicable non-disclosure, record
keeping, regulatory compliance, intellectual property and indemnification
provisions of this Agreement shall survive the termination of such licenses.
9.04 USE OF LICENSED KNOW-HOW AFTER TERMINATION. After
termination, each party shall retain the right to use any Licensed Know-How
disclosed to it hereunder, except that (a) in case of termination for cause
pursuant to Section 9.01, the breaching party shall not retain such right; or
(b) in the case of termination in a given country under Section 9.02, the
terminating party shall not retain such right for the country.
<PAGE> 53
Page 50
9.05 REMEDIES. Termination of this Agreement for any reason shall
be without prejudice to any remedies which a party may then or thereafter have
under this Agreement or at law.
ARTICLE 10 - MISCELLANEOUS PROVISIONS
-------------------------------------
10.01 ASSIGNABILITY. Neither party may assign this Agreement
without the prior written consent of the other party, which consent will not be
unreasonably withheld, except that either party may assign this Agreement
without such consent to an Affiliated Company; provided that such Affiliated
Company agrees to be bound by the terms and conditions of this Agreement.
10.02 PRESS RELEASE. Except as required by law, neither party shall
use the name of the other party in any publicity release without the prior
written permission of such other party, which shall not be unreasonably
withheld. The other party shall have a reasonable opportunity to review and
comment on any such proposed publicity release. Except as required by law or
permitted elsewhere in this Agreement, neither party shall publicly disclose
the terms and conditions of this Agreement, unless expressly authorized to do
so in advance by the other party.
10.03 LAW. This Agreement shall be governed by and interpreted under
the laws of the State of New Jersey.
<PAGE> 54
Page 51
10.04 SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
10.05 CAPTIONS. All captions hereunder are for convenience only and
shall not be interpreted as having any substantive meaning.
10.06 RELIANCE. All covenants, agreements, representations and
warranties made hereunder shall be deemed to have been relied upon
notwithstanding any investigation heretofore or hereafter made and shall
survive the execution of this Agreement. The parties have not relied on any
agreements, representations or warranties not contained herein.
10.07 NOTICES. Any notices required by this Agreement shall be sent
by registered mail, postage prepaid, or by telex, cable, or facsimile, and
shall be forwarded to the respective addresses set forth below unless
subsequently changed by written notice:
<PAGE> 55
Page 52
For GI: Genetics Institute Inc.
87 CambridgePark Drive
Cambridge, MA 02140-2787
Attn: General Counsel
For Roche:
Roche-Nutley: Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: Corporate Secretary
and
Roche-Basle: F.Hoffmann-La Roche Ltd
CH-4002
Basle, Switzerland
Attn: Law Department
10.08 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the within subject matter
and supersedes all previous agreements, whether written or oral including but
not limited to the Heads of Agreement. The Agreement may be changed only in
writing signed by duly authorized representatives of GI and Roche.
<PAGE> 56
Page 53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized representatives.
GENETICS INSTITUTE, INC. HOFFMANN-LA ROCHE INC.
By:____________________________ By:___________________________
Name:__________________________ Name:_________________________
Title:_________________________ Title:________________________
Date:__________________________ Date:_________________________
F.HOFFMANN-LA ROCHE LTD
By:____________________________
Name:__________________________
Title:_________________________
Date:__________________________
<PAGE> 57
<TABLE>
APPENDIX A
----------
LICENSED PATENT RIGHTS
----------------------
GI
- - --
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 11/9/89 46673/89 638430
Canada 11/9/89 2,002,607-3
Europe a*) 11/9/89 90901161.1
b**) 9/4/91 91918119.8
Japan a) 11/9/89 501209/90
b) 9/4/91 516686/91
Mexico 6/5/92 92/3294
PCT a) 11/9/89 PCT/US89/05027
b) 9/4/91 PCT/US91/06332
USA a) 11/10/88 269,945/88
b) 2/7/89 307,817/89
c) 9/18/90 584,941/90
</TABLE>
<TABLE>
ROCHE
- - -----
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 12/20/90 68349/90
Canada 12/19/90 2032653-1
Europe*** 12/09/90 90123670.3
Ireland 12/21/90 4694/90
Japan 12/22/90 413259/90
New Zealand 12/19/90 236545
Philippines 12/19/90 41751
South Africa 12/19/90 10237/90 10237/90
</TABLE>
<PAGE> 58
<TABLE>
APPENDIX A
----------
LICENSED PATENT RIGHTS (CONTINUED)
----------------------------------
ROCHE (CONTINUED)
- - -----------------
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
USA a) 12/22/89 455708/89
b) 05/09/90 520935/90
c) 08/27/90 572284/90
d) 03/24/92 957023/92
<FN>
* Designated countries: AT, BE, CH, DE, FR, GB, IT, LU, NL, SE
** Designated countries: AT, BE, CH, DE, DK, ES, FR, GB, GR, IT, LU, NL, SE
*** Designated countries: AT, BE, CH, DE, DK, FR, GB, IT, LU, NL, SE
</TABLE>
<PAGE> 59
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX B
----------
NON-LICENSED PRE-EXISTING KNOW-HOW
----------------------------------
***Entire schedule has been deleted***
<PAGE> 60
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX C
----------
RESEARCH PLAN
-------------
***Entire schedule has been deleted***
<PAGE> 61
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX D
----------
LICENSED COLLABORATIVE KNOW-HOW TO BE FURNISHED BY GI TO ROCHE
--------------------------------------------------------------
***Entire schedule has been deleted***
<PAGE> 62
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX E
----------
LICENSED COLLABORATIVE KNOW-HOW TO BE FURNISHED BY ROCHE TO GI
--------------------------------------------------------------
***Entire schedule has been deleted***
<PAGE> 63
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX F
----------
SOLE AND JOINT INVENTIONS
-------------------------
***Entire schedule has been deleted***
<PAGE> 64
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
APPENDIX G
----------
ACQUIRED RIGHTS FROM THIRD PARTIES
----------------------------------
***Entire schedule has been deleted***
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
July 8, 1994
American Home Products Corporation
Five Giralda Farms
Madison, NJ 07904
Attention: Fred Hassan
Senior Vice President
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, PA 19087
Attention: Dr. Hans Mueller
Senior Vice President
Re: Agreement to Form IL-12 Joint Venture
-------------------------------------
Gentlemen/Mesdames:
This letter sets forth our understanding of the basic business and
commercial terms of our agreement (the "Agreement") to enter into a joint
venture for the development and commercialization of interleukin-12 in all
countries throughout the world except Japan (the "Territory"). If this letter
reflects your understanding, kindly sign both enclosed copies of this letter
and return one copy to my attention, and we can proceed with the project and
the preparation of the definitive documents contemplated by this Agreement.
1. BACKGROUND.
Genetics Institute, Inc. ("GI"), in partial collaboration with the
Wistar Institute, Inc. ("Wistar"), identified, isolated, purified and cloned
IL-12 (as defined below) and plans to develop, use, manufacture, distribute and
sell products derived from IL-12 throughout the world. GI has obtained an
exclusive license from Wistar for GI and its affiliates under Wistar's interest
in the resulting IL-12 patent and know-how rights (the "Wistar Rights"),
pursuant to a License Agreement dated as of June 22, 1992, as amended, by and
between GI and Wistar (the "Wistar License Agreement").
GI also entered into a pre-clinical collaboration and cross-license
with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.
<PAGE> 2
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -2-
(collectively, "Roche") pursuant to a Heads of Agreement dated as of May 4,
1992, as amended, by and between Roche and GI, which will be superseded by a
definitive agreement implementing its terms, (the "Roche License Agreement")
with respect to their respective patent rights to IL-12, and the patent rights
and know-how arising out of their pre-clinical collaboration (the "Roche
Rights"). The pre-clinical collaboration ended on ************; however, the
cross-license survives.
GI has determined that it is in its strategic interest to seek a
partner for the development and commercialization of IL- 12. In accordance
with Section 3.07 of the Governance Agreement (the "Governance Agreement")
dated as of January 16, 1992, among GI, American Home Products Corporation
("AHP") and AHP Biotech Holdings, Inc. ("Holdings"), GI obtained from its Board
of Directors a waiver of the requirements of clauses (i) and (ii) of that
Section before making an offer to AHP with respect to IL-12 thereunder.
Pursuant to such waiver, on March 10, 1994, GI made an offer under Section 3.07
to AHP through its Wyeth-Ayerst Laboratories Division ("Wyeth") to participate
exclusively with GI in the development and commercialization of its IL-12
therapeutic protein outside North America and Japan (the "Offer"). Such Offer
remains open and valid through July 8, 1994. AHP has considered the Offer in
good faith, and pursuant to subsection (c) of Section 3.07, AHP has proposed
alternative terms which GI has considered and discussed with AHP in good faith,
and AHP has revised such terms based on such discussions.
This letter sets forth the basic business and commercial terms of a
development and commercialization transaction that is based on these
alternative terms and, upon execution, constitutes a modification to the Offer
and acceptance of such modified Offer.
2. PRODUCT AND THERAPEUTIC FIELDS.
The Product (as defined in the Governance Agreement) is IL-12 for use
in the prevention or treatment of disease in humans, excluding animal,
diagnostic or research reagent uses (the "Field"). Indications in the Field
include, without limitation, administration of IL-12 itself, in combination
with at least one other therapeutic, or as a Vaccine Adjuvant (as defined
below) or the use of the polynucleotides encoding IL-12 in Gene Therapy (as
defined below). GI agrees to include appropriate provisions in any of its
agreements with third parties relating to animal, diagnostic or research
reagent uses of IL-12 to inform such parties of the exclusive rights held by
the joint venture in the Field, and to prevent, to the extent permitted by law,
such third party from
<PAGE> 3
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -3-
making, using or selling IL-12 other than exclusively for animal, diagnostic or
research reagent purposes.
As used in this Agreement, IL-12 shall mean:
a. the proteins, peptides or polypeptides, referred
to as NKSF, CLMF or IL-12, which are described or
claimed in the GI and/or Roche patent applications
set forth on Appendix A (the "Protein");
b. the subunits of the Protein or combination of
such subunits to form the Protein;
c. the polynucleotides ("PNs") which encode the
Protein, the subunits of the Protein and/or
subsequences thereof;
d. any modified form of the Protein; or
e. naturally occurring allotypic variant or mutant
forms of the Protein or of the PNs noted above.
As used in this Agreement, "Vaccine Adjuvant" means the use of
IL-12 in combination with an immunogen (e.g., viral proteins,
parasite proteins or miscellaneous antigens) or
polynucleotides encoding an immunogen to enhance, suppress or
otherwise modulate the immune system in response to disease in
vivo or ex vivo; as used in this sentence, "combination" means
use in conjunction with, simultaneously with (combined or
uncombined) or sequentially with an immunogen.
As used in this Agreement, "Gene Therapy" means the genetic
modification of human somatic cells by the introduction of
exogenous DNA or RNA into those somatic cells for the purpose
of expressing IL-12 in vivo for the treatment or prevention of
disease or genetic defect.
3. TERRITORY AND LICENSE RIGHTS.
GI shall grant the joint venture exclusive rights to develop, use and
sell IL-12 throughout the Territory in the Field. The joint venture will also
have the non-exclusive right to formulate, fill and finish IL-12 bulk drug
substance and to use IL-12 as a research reagent, and have others do so on the
joint venture's behalf. GI will reserve the exclusive right to manufacture
IL-12 bulk drug substance subject to Section 9, below, and the non-exclusive
right in the Field to conduct discovery research and
<PAGE> 4
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -4-
collaborate with non-commercial third parties on discovery research related to
IL-12, but shall reserve or obtain a license (or rights to license) for the
joint venture to develop, use and sell in the Territory new uses or other
improvements to the IL-12 products in the Field resulting from such discovery
research with non-commercial third parties.
These rights will be transferred in the Territory in consideration of
the royalties, milestone payments and benchmark payments described below. The
transfer will be in the form of a license to GI's current and future IL-12
patent and know-how rights, a sublicense to the Roche Rights and an assumption
by the joint venture, as an affiliate of GI, of the Wistar Rights under the
Wistar License Agreement.
The license agreement will include, without limitation, customary and
usual provisions covering such matters as confidentiality and patent right
protection, maintenance and enforcement, and representations to the joint
venture (to the best of GI's knowledge in the case of clauses (i), (ii) and
(v)) regarding (i) ownership of patents and technology free and clear of third
party claims, (ii) absence of infringement of third party patents, (iii)
authority to grant rights to the joint venture pursuant to the Roche License
Agreement and other applicable agreements, (iv) authority to allow the joint
venture to assume the rights of a directly licensed affiliate of GI under the
Wistar License Agreement, and (v) satisfaction of other statutory conditions
for securing patent protection. The joint venture shall waive any rights to
seek damages or any other remedy for the breach of the foregoing
representations unless such a breach has a material and adverse impact on the
joint venture.
The license agreement shall also contain provisions pursuant to which
GI will have the first right to seek, obtain and maintain patents at the joint
venture's expense in the Territory, and the joint venture will have the
secondary right to do so in the event GI elects not to do so with respect to a
particular patent right. GI agrees to give the joint venture and Wyeth
adequate information and notice, to the extent practical, to exercise its
secondary rights. The license shall also give GI the first right to initiate
litigation against infringers in the Territory, and, in the event GI fails to
initiate suit within 60 days of receipt of a request to do so, the joint
venture shall have the right to initiate litigation or permit Wyeth to initiate
litigation in its Sales Territory (as defined below). The non-initiating party
(i.e., GI or the joint venture) shall have the right to contribute up to *** of
the costs incurred in any such suit and to share in the damages or royalties in
proportion to such funding contribution. These
<PAGE> 5
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -5-
rights shall also apply to the Roche Rights and the Wistar Rights in so far as
permitted by the Roche and Wistar license agreements. Notwithstanding anything
to the contrary, any settlement of such litigation by the initiating party
shall require the consent of the non-initiating party, which consent will not
be unreasonably withheld. In addition, the license agreement will include
appropriate provisions concerning the conduct of the defense against third
party claims of patent infringement.
4. STRUCTURE OF THE JOINT VENTURE.
The parties agree to form a joint venture which may involve the
organization of one or more partnerships, corporations or other entities to be
owned fifty (50) percent by GI or a GI controlled affiliate, designated by GI,
and fifty (50) percent by AHP, or an AHP controlled affiliate, designated by
AHP.
The parties shall take into consideration marketing, operational,
legal, financial and tax considerations in selecting the form and domicile for
each of the joint venture entities and in structuring the relationship and
roles of GI, AHP and Wyeth in providing services and supplies to the joint
venture and each of such entities.
AHP and Wyeth shall have the right to terminate their interest in the
joint venture and all of its other entities without cause on or after
****************, including any marketing rights; provided that they:
a. provide GI with at least ********** prior written notice
of such termination;
b. fulfill all of their obligations for on-going and
previously approved activities during the ********* notice period with
the understanding that ******* ************* and ******** shall not
******** ****** the ***** of ******** in the prior ********* period
and that ***** and *** shall not be *********** for the ******* of any
******* ********* ******** during such ********* period; and
c. continue, after such termination, to perform such
activities, at GI's request and expense, to the extent reasonably
necessary for GI to obtain by filing or transfer any applicable
regulatory filings or approvals or other rights to continue clinical
development or otherwise to permit the IL-12 products to remain on the
market. In such event, the parties shall take all necessary action,
beginning with the giving of notice by AHP and Wyeth, to transfer any
regulatory
<PAGE> 6
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -6-
filings or approvals, clinical data, and trademarks, etc. to GI or its
designee, and to support GI in making any necessary filings so that
the period of time after such termination during which Wyeth or AHP
have to continue to perform such activities on behalf of GI can be
minimized. Further, AHP and Wyeth shall provide continuing rights to
GI to use any other intellectual property rights owned by AHP or Wyeth
at the time of such notice to enable GI, its licensees and
distributors to continue its, AHP's and Wyeth's activities
contemplated by the definitive agreements.
5. LICENSE FEES AND ROYALTIES. GI will be paid the following license
fees (in the form of signature and milestone payments) and royalties by the
joint venture:
<PAGE> 7
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -7-
a. License Fees -
<TABLE>
<CAPTION>
Milestone
Payment Due Payment
- - ------------------------------------ -----------
<S> <C>
Earlier of: (i) execution of the *************
definitive agreements or
(ii) August 31, 1994, (the "Payment
Date")
The later of (i) ********** of ***** ************ per indication
***************** (1) or (ii) the
Payment Date
************* of ******** in a *********** per indication
***** ** ******** *****(1)(2)
********** (1): **** *********** per indication
**** *********** per indication
************ (1): **** *********** per indication
**** *********** per indication
<FN>
_______________________________
(1) Payments will be made for the first indication to achieve each milestone in
each of up to ***** therapeutic areas outside the Vaccine Adjuvant and Gene
Therapy fields. For this purpose, a therapeutic area shall be considered a
distinct disease class, such as ******* ********** **** ******** etc.
Accordingly, GI would only receive payments once for each completed milestone
in each therapeutic area. If the first indication in a therapeutic area fails
before PLA approval, GI would be entitled to receive any unpaid milestone
payments for that therapeutic area as milestones are achieved in another
indication in that area or in another indication in an additional therapeutic
area for which the remaining milestone payments have not been paid. In no event
shall GI receive, in addition to the *********** signature payment, milestone
payments in excess of ************* in any one therapeutic area or milestone
payments in excess of ************** in the aggregate for all therapeutic
areas.
(2) ************* of ******** will be more specifically described in the
definitive agreements.
</TABLE>
<PAGE> 8
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -8-
b. Royalty Schedule - Royalties shall be reported and paid 45 days
after the end of each calendar quarter to GI by the joint venture on the
aggregate annual net sales of all IL-12 products sold during such quarter by
the joint venture or its affiliates to the first unrelated third party
excluding *************** and **** ******* product sales. The following
royalty rates shall apply to each bracket of aggregate annual net sales:
<TABLE>
<CAPTION>
Annual
IL-12 Net Sales Royalty Rate
--------------- ------------
<S> <C> <C> <C>
$ U.S. ************ MM ****
************* MM ****
************* MM ****
************* MM ****
***** ****
</TABLE>
The beginning of the annual period, for the purpose of calculating
royalties, shall be the first full calendar quarter of net sales of IL-12
following market approval anywhere in the Territory, and shall be independent
of the fiscal year of the joint venture.
Royalties shall be payable on a country-by-country basis in the
Territory for the life of any of the patent rights in the case of each IL-12
product the manufacture, use or sale of which is covered by a valid claim under
applicable patent rights, or, in the absence of such patent rights, ** years
from the first commercial sale, on a country-by-country basis, of any IL-12
product using any of the know-how.
c. Third Party Royalties - The joint venture shall be responsible
for any royalties, or other payments payable to Roche, on or after
************, arising out of the Roche License Agreement with respect to the
Territory. As a directly-licensed affiliate of GI under the Wistar License
Agreement, the joint venture shall also be obligated to pay, or reimburse GI
for payment of, royalties (or payments arising out of the sublicense to
permitted third parties of any Wistar Rights) payable to Wistar on or after
************. The joint venture shall be paid any royalties and other payments
payable by Roche to GI which arise out of the sale of IL-12 in the Territory.
In the event that the joint venture, or GI, with the consent of the joint
venture, which shall not be unreasonably withheld, enters into any future
agreements
<PAGE> 9
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -9-
providing for the payment of royalties or other amounts on sales of IL-12 in
the Territory, the joint venture shall pay such amounts, but ******** of such
payments by the joint venture shall be creditable against up to ******** of the
royalties paid by the joint venture to GI (as provided by Section 5.b., above)
on sales of IL-12 products, the sale of which are subject to such third party
royalty, with respect to the same calendar quarter in which such IL-12 products
are sold.
6. GI'S PUT/CALL OPTION.
If, at any time, AHP's Voting Interest (as defined in the Governance
Agreement) is less than ***, GI shall have the right, but not the obligation,
to initiate buy-sell proceedings. In the event that GI desires to initiate
buy-sell proceedings, it shall submit to AHP in writing a proposed purchase
price for AHP's entire interest in the joint venture. Within ******* after the
receipt of a proposed purchase price from GI, AHP shall elect to (x) purchase
GI's entire interest in the joint venture at the proposed purchase price or (y)
sell its entire interest in the joint venture to GI at the proposed purchase
price. Any failure to respond to GI in writing within such time period will be
deemed an election by AHP to sell its entire interest in the joint venture to
GI. The closing of any such purchase and sale shall be made in cash or by
delivery of the Note (as defined below) and shall be consummated within
******** from AHP's decision to purchase or sell.
The definitive agreements shall provide that GI be permitted to pay
the purchase price by delivering the Note to AHP in the event that AHP or
Holdings (i) has exercised any of its then existing rights under the Governance
Agreement preventing GI from raising the necessary capital, through debt or
equity financing, to purchase AHP's interest in the joint venture or (ii) does
not vote its shares of GI voting securities in favor of a GI management
proposal to increase the authorized capital stock of GI. The "Note" shall be
an installment note with a final maturity not to exceed ******** and interest
accruing at the prime rate of the Bank of Boston.
In the event of a purchase and sale, the license from GI to the joint
venture and GI's IL-12 supply rights and obligations shall remain in effect.
Further, if at the time of a purchase and sale, the joint venture shall have an
existing agreement with the selling partner or any of the selling partner's
affiliates for the conduct of activities (other than the right and obligation
of GI to supply bulk material), the purchasing partner shall have the right,
upon six months prior written notice to the selling partner, to terminate any
or all of such agreements, but the selling partner
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shall be obligated, at the election of the purchasing partner, to perform under
any such agreement or agreements for a period equal to the lesser of (x) the
remaining term of any such agreement or agreements or (y) ********.
After such period, at the purchasing partner's request and expense,
the selling partner shall continue to perform activities to the extent
reasonably necessary for the purchasing partner to obtain by filing or transfer
any applicable regulatory filings or approvals or other rights to continue
clinical development or otherwise to permit the IL-12 products to remain on the
market. In such event, the parties shall take all necessary action, beginning
with the election by AHP to purchase or sell, to transfer any regulatory
filings or approvals, clinical data, and trademarks, etc. to the purchasing
partner or its designee, and to support the purchasing partner in making any
necessary filings so that the period of time after such termination during
which the selling partner has to continue to perform such activities on behalf
of the purchasing partner can be minimized. Further, the selling partner shall
provide continuing rights to the purchasing partner to use any other
intellectual property rights owned by the selling partner at the time of such
notice to enable the purchasing partner, its licensees and distributors to
continue the selling partner's activities contemplated by the definitive
agreements.
7. MANAGEMENT.
The overall business of the joint venture shall be managed by a
steering committee ("Steering Committee") composed of 6-10 members, an equal
number of whom shall be designated by Wyeth and by GI, in their discretion.
The development of IL-12 as a therapeutic or prophylactic protein
product (excluding Vaccine Adjuvant and Gene Therapy products) shall be managed
day-to-day by an evolving project team ("Project Team") composed of members
designated by Wyeth and GI, in their discretion, taking into consideration the
then-current development and commercialization needs of the joint venture.
Each party shall appoint a project director and these persons shall work
together to coordinate the activities of the Project Team. The Project Team
shall report to the Steering Committee at regular intervals. To facilitate
good communications and harmonization in project planning, the Project Team
will prepare (a) a research strategy and global development plan (as soon as
possible), (b) a registration and positioning strategy document (end of Phase
II), and (c) annual operating plans for the project. In addition, the Project
Team will meet on a regular basis to maximize coordination and cooperation
between Wyeth and GI.
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It is the intent of the parties that all decisions to be made by the
joint venture be made by the consensus of the Project Team and/or the consensus
of the Steering Committee. Consensus shall mean the determination of at least
a majority of the members present at any meeting at which at least a majority
of the entire board or team is present, provided that such majority shall
include at least one member designated by each partner. The Steering Committee
shall resolve any deadlocks on the Project Team after consultation with the
members of the Project Team.
Major decisions ("Major Decisions") requiring the consent of the
Steering Committee shall be set forth in the definitive agreement and shall
include, without limitation:
(i) approval of annual budgets and subsequent revisions
to such annual budgets;
(ii) approval of strategic plans and the implementation
thereof;
(iii) approval of product, clinical and market development
plans and budgets;
(iv) approval of product registration, labelling and
promotional plans and budgets therefor;
(v) approval of formulation, filling and finishing plans
and budgets therefor;
(vi) approval of material services to be purchased by the
joint venture from the partners, their affiliates or from third parties;
(vii) direction of negotiations regarding commercial
transactions of the joint venture, including, but not limited to, transactions
with AHP, GI or their respective affiliates;
(viii) approval of the timing and amount of the contribution
by the partners of capital to the joint venture and, taking into consideration
such factors as the capital requirements of the joint venture and a preference
for current distributions, the distribution of cash flow to the partners;
(ix) appointment or removal of independent public
accountants and legal counsel;
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(x) commencement, prosecution, defense or settlement of
any litigation or arbitration or potential litigation or arbitration;
(xi) incurrence of debt and/or equity financing from third
parties;
(xii) purchase, acquisition or formation of another entity
or business;
(xiii) creation of liens, mortgages, pledges or other forms
of encumbrances upon any of the assets of the joint venture;
(xiv) sale, lease, transfer or exchange of significant
parts of the business or assets of the joint venture;
(xv) approval of material cash disbursements, payments and
amounts to be set aside as reserves;
(xvi) any other matter which might substantially affect the
financial condition, operations or business of the joint venture;
(xvii) a decision of the joint venture (or GI on behalf of
the joint venture) to license-in or acquire patent or know-how rights related
to IL-12, the cost of which, in whole or in part, will be paid for by the joint
venture; and
(xviii) any matter reasonably designated as a "Major
Decision" by either partner.
Anything to the contrary notwithstanding, and subject to the Executive Dispute
resolution mechanism set forth below, the foregoing right of the partners to
participate in Major Decisions shall be limited by the preferential rights of
the parties to be set forth in agreements with the joint venture as described
in the remainder of this Section, and in Section 3 (prosecution, maintenance
and enforcement of patents), Section 9 (supply rights), Section 10 (Marketing
Organization registration management rights), Section 11 (Marketing
Organization promotion decisions) and Section 12 (Vaccine Adjuvant and Gene
Therapy development and commercialization management).
In the event that the Steering Committee is unable to reach a
consensus on any Major Decision and such inability continues for a period of
******* after its first consideration by the Steering Committee, either partner
shall have the right to request that the issue be submitted to the Chief
Executive Officer of GI and the
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executive officer in charge of pharmaceutical operations of AHP (the "Executive
Officers") for final binding resolution.
The Executive Officers shall be required to use their diligent efforts
to resolve any issue referred to them within ******* of its referral to them.
Each Executive Officer shall have the right to engage the services of any
number of independent experts in the field in question (the individuals so
engaged by each Executive Officer to be reasonably acceptable to the other
Executive Officer in terms of independence and expertise) to assist the
Executive Officer in making a joint determination in the best interest of the
joint venture, and each Executive Officer shall be obligated to consider in
good faith the analyses and opinions of any such independent experts engaged by
either of them in making a determination.
In the event that the Executive Officers are unable to resolve a
matter within ******* of its referral to them, GI shall have the right to make
the final determination with respect to the following product development
issues:
(i) whether or not to ******** ************ ******* in a
*** ********** or *********** ****;
(ii) whether or not to **** an *** or ******** ********
****** for a *******************;
(iii) whether or not to **** to ***** ** ******** ******
for a *******************;
(iv) whether or not to **** to ***** *** ******** ******
for a *******************;
(v) approval of budgets for the achievement of (i)-(iv),
above; and
(vi) whether or not and on what terms to pursue a specific
business opportunity with a third party or Wyeth (which GI reasonably
determines, after consultation with Wyeth, is in the best interests of the
joint venture) for the development and commercialization of **************** or
************* indications as contemplated by **********.
In the event that the Executive Officers are unable to resolve a
matter within ******* of its referral to them and the matter involves
regulatory filings or local country marketing or promotional activities, the
party affiliated with the Marketing Organization (as defined below) having
marketing rights in the
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territory involved shall have the right to make the final determination with
respect to such issue. Notwithstanding the foregoing, the parties recognize
the need to coordinate their activities in these areas and agree to use good
faith efforts not to take any actions that would seriously conflict with the
registration or promotional strategy of the other Marketing Organization.
In the event the Executive Officers are unable to resolve any other
matter within ******* of its referral to them, the parties shall continue to
discuss such issue in good faith until a determination is made.
8. CAPITAL CONTRIBUTIONS.
The partners agree to fund all expenses of the joint venture for the
development and commercialization of IL-12, which are approved by the Steering
Committee, or in the event of a failure to reach consensus, approved by the
Executive Officers or a tie- breaking partner in accordance with Section 7,
except as provided below. The joint venture shall pay all reasonable expenses
incurred by GI for the development and commercialization of IL-12 in the Field
(and which are not related to IL-12 manufacturing process development) between
July 1, 1994 and the execution of the definitive agreements. The budget for
the period between the execution of the definitive agreements and December 31,
1994 shall be included in the definitive agreement and shall be deemed to be
approved by the Steering Committee. Thereafter, annual budgets shall be
promptly prepared by the Project Team and approved by the Steering Committee.
The definitive agreements shall include (x) rights of one partner to
pursue activities that the other partner does not desire to pursue, as
described below, and (y) provisions prohibiting AHP or Holdings from exercising
any of AHP's or Holding's then existing rights under the Governance Agreement
which would prevent or interfere with GI's exercising its tie-breaking rights
or with GI's carrying out of a right to independently pursue an activity.
In the event the joint venture decides not to proceed with development
in a particular therapeutic area, a partner (the "Sole Partner") may elect to
continue development in such therapeutic area. If the other partner (the
"Other Partner") declines to fund or otherwise participate in this development
work through the joint venture, the Sole Partner electing to continue shall
fund all development costs and receive sole rights to indications in such
therapeutic area. The Sole Partner shall also pay ***** **** ******* of the
amount of any applicable milestone payments to GI
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otherwise payable by the joint venture. The Sole Partner shall keep the other
partner informed on a timely basis of progress in the development program. At
any point prior to the filing of a PLA in such therapeutic area, the Other
Partner may cause the joint venture to reacquire rights for such therapeutic
area. The joint venture shall reimburse the Sole Partner **** of its
development costs not funded by the joint venture if the rights are reacquired
before initiation of **************** in such therapeutic area and **** of its
development costs not funded by the joint venture if the rights are reacquired
after the initiation of **************** in such therapeutic area. Upon such
reacquisition, the Other Partner shall also pay GI the remaining
****************** of any milestone payments partially paid by the Sole Partner
for such therapeutic area.
In the event that one of the partners disagrees with a decision of the
joint venture, made through the tie-breaking procedure, to proceed with
development in a particular therapeutic area, that partner may give **********
notice of its decision to discontinue funding further development in that
therapeutic area. During the ********* period, the partner providing such
notice shall fulfill all of its obligations for on-going and previously
approved activities for such therapeutic area with the understanding that
******* ************* and ******** shall not ********* ****** the ***** of
******** in the prior ********* period and that such partner shall no longer be
*********** for the ******* of any ******* ********* ******** for such
therapeutic area during such ********* period, and the other partner shall only
be *********** for the ******* of ***** **** ******* of such ********* ********
during such period. At the end of such ********* period, the other partner
may, in its sole discretion, continue at its own expense development in such
therapeutic area as Sole Partner, ********* ******* to GI of ***** **** *******
of any additional ********* ******** otherwise due GI by the joint venture. If
it does so, the Sole Partner shall acquire all rights for the therapeutic area,
subject to the buyback provision above.
Notwithstanding the above, a partner may not elect to discontinue funding in
the ********* **** ** ********* therapeutic areas until after the completion of
the ***** ***** ** ***** in such therapeutic area.
9. MANUFACTURE AND SUPPLY OF IL-12.
The joint venture shall purchase all of its requirements of IL-12 bulk
drug substance from GI for all purposes. GI shall be solely responsible for
the development of, and the ***** ********** with developing, a commercial
scale production process for IL-12
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bulk drug substance, and shall supply all of such requirements.
All IL-12 bulk drug substance supplied by GI for preclinical and
clinical purposes pursuant to the foregoing right shall be supplied and
invoiced at GI's Direct Manufacturing Cost, F.O.B. GI's manufacturing facility.
The material shall be inventoried either by GI or the joint venture. GI shall
invoice the joint venture for GI's Direct Manufacturing Cost associated with
each production run of IL-12 bulk drug substance at the completion of the
production run of such supply and the joint venture shall make such payments to
GI within thirty (30) days of receipt of the applicable invoice. The joint
venture agrees to purchase the next production run which is scheduled to run
from ************ through ************ with the understanding that delivery
will not be made until completion of the production run in ************. The
obligation to purchase future production runs shall be subject to their
inclusion in a clinical production plan to be prepared by the Project Team and
approved by the Steering Committee.
GI shall have the right to undertake such manufacture itself, through
an affiliate, or, with the consent of the joint venture which shall not be
unreasonably withheld, through a third party. In the event that GI uses an
affiliate to undertake such manufacture, all IL-12 bulk drug substance so
supplied shall be supplied at such affiliate's Direct Manufacturing Cost,
F.O.B. such Affiliate's manufacturing facility.
The joint venture shall determine whether GI, the joint venture, an
affiliate of AHP or a third party will formulate, fill and finish (including
packaging) the IL-12 product for clinical and commercial purposes, and shall
choose the most efficient and cost effective alternative. In the event GI
agrees to perform such formulation, fill and finish activities for clinical
supply, all of such activities shall be paid by the joint venture and invoiced
at GI's Direct Cost, and GI shall have the right to use an affiliate or
unrelated third party to perform such services on GI's behalf.
All IL-12 (either in bulk or final form) supplied by GI for
commercial purposes pursuant to the foregoing right shall be supplied to the
joint venture pursuant to the terms of a separate supply agreement. Such
supply agreement shall be entered into no later than ********** prior to the
anticipated initiation of ***** *******************, and at such time, the
joint venture shall have determined (as provided above) who will formulate,
fill and finish the final product. GI shall supply commercial IL-12 bulk drug
substance at a price equal to ********** ******* (x) ****** ******* ***** of
net sales of IL-12 and (y) the Direct Cost incurred by the joint venture in
formulating, filling and finishing the IL-12
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product. In the event that, pursuant to the terms of the supply agreement, GI
is also responsible for formulating, filling and finishing the IL-12 product,
GI shall be paid *** of the net sales of the IL-12. Payment shall be made on
delivery (net/30) and the calculation of the purchase price shall be based on
the weighted- average worldwide net sales per international activity unit based
on the most recent calendar quarter's average net selling price per activity
unit. A good faith estimate and payment shall be made for shipments made prior
to the giving of the first royalty report, and an adjustment made in the form
of a credit to the joint venture or a payment to GI promptly following receipt
of such report by GI.
In addition to such terms regarding supply price, each supply
agreement shall contain terms regarding forecast procedures, reporting of net
sales, order and delivery times, minimum and maximum quantities, hardship
provisions and other usual and customary terms. In addition, the supply
agreement shall contain customary and reasonable terms authorizing the joint
venture to make, or have made, IL-12 bulk drug substance during such times and
to the extent that GI is unable to meet all of GI and the joint venture's
requirements in their respective territories to assure a fair apportionment of
bulk supplies.
For the purpose of this Agreement,
"Direct Cost" means (a) costs directly attributable to an activity
(i.e., those costs which vary with such activity), including, but not limited
to, direct labor and benefit expenses for such activity and consumable bulk and
other materials, as determined in accordance with generally accepted cost
accounting practices in the country of the activity, plus (b) fixed overhead
costs allocable to the activity, including, but not limited to, direct benefit
and labor expenses for technical services and support services, depreciation,
maintenance and repairs and insurance costs associated with such activity, as
determined in accordance with generally accepted cost accounting practices in
the country of the activity; and
"Direct Manufacturing Cost" means (a) costs directly attributable to
manufacturing, quality assurance and quality control related to a unit of
product (i.e., those costs which vary with production), including, but not
limited to, direct labor and benefit expenses for manufacturing, and consumable
bulk and other production materials, as determined in accordance with generally
accepted cost accounting practices in the country of manufacture, plus (b)
fixed manufacturing overhead costs allocable to the product based on the actual
percentage utilization (including start-up and shut-down time) of the capacity
of the manufacturing
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facility, including, but not limited to, direct benefit and labor expenses for
technical services and support services, depreciation, maintenance and repairs
and insurance costs associated with such utilization of the manufacturing
facility, as determined in accordance with generally accepted cost accounting
practices in the country of manufacture. Without limiting the generality of
the foregoing, Direct Manufacturing Cost shall be deemed to include (x) the
full cost associated with quality control samples, retention samples,
manufacturing losses and production rejects and (y) payments (including,
without limitation, royalties, option fees or license fees) made to one or more
third parties to obtain a license or similar right in the absence of which
manufacture could not be legally undertaken.
10. DEVELOPMENT ACTIVITIES.
It is the intention of the parties that all pre-clinical, clinical,
regulatory and Territory-wide product development activities (other than
manufacturing process development which is GI's responsibility or Gene Therapy
and Vaccine Adjuvant activities) shall be purchased by the joint venture from
the partners or their affiliates to the extent practical. The Project Team
shall be responsible for all of such activities to be conducted in the
Territory. The joint venture shall take into consideration the extent to which
Wyeth or GI offer special expertise which can advance the development of IL-12
in contracting for their services. Wyeth and GI agree to make their services
available to the joint venture to the extent reasonably requested by the joint
venture. Phase IV clinical trials shall be paid for by each Marketing
Organization in their respective Sales Territory (as defined below).
The joint venture will enter into development agreements with GI and
Wyeth, or their designees to accomplish the purposes of this section. Services
under such agreements will be compensated based on the **** of ****** *****,
including ******* ********, plus ***** **** ******* of such ***** **** and
******** and plus any *********** (subject to the last sentence of Section **)
and *******************.
To the extent permitted by law, IL-12 will be registered, and PLA's
will be filed, in the name of each Marketing Organization in their Sales
Territory. All costs of filing for investigation of IL-12 or for regulatory
approval of IL-12 (other than Phase IV trials) will be paid for by the joint
venture. In addition, to the extent permitted by law, the IL-12 label will
contain the name of
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the Marketing Organization for that Sales Territory and the name of the
manufacturer of the IL-12 bulk drug substance.
In the event the joint venture determines that Wyeth or GI are unable
to provide certain services, the joint venture will have the right to purchase
services from unrelated third parties. In addition, Wyeth and GI will also
have the right to subcontract with third parties in performing services for the
joint venture for activities which they would generally seek third party
assistance in connection with their other products (e.g., research
collaborations, pre-clinical and clinical investigations, toxicology studies,
clinical monitoring, etc.).
11. COMMERCIALIZATION AND MARKETING.
The joint venture shall appoint exclusive marketing organizations
("Marketing Organization(s)") to market and sell IL-12 in the Field in the
Territory, other than for Vaccine Adjuvant and Gene Therapy products which the
joint venture determines should be developed by a third party. Each Marketing
Organization shall enter into a sales and distribution agreement with the joint
venture for its respective portion of the Territory (the "Sales Territory").
Such agreement shall contain customary and reasonable terms, including without
limitation, supply and delivery terms, warranties, diligence obligations, etc.
GI, or a GI affiliate designated by GI, shall be appointed by the
joint venture as a Marketing Organization in the United States and its
territories and possessions, and in Canada and Mexico (together, "North
America"). Wyeth, or a Wyeth affiliate designated by Wyeth, shall be appointed
by the joint venture as a Marketing Organization in the remainder of the
Territory. In the event GI determines that ********** ***** ****** is required
in ***** ******* to maximize its return on its investment, *****, or a *****
********* designated by *****, shall have the ***** ** ***** ***************
************* ****** to enter into * ************ ********* with ** on
commercially reasonable terms. It is understood that all compensation for any
such ************ activity shall be paid by *** and not by *** ***** *******.
Under their agreements with the joint venture, each Marketing
Organization shall be paid a commission of *** of their respective net sales
and shall fund and diligently perform the following activities in its Sales
Territory:
a. Own, hold and maintain IL-12 marketing authorizations and
trademarks;
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b. Establish suggested list prices and discounting policy, and
negotiate reimbursement terms with government authorities;
c. In coordination with the pan-Territory education and promotion
programs, conduct educational and promotional activities; and
d. Register, distribute, sell and market IL-12 (including booking
sales and establishing, training, managing and funding of a
sales force effort).
12. VACCINE ADJUVANT AND GENE THERAPY DEVELOPMENT ACTIVITIES.
The parties intend that the joint venture will enter into an agreement
with GI to manage the development and commercialization of IL-12 in the Vaccine
Adjuvant and Gene Therapy fields, and anticipate that the joint venture will
enter into development and commercialization collaborations with third parties
to access vaccine and gene therapy products and technologies and commercialize
IL-12 in these fields. It is also anticipated that such third party
collaborators will receive significant marketing rights as part of such
transactions. GI shall review with the Steering Committee such proposed
collaborations. AHP agrees to waive its rights of first refusal under Section
3.07 of the Governance Agreement with respect to such proposed collaborations.
In the event the joint venture enters into such a collaboration, any
revenue, royalties, fees or consideration payable to the joint venture by such
third party shall be paid *** to GI and *** to the joint venture. IL-12 bulk
drug substance shall only be supplied to such third parties through the joint
venture. As provided in Section 5.c., above, the joint venture shall also be
responsible for payments to Roche and Wistar.
In the event the joint venture decides, to itself develop and
commercialize an IL-12 Vaccine Adjuvant or Gene Therapy product, then the joint
venture shall negotiate good faith license fees payable to GI on the
accomplishment of appropriate milestones which shall not exceed *********** per
product and with payments for no more than *** complete sets of benchmarks
regardless of the number of Vaccine Adjuvant and Gene Therapy products that may
be commercialized by the joint venture. Thus, if *** products complete
development and their benchmarks are fully paid, no additional benchmarks shall
be payable for a ***** product. If any of the first *** products (or their
substitutes) fail before payment of all of the benchmarks, then regardless of
the value of a substitute product, only the remaining unpaid benchmark payments
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negotiated with respect to the product it is replacing shall be paid for such
substitute product. In addition, in no event shall the aggregate benchmark
payments for all Vaccine Adjuvant and Gene Therapy products exceed ***********.
GI agrees to supply IL-12 to the joint venture for use in the Vaccine
Adjuvant field at the same price as GI sold IL-12 bulk drug substance to the
joint venture during the most recent calendar quarter. In the event there have
been no sales of such IL- 12 bulk drug substance, such price shall be based on
*** of the final Vaccine Adjuvant product (IL-12 plus the vaccine) net sales,
but in no event less than GI's Direct Manufacturing Cost plus *********** ****
*******. In addition, in no event shall the IL-12 bulk drug substance supply
price exceed ****** **** ******* of the final Vaccine Adjuvant product (IL-12
plus the vaccine) net sales.
13. GLOBAL COORDINATION.
The parties acknowledge that it is in their interest to adopt
strategies which harmonize clinical and regulatory strategies throughout the
Territory, and that notwithstanding Wyeth's and GI's rights to break a tie with
respect to certain major decisions, they will use their best efforts to strive
for good communication so that there is an appropriate environment for reaching
consensus. GI further agrees to use commercially reasonable and diligent
efforts to work with GI-Yamanouchi, Inc., its Japanese joint venture with
Yamanouchi Pharmaceutical Co., Ltd. and anticipated IL-12 partner in Japan, and
enlist their cooperation in the formulation of a global strategy for
development and commercialization of IL-12.
14. DEFINITIVE AGREEMENTS; INTERIM OPERATIONS.
This agreement constitutes the acceptance by AHP of a modified offer
under Section 3.07 of the Governance Agreement, and shall be a binding
agreement of the parties. GI, AHP and Wyeth agree to use their best efforts,
with their utmost speed and diligence, to draft, negotiate, execute and deliver
as soon as is practical definitive agreements reflecting the formation of the
joint venture, its related entities, and the related agreements contemplated
herein. Each party agrees to negotiate reasonably and in good faith towards
such definitive agreements.
The joint venture shall be deemed to be formed as of July 1, 1994,
upon the ratification of this Agreement by the independent directors on the GI
Board of Directors. The joint venture shall pay GI and Wyeth all amounts due
under this Agreement on the earlier of (i) the date on which the definitive
agreements are
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signed or (ii) August 31, 1994 if they are not yet signed. On such date, the
parties shall fund the joint venture to the extent required to make the
signature payment, any payments for completed milestones, and the reimbursement
projected for expenses to be incurred by the joint venture through December 31,
1994.
15. MISCELLANEOUS.
NOTICES. All notices from one party to the others will be in writing
and will be given by addressing the same to the other at the address
or facsimile number set forth in this Agreement, or at such other
address or facsimile number as either may specify in writing to the
other. Notices to:
GI will be marked: "ATTENTION: GENERAL COUNSEL"
with a copy to: "ATTENTION: VICE PRESIDENT
CORPORATE DEVELOPMENT"
AHP will be marked: "ATTENTION: GENERAL COUNSEL".
Wyeth will be marked: "ATTENTION: DR. H. MUELLER AND
DR. R. LEVY".
All notices will become effective when deposited in the United States
Mail with proper postage for first class registered or
certified mail prepaid, return receipt requested, or when
delivered personally, or, if promptly confirmed by mail as
provided above, when dispatched by facsimile.
ASSIGNMENT. This Agreement, and the rights and obligations hereunder,
may not be assigned or transferred by any party without the prior
written consent of the other parties, except that a party may assign
this Agreement to an affiliated company, or in connection with its
merger, consolidation, sale or sale of all or substantially all of its
assets.
ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with regard to its subject matter, and supersedes all
previous written or oral representations, agreements and
understandings between GI and AHP.
NO MODIFICATION. This Agreement may be changed only by a writing
signed by the parties.
SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any
<PAGE> 23
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -23-
respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement, and all other
provisions shall remain in full force and effect. If any of the
provisions of this Agreement is held to be excessively broad, it shall
be reformed and construed by limiting and reducing it so as to be
enforceable to the maximum extent permitted by law.
APPLICABLE LAW. This Agreement will in all events and for all
purposes be governed by, and construed in accordance with, the law of
The Commonwealth of Massachusetts without regard to any choice of law
principle that would dictate the application of the law of another
jurisdiction.
RATIFICATION. This Agreement is subject to ratification by the
independent directors on the GI Board of Directors.
If you agree that this letter sets forth your understanding of our
agreement, kindly sign both copies of this letter and return one copy and we
will proceed with the project.
Very truly yours,
GENETICS INSTITUTE, INC.
Jack Morgan
Vice President
-Corporate Development
<TABLE>
Agreed and Accepted:
<CAPTION>
AMERICAN HOME PRODUCTS CORPORATION WYETH AYERST LABORATORIES
<S> <C>
By:_______________________ By:____________________
Name:_____________________ Name:______________________
Title:____________________ Title:____________________
Date:_____________________ Date:______________________
</TABLE>
cc: Louis Hoynes, Jr.
Lawrence Stein
Tuan Ha-Ngoc
<PAGE> 24
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -24-
<TABLE>
APPENDIX A
----------
IL-12 PATENT RIGHTS
-------------------
GI
<CAPTION>
COUNTRY ____ FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 11/9/89 46673/89 638430
Canada 11/9/89 2,002,607-3
Europe a*) 11/9/89 90901161.1
b**) 9/4/91 91918119.8
Japan a) 11/9/89 501209/90
b) 9/4/91 516686/91
Mexico 6/5/92 92/3294
PCT a) 11/9/89 PCT/US89/05027
b) 9/4/91 PCT/US91/06332
USA a) 11/10/88 269,945/88
b) 2/7/89 307,817/89
c) 9/18/90 584,941/90
</TABLE>
ROCHE
<TABLE>
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 12/20/90 68349/90
Canada 12/19/90 2032653-1
Europe*** 12/09/90 90123670.3
Ireland 12/21/90 4694/90
Japan 12/22/90 413259/90
New Zealand 12/19/90 236545
Philippines 12/19/90 41751
South Africa 12/19/90 10237/90 10237/90
</TABLE>
<PAGE> 25
American Home Products Corporation
Wyeth-Ayerst Laboratories
July 8, 1994
Page -25-
<TABLE>
APPENDIX A
----------
IL-12 PATENT RIGHTS
-------------------
(CONTINUED)
- - -----------
ROCHE (CONTINUED)
- - -----------------
<CAPTION>
COUNTRY ______ FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C>
USA a) 12/22/89 455708/89
b) 05/09/90 520935/90
c) 08/27/90 572284/90
d) 03/24/92 957023/92
<FN>
* Designated countries: AT, BE, CH, DE, FR, GB, IT, LU, NL, SE
** Designated countries: AT, BE CH, DE, DK, ES, FR, GB, GR, IT, LU, NL, SE
*** Designated countries: AT, BE, CH, DE, DK, FR, GB, IT, LU, NL, SE
</TABLE>
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
SIGNATURE COPY (7/27/94)
IL-12 JOINT DEVELOPMENT AGREEMENT AND LICENSE AGREEMENT
-------------------------------------------------------
AGREEMENT dated as of August 4, 1994 between GENETICS
INSTITUTE, INC., a Delaware corporation having its principal place of business
at 87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred
to as "GI") and GI-YAMANOUCHI, INC., a Japanese corporation, having its
principal place of business at Higashi Azabu Annex, 1-10-13 Higashi Azabu,
Minato-ku, Tokyo 106, Japan (formerly referred to as the "JJV"; hereinafter
referred to as the "GYJ").
INTRODUCTION
------------
1. GI has identified, isolated, purified and/or cloned IL-12
(as defined below) and plans to develop, use, manufacture, distribute and sell
products derived from IL-12 throughout the world.
2. The GYJ desires to participate with GI in the joint
development of IL-12 for commercialization in Japan and to license from GI the
right to further develop, use, distribute and sell products derived from IL-12
in Japan.
3. GI is willing, for the consideration and on the terms set
forth herein, to jointly develop with the GYJ and to license such factors to
the GYJ for such purposes.
In consideration of the mutual covenants and promises
contained in this Agreement and other good and valuable consideration, GI and
the GYJ agree as follows:
<PAGE> 2
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
ARTICLE I. DEFINITIONS
-----------------------
As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the following meanings:
1.1. "Additional Licensee" means a licensee of GI other than the GYJ.
1.2. "Affiliate" means any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common control
with a Party. For purposes of this Section 1.2, "control" shall mean (a) in
the case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares entitled to vote for the election of
directors; and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities.
1.3. "Confidential Information" means all proprietary information and
materials, patentable or otherwise, including DNA sequences, vectors, cells,
substances, formulations, techniques, methodology, equipment, data, reports,
know-how, sources of supply, patent positioning and business plans, including
any negative developments, which are communicated to, learned of, developed or
otherwise acquired by either Party, and any other information designated by the
disclosing Party as confidential or proprietary, whether or not related to
IL-12.
1.4. "Direct Manufacturing Cost" means (a) costs directly attributable
to manufacturing, quality assurance and quality
2
<PAGE> 3
control related to a unit of production (i.e., those costs which vary with
production), including but not limited to, direct labor and benefit expenses
for manufacturing and consumable bulk and other production materials, as
determined in accordance with generally accepted cost accounting practices in
the country of manufacture, plus (b) fixed manufacturing overhead costs
allocable to the product based on the actual percentage utilization (including
start-up and shut-down time) of the capacity of the manufacturing facility,
including, but not limited to, direct benefit and labor expenses for technical
services and support services, depreciation, maintenance and repairs and
insurance costs associated with such utilization of the manufacturing facility,
as determined in accordance with generally accepted cost accounting practices
in the country of manufacture. Without limiting the generality of the
foregoing, Direct Manufacturing Cost shall be deemed to include (x) the full
cost associated with quality control samples, retention samples, manufacturing
losses and production rejects and (y) payments (including, without limitation,
royalties, option fees or license fees) made to one or more third parties to
obtain a license or similar right in the absence of which manufacture could not
be legally undertaken.
1.5. "Distributor" means a third party which is not an Affiliate of the
GYJ and which is a distributor, wholesaler or other entity purchasing Licensed
Products from the GYJ or a sublicensee of the GYJ for resale.
3
<PAGE> 4
1.6. "GI" means Genetics Institute, Inc., a Delaware corporation.
1.7. "IL-12" or "Interleukin-12" shall mean:
(a) the proteins, peptides or polypeptides referred
to as "NKSF", "CLMF" or "IL-12", which are described or claimed in the GI
and/or Roche patent applications set forth on Exhibit A to this Agreement
(the "Protein");
(b) the subunits of the Protein or combination of
such subunits of the Protein;
(c) the polynucleotides ("PNs") which encode the
Protein, the subunits of the Protein and/or subsequences thereof;
(d) any modified form of the Protein; or
(e) naturally occurring allotypic variant or mutant
forms of the Protein or of the PNs noted above.
1.8. "Improvements" means any information, patentable or otherwise,
developed or acquired (by license or otherwise) by the GYJ (other than
technical information developed, applied or acquired solely pursuant to the
terms of Section 3.1 of this Agreement) during the term of this Agreement and
which relates to IL-12, which information is reasonably necessary or is
required to develop, use, manufacture, distribute and/or sell Licensed
Products.
1.9. "IND" means an Investigational New Drug Application or its
equivalent or any corresponding foreign application or registration.
4
<PAGE> 5
1.10. "Know-How" means all technical information, patentable or
otherwise, of GI, developed, applied or acquired (by license or otherwise) by
GI as of the date of this Agreement or hereafter developed, applied or acquired
(by license or otherwise) by GI during the term of this Agreement in connection
with IL-12, relating to the identification, characterization, use or production
of IL-12 which is reasonably necessary or is required to develop, use,
manufacture, distribute and/or sell Licensed Products. "Know-How" does not
include any technical information which (a) was previously licensed to GI under
the Roche Cross- License, or to GI and its Affiliates under the Wistar License
or (b) is developed, applied or acquired solely pursuant to the terms of
Section 6.2 of this Agreement.
1.11. "Licensed Field" means all uses of IL-12 excluding gene therapy
or vaccine adjuvant uses. As used in this Agreement, "gene therapy" means the
genetic modification of human somatic cells by the introduction of exogenous
DNA or RNA into those somatic cells for the purpose of expressing IL-12 in vivo
for the treatment or prevention of disease. As used in this Agreement,
"vaccine adjuvant" means the use of IL-12 in combination with an immunogen
(e.g., viral proteins, parasite proteins or miscellaneous antigens) to enhance,
suppress or otherwise modulate the cell-mediated arm of the immune system in
response to disease; as used in this sentence, "combination" means use in
conjunction with, simultaneous with (combined or uncombined) or sequentially
with an immunogen.
5
<PAGE> 6
1.12. "Licensed Products" means IL-12 and any and all formulations,
mixtures or compositions thereof which, or the use, making or manufacturing of
which, is covered by a Valid Claim of any of the Patent Rights and/or embodies
any Know-How.
1.13. "Licensee Know-How" means all technical information, patentable
or otherwise, of the GYJ, developed, applied or acquired (by license or
otherwise) by the GYJ as of the date of this Agreement or hereafter developed,
applied or acquired (by license or otherwise) by the GYJ during the term of
this Agreement in connection with IL-12, relating to the identification,
characterization, use or production of IL-12 which is reasonably necessary or
is required to develop, use, manufacture, distribute and/or sell Licensed
Products. "Licensee Know-How" does not include technical information
developed, applied or acquired solely pursuant to the terms of Article III of
this Agreement.
1.14. "Licensee Patent Rights" means all patents and patent
applications (which for all purposes of this Agreement shall be deemed to
include certificates of invention and applications for certificates of
invention) developed, applied or acquired (by license or otherwise) by the GYJ
as of the date of this Agreement or hereafter developed, applied or acquired
(by license or otherwise) by the GYJ during the term of this Agreement in
connection with IL-12, relating to the identification, characterization, use or
production of IL-12 which are reasonably necessary or are required to develop,
use, manufacture, distribute and/or sell Licensed Products. "Licensee Patent
Rights" does not
6
<PAGE> 7
include any patents or patent applications developed, applied or acquired
solely pursuant to the terms of Article III of this Agreement.
1.15. "NDA" means a New Drug Application or its equivalent or any
corresponding foreign application or registration.
1.16. "Net Sales" means the aggregate United States dollar equivalent
of gross revenues derived by or payable to the GYJ and its sublicensees from or
on account of the sale of Licensed Products to independent third parties, less
(a) reasonable credits or allowances, if any, actually granted on account of,
and reasonably allocable to, Licensed Products, based on price adjustments or
on discounts or rebates paid to Distributors, (b) reasonable credits or
allowances, if any, actually granted on account of recalls, rejection or return
of Licensed Products previously sold, (c) excises, sales taxes, consumption
taxes, duties or other taxes imposed upon and paid with respect to such sales
(excluding income or franchise taxes of any kind) and (d) separately itemized
transportation and insurance costs incurred in shipping Licensed Products to
such independent third parties. Upon request of the GYJ, the Parties agree to
discuss the substitution of a deduction of a fixed percentage of Net Sales in
lieu of the itemized deduction set forth in subsection (d). No deduction shall
be made for any item of cost incurred by the GYJ or its sublicensees in
preparing, manufacturing, shipping or selling Licensed Products except as
permitted pursuant to clauses (a), (b), (c) and (d) of the foregoing sentence.
Net Sales shall not include
7
<PAGE> 8
any transfer between the GYJ and any of its sublicensees for resale. If the
GYJ or its sublicensee sells Licensed Products to a Distributor, Net Sales
shall be deemed to be the gross revenues received by the GYJ and/or the
applicable sublicensee from the sale of Licensed Products to the Distributor.
In the event that the GYJ or any of its sublicensees shall make any transfer of
Licensed Products to independent third parties for other than monetary value,
such transfer shall be considered a sale hereunder for accounting and royalty
purposes. Net Sales for any such transfers shall be the average price of "arms
length" sales by the GYJ or its applicable sublicensee in the Territory during
the royalty reporting period in which such transfer occurs or, if no such "arms
length" sales occurred in the Territory during such period, during the last
period in which such "arms length" sales occurred. If no "arms length" sales
have occurred in the Territory, Net Sales for any such transfer in such country
in the Territory shall be agreed upon by GI and the GYJ. Notwithstanding the
foregoing, no transfer of Licensed Products for test or developmental purposes
or as samples shall be considered a sale hereunder for accounting and royalty
purposes. In the event that the GYJ or any of its sublicensees shall sell
Licensed Products together with other products of the GYJ or its sublicensee to
independent third parties at a price which is less than the average price of
"arms length" sales in the Territory for the royalty reporting period in which
such sales occur (such sales to be excluded from the calculation of the average
price of "arms length" sales), Net Sales for any such
8
<PAGE> 9
sales shall be the average price of "arms length" sales by the GYJ and its
sublicensees in the Territory during the royalty reporting period in which
such sales occur. If no "arms length" sales shall have occurred in the
Territory during such period, the relevant reference factor shall be the last
royalty reporting period in which such "arms length" sales occurred. If no
"arms length" sales have occurred in the Territory, Net Sales for such sales
shall be agreed upon by GI and the GYJ. The inclusion of a "sublicensee" in
this Section shall not imply a right to further sublicense the Roche Patent
Rights or Roche Know-How, but is included in the event GI becomes able to offer
such rights to the GYJ.
1.17. "Party" means GI or the GYJ; "Parties" means GI and the GYJ.
1.18. "Patent Rights" means all patents and patent applications (which
for all purposes of this Agreement shall be deemed to include certificates of
invention and applications for certificates of invention) developed, applied or
acquired (by license or otherwise) by GI as of the date of this Agreement or
hereafter developed, applied or acquired (by license or otherwise) by GI during
the term of this Agreement in connection with IL-12, relating to the
identification, characterization, use or production of IL-12 which are
reasonably necessary or are required to develop, use, manufacture, distribute
and/or sell Licensed Products. "Patent Rights" does not include patents and
patent applications which (a) were previously licensed to GI under the Roche
Cross-License, or to GI and its Affiliates under the Wistar License or
9
<PAGE> 10
(b) are developed, applied or acquired solely pursuant to the terms of Section
6.2 of this Agreement.
1.19. "Roche" means Hoffmann-La Roche Inc., a New Jersey corporation
and/or F. Hoffmann-La Roche Ltd., a Swiss corporation.
1.20. "Roche Cross-License" means the Heads of Agreement between GI and
Roche dated as of May 4, 1992, and any subsequent agreement between GI and
Roche pursuant thereto.
1.21. "Roche Patent Rights" means all patents and patent applications
acquired by license by GI under the Roche Cross-License.
1.22. "Roche Know-How" means all technical information, patentable or
otherwise acquired by license by GI under the Roche Cross-License.
1.23. "Territory" means Japan.
1.24. "Valid Claim" means a claim of an unexpired patent which shall
not have been withdrawn, canceled or disclaimed, nor held invalid by a court of
competent jurisdiction in an unappealed or unappealable decision, or the claim
of a patent application which has not been on file for more than seven years.
1.25. "Wistar License" means the June 30, 1992 License Agreement, as
amended, between GI and The Wistar Institute of Anatomy and Biology, a
Pennsylvania non-profit corporation, a copy of which is attached to this
Agreement as Exhibit B.
10
<PAGE> 11
ARTICLE II. JOINT DEVELOPMENT ACTIVITIES
-----------------------------------------
2.1 Development Activities.
----------------------
(a) GI is engaged in the development and commercialization of IL-12 on
a world-wide basis. The GYJ agrees to participate in the further development,
registration and commercialization of IL-12 for the Japanese market. GI is
conducting substantial research and development activities relating to IL-12
the results of which will be used by the GYJ to commercialize IL-12 in the
Territory. GI's activities will include, but are not limited to, performance
of preclinical research into the activities of IL-12, performance of clinical
testing research into the safety and efficacy of IL-12, development of tests,
assays, and processes for quality assurance, quality control, and manufacturing
process methods, regulatory registration of IL-12 with the FDA to enable GI to
export IL-12 to the GYJ, and the development, testing and scale-up of
manufacturing processes. In conducting such research and development
activities, GI agrees to give due consideration to the regulations and
guidelines in the Territory in order to make the data and information derived
from those activities useful for the registration of the Licensed Products.
(b) These research and development activities which are being and will
be conducted by GI for worldwide research and development of IL-12 are
substantial. The parties have considered their scope and extent, and their
usefulness to the GYJ in the Territory. In consideration of the potential
market
11
<PAGE> 12
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
value of the Territory in relationship to the world, the Parties have agreed
that *** ******* ******* is the appropriate consideration for the Territory's
share of GI's research and development activities, as set forth in Sections
2.2(a) and (b), below. Because of the uncertainty of the success of these
research and development activities by GI, payments are tied to the achievement
of Benchmarks, as defined in Section 2.2.
2.2. Payments for Research and Development Services.
----------------------------------------------
<TABLE>
(a) In consideration of the research and development services to
be conducted by GI for the benefit of the GYJ, the GYJ shall make the following
payments to GI:
<CAPTION>
Benchmark Benchmark Payment
--------- -----------------
<S> <C> <C>
1. Signature of this Agreement ***********
2. ******** of a **** *** *******
to the *** ***********
3. ********* of ******** ****** in ***** ***********
4. ***** *** ********** in ***** ***********
5. ********* ******** in ***** ***********
========
Subtotal ***********
</TABLE>
******** ****** under the **** *** ********* in **** ***** a copy of the ****
*** ******* referred to in ********* ** ****** will be ********* to the *** upon
or promptly following execution of this Agreement
(b) BONUS PAYMENTS. In addition, in the event GI achieves the
additional Benchmarks listed below, the GYJ shall make the following payments to
GI:
12
<PAGE> 13
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
<TABLE>
<CAPTION>
Benchmark Benchmark Payment
--------- -----------------
<S> <C> <C>
** ************* of ********
in ***** ****** in a ***** **
***** in ***** ****** or ***** ***********
** ************* of ******** in
********* * in a ***** ** *****
in ***** ****** or ***** ***********
** ********** ******** of ********* *
in ***** ***********
=========
Subtotal ************
</TABLE>
(c) Each party shall promptly notify the other Party upon completion
of their applicable Benchmarks. GI shall invoice the GYJ upon such completion
and payment shall be due thirty (30) days following such invoice. Payment shall
be made in U.S. dollars at a bank designated by GI on the date payment is due.
(d) Where any Benchmark payments are due GI hereunder where, by reason
of currency regulations or taxes of any kind, it is impossible or illegal for
the GYJ, any Affiliate or sublicensee to transfer such Benchmark payment to GI,
such Benchmark payments shall be deposited in whatever currency is allowable by
the person or entity not able to make the transfer for the benefit or credit of
GI in an accredited bank in the Territory that is acceptable to GI.
13
<PAGE> 14
ARTICLE III. PATENT AND KNOW-HOW LICENSES,
-------------------------------------------
SUBLICENSES AND ROYALTIES
-------------------------
3.1. Licenses of GI Rights.
----------------------
(a) GRANT. Subject to the payment of royalties provided for in this
Article, the non-exclusive rights GI has granted to Roche under the Roche
Cross-License and the fulfillment by the GYJ of the other terms and conditions
of this Agreement, GI hereby grants to the GYJ:
(i) an exclusive license in the Territory under the Patent
Rights, and
(ii) an exclusive license to use the Know-How in the Territory,
including the right to grant sublicenses as provided in subsection
3.1 (b) below, for the sole and exclusive purpose, restricted to
the Licensed Field, of developing, using, distributing and selling
Licensed Products in the Territory. The GYJ shall have no right
to manufacture IL-12 in the Territory, but shall have an option to
fill and finish Licensed Products in accordance with Section 5.5,
below. The licenses granted pursuant to Section 3.1(a)(i) shall
continue in effect until the earlier of termination of this
Agreement under Section 8.2 or the expiration of the last patent
licensed to the GYJ hereunder; the licenses granted pursuant to
Section 3.1 (a)(ii) shall continue in effect until the earlier of
termination of this Agreement under Section 8.2 or as provided in
Sections 3.4 (b) and (c) below.
14
<PAGE> 15
(b) SUBLICENSES. The GYJ shall have the right to sublicense, in whole
or in part, its rights under Section 3.1(a) of this Agreement. GI shall have
the right to approve each sublicensee, which approval shall not be unreasonably
withheld or delayed. Notwithstanding any such sublicense, the GYJ shall remain
primarily liable to GI for all of the GYJ's duties and obligations contained in
this Agreement, and any act or omission of a sublicensee which would be a breach
of this Agreement if performed by the GYJ shall be deemed to be a breach by the
GYJ of this Agreement. A copy of each approved sublicense agreement entered
into by the GYJ under this Agreement shall be furnished to GI promptly after
execution thereof.
3.2. VACCINE AND GENE THERAPY MARKETING RIGHTS. As of the date of this
Agreement, GI is negotiating, or intends to negotiate, with certain vaccine
companies and/or gene therapy companies for the research and development of
vaccine and/or gene therapy products which, if developed, would include or
require the coordinated use of IL-12. To the extent that GI is able to
negotiate the right to market any such vaccine and/or gene therapy products in
Japan, GI will offer such marketing rights to GYJ under the Right of First
Refusal Agreement dated September 20, 1990 between GI and the GYJ.
3.3. Sublicenses of Roche Patent Rights and Roche Know-How.
------------------------------------------------------
(a) GRANT. Subject to the payment of royalties provided for in this
Article III, the rights retained by Roche under the Roche Cross-License and the
fulfillment by the GYJ of the other
15
<PAGE> 16
terms and conditions of this Agreement, GI hereby grants to the GYJ:
(i) an exclusive sublicense in the Territory under the Roche
Patent Rights, and
(ii) an exclusive sublicense to use the Roche Know-How in the
Territory,
without the right to grant further sublicenses, for the sole and exclusive
purpose, restricted to the Licensed Field, of developing, using, distributing
and selling Licensed Products in the Territory. The sublicense granted pursuant
to Section 3.3(a)(i) shall continue in effect until the earliest of termination
of the Roche Cross- License, or termination of this Agreement under Section 8.2,
or the expiration of the last patent sublicensed to the GYJ hereunder; the
sublicense granted pursuant to Section 3.3 (a)(ii) shall continue in effect
until the earliest of termination of the Roche Cross-License, or termination of
this Agreement under Section 8.2, or as provided in Sections 3.4 (b) and (c),
below.
(b) FURTHER SUBLICENSES. Notwithstanding the prohibition on further
sublicensing set forth in Subsection 3.3 (a) above, in the event that the GYJ
desires to grant a further sublicense of the rights granted under this Agreement
to a third party or third parties, the GYJ shall so inform GI, and GI will
consider in good faith the opportunity to obtain such sub-sublicensing rights
from Roche. In the event that GI obtains such sub-sublicensing rights from
Roche, the GYJ shall have the right to further sublicense, in whole or in part,
its rights under Section 3.3 (a) of this Agreement. GI shall have the right to
16
<PAGE> 17
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
approve each further sublicensee, which approval shall not be unreasonably
withheld or delayed. Notwithstanding any such further sublicense, the GYJ shall
remain primarily liable to GI for all of the GYJ's duties and obligations
contained in this Agreement, and any act or omission of a further sublicensee
which would be a breach of this Agreement, if performed by the GYJ, shall be
deemed to be a breach by the GYJ of this Agreement. A copy of each approved
further sublicense agreement entered into by the GYJ under this Agreement shall
be furnished to GI promptly after execution thereof.
3.4. Royalties.
---------
<TABLE>
(a) The GYJ shall pay to GI during the term of the license granted in
Sections 3.1 (a) above and the sublicense granted in Section 3.3 (a) above, the
following earned royalties on all Net Sales made by the GYJ and its sublicensees
of Licensed Products which fall within the definition of Licensed Products by
virtue of involving (x) a Valid Claim under the Patent Rights or Roche Patent
Rights or (y) the Know-How or Roche Know-How:
<CAPTION>
Royalty Rate Annual Net Sales
------------ ----------------
<S> <C>
**** *** ***** up to * ***** ** ******** ***
**** *********** *** ***** from * ******* ******** *** to ** ******* ******** ***
</TABLE>
17
<PAGE> 18
Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
<TABLE>
<S> <C>
**** *********** *** ***** from ** ******* ******** *** up to ** ******* ******** ***
**** *********** *** ***** over ** ******* ******** ***
</TABLE>
Under no circumstances shall the GYJ be obligated to pay royalties under both
subsections (x) and (y) above; only one royalty shall be due with respect
to each sale of a Licensed Product.
(b) Royalties based upon Licensed Products involving a Valid Claim under
the Patent Rights or Roche Patent Rights shall be payable with respect to Net
Sales in the Territory where the Licensed Products are used, manufactured,
distributed or sold in which there is a Valid Claim under Patent Rights or Roche
Patent Rights. Royalties based upon Licensed Products involving the Know-How or
Roche Know-How shall be payable for a period of ** years after the first sale of
Licensed Products in the Territory.
(c) Upon the expiration of the royalty obligations set forth in Section
3.4 (b) with respect to any Know-How or Roche Know-How in the Territory, the
license granted under Section 3.1 (a)(ii) with respect to such Know-How, or the
sublicense granted under Section 3.3 (a)(ii) with respect to such Roche
Know-How, as applicable, in the Territory shall become fully paid non-exclusive
licenses.
(d) GI will pay or reimburse the GYJ for all royalties payable to The
Wistar Institute of Anatomy and Biology by the GYJ, as a designated GI
"Affiliate" under the Wistar License.
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3.5. ROYALTY REPORTS AND PAYMENT. The GYJ shall deliver to GI (a)
within 30 days after the end of the calendar quarters ended June 30 and December
31 of each year and (b) within 60 days after the end of the calendar quarters
ended March 31 and September 30 of each year, a written report showing (i) its
computation of royalties due under this Agreement upon Net Sales by the GYJ and
its permitted sublicensees during such calendar quarter and (ii) such other
additional information as may be necessary or desirable for GI to report and pay
royalties to (x) Roche under the Roche Cross-License and (y) The Wistar
Institute of Anatomy and Biology under the Wistar License for GYJ sales of
Licensed Products in the Territory. All Net Sales shall be segmented in each
such report according to sales by the GYJ and each permitted sublicensee,
including the rates of exchange used to convert such royalties to United States
dollars from the currency in which such sales were made. For the purposes
hereof, the rates of exchange to be used for converting royalties hereunder to
United States dollars shall be those in effect for the purchase of dollars, at a
leading Japanese bank mutually acceptable to the GYJ and GI, on the day on which
payment is due. The GYJ, simultaneously with the delivery of each such report,
shall tender payment in United States dollars of all royalties shown to be due
thereon.
3.6. RECORDS. The GYJ shall keep, and shall require all Affiliates and
sublicensees to keep, full, true and accurate books of accounts and other
records containing all information and data which may be necessary to ascertain
and verify the royalties pay-
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able hereunder. During the term of this Agreement and for a period of one year
following its termination, GI shall have the right from time to time (not to
exceed twice during each calendar year) to inspect, or have an agent,
accountant or other representative inspect, such books, records and supporting
data.
3.7. FOREIGN PAYMENTS. Where any royalties are due GI hereunder where,
by reason of currency regulations or taxes of any kind, it is impossible or
illegal for the GYJ, any Affiliate or sublicensee to transfer such royalties to
GI, such royalties shall be deposited in whatever currency is allowable by the
person or entity not able to make the transfer for the benefit or credit of GI
in an accredited bank in the Territory that is acceptable to GI.
3.8. WITHHOLDING TAX. If laws or regulations require withholding by the
GYJ of any taxes imposed upon GI on account of any royalties paid under this
Agreement, such taxes shall be deducted by the GYJ as required by law from such
payable royalty and shall be paid by the GYJ to the proper taxing authority.
Official reports of payment of any withholding tax shall be secured and sent to
GI as evidence of such payment.
ARTICLE IV. DEVELOPMENT, TESTING,
----------------------------------
SCALE-UP AND COMMERCIALIZATION
------------------------------
4.1. OBLIGATIONS OF GI. GI agrees to use its best efforts to disclose
to the GYJ, on an on-going basis, in writing when reasonably requested and
required, any laboratory, animal, clinical, production and other scientific data
and results in GI's possession and which is otherwise developed by GI in
connection
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with GI's development of IL-12 or which is developed by an Additional Licensee
and is available for disclosure to and use by the GYJ. While GI intends to use
best efforts to develop and commercialize IL-12 in North America and in other
territories outside the Territory in cooperation with Additional Licensees, GI
does not represent or warrant that such efforts will be successful or that they
will be continued under circumstances where GI determines that further
development is no longer warranted or commercially reasonable.
4.2. OBLIGATIONS OF THE GYJ. The GYJ agrees to use its best efforts to
further develop and commercialize IL-12 in the Territory and to:
(a) conduct all laboratory, animal, preclinical, clinical, and
other scientific tests and studies necessary for the regulatory filing
and approval of IL-12 in the Territory;
(b) disclose to GI, in writing, the data and results of all
studies and tests conducted by it pursuant to clause (a), above, to the
extent permitted by law;
(c) prepare and file all government applications necessary to
obtain approvals to import, develop, use, fill and finish, distribute
and sell Licensed Products in the Territory;
(d) to the extent provided in this Agreement, provide for
formulation of Licensed Products on a commercial scale but only if the
parties agree in accordance with Section 5.5;
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(e) to the extent provided in this Agreement, provide for
preparation and finishing of the final dosage form of Licensed Products
on a commercial scale; and
(f) market Licensed Products in the Territory on a commercial
basis after receipt of all necessary approvals for marketing by
applicable government regulatory agencies.
ARTICLE V. MANUFACTURE
----------------------
5.1. CLINICAL SUPPLY. GI retains the right, and shall use
commercially reasonable efforts, to supply the GYJ, and its assignees and
sublicensees (including, without limitation, any Additional Licensees) with 100%
of their requirements of IL-12 for all preclinical and clinical purposes. All
IL-12 supplied by GI for preclinical and clinical purposes pursuant to the
foregoing retained right shall be supplied directly to the person whose
requirements are being met and shall be supplied at GI's Direct Manufacturing
cost, F.O.B. GI's manufacturing facility. Formulation, filling and finishing
shall be separately priced in accordance with Section 5.5. GI shall invoice
such person for GI's Direct Manufacturing Cost associated with each supply of
bulk IL-12 at the time of shipment of such supply and such persons shall be
required to make such payments to GI within thirty (30) days of receipt of the
applicable invoice. GI shall have the right to undertake such manufacture itself
or through an Affiliate or through a third party. Except as provided below, in
the event that GI uses an Affiliate to undertake such manufacture, all bulk
IL-12
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so supplied shall be supplied at such Affiliate's Direct Manufacturing cost,
F.O.B. such Affiliate's manufacturing facility. In the event that GI uses a
third party to undertake such manufacture, all bulk IL-12 so supplied shall be
supplied at GI's cost.
5.2. RECORDS. GI shall keep and shall require all Affiliates to keep,
full, true and accurate books of accounts and other records containing all
information and data which may be necessary to ascertain and verify the supply
price charged for all preclinical and clinical bulk IL-12 supplied pursuant to
Section 5.1 of this Agreement. During the term of this Agreement and for a
period of one year following its termination, each person supplied with bulk
IL-12 shall have the right from time to time (not to exceed twice during each
calendar year) to inspect, or have an agent, accountant or other representative
inspect, such books, records and supporting data.
5.3. STANDARDS. All preclinical and clinical bulk IL-12 supplied by
GI pursuant to Section 5.1 of this Agreement shall meet the specifications
required by the United States Food and Drug Administration and shall meet such
other specifications as are mutually agreed upon by GI and each person whose
requirements are being met.
5.4. COMMERCIAL SUPPLY. GI retains the right, and shall use
commercially reasonable efforts, to supply the GYJ and its assignees and
sublicensees (including, without limitation, any Additional Licensees) with 100%
of their requirements of bulk IL-12
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Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
for all commercial purposes. All bulk IL-12 supplied by GI for commercial
purposes pursuant to the foregoing retained right shall be supplied directly to
the person whose requirements are being met. GI shall enter into a separate
supply agreement with each person to be supplied with bulk IL-12. With respect
to each person whose requirements are being met, such supply agreement shall be
entered into at least six (6) months prior to the filing of a related NDA by
such person. Subject to mutual hardship provisions to be agreed upon by the
parties, GI shall supply commercial bulk IL-12 to the GYJ or other persons
hereunder at a price equal to *** of the average net selling price of the
product being sold. In the event that, pursuant to Section 5.5 below, GI is
also responsible for filling and finishing the Licensed Product, GI shall, in
addition to receiving the foregoing supply price, be reimbursed for the price
agreed to in connection therewith. In addition to such terms regarding supply
price and formulation, filling and finishing, each supply agreement shall
contain terms regarding forecast procedures, order and delivery times, minimum
and maximum quantities, currency exchange provisions and other usual and
customary terms.
5.5. FORMULATION, FILLING AND FINISHING. GI shall have the first
right to formulate, fill and finish the Licensed Product to meet commercial
needs, taking into due consideration the most economic approach for such
allocation of responsibility. The parties shall discuss and agree upon the
respective responsibilities in this area no later than *** *** ****** prior to
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Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
the initiation of ***** *** ******** ******* including the pricing for such
responsibilities.
5.6. LICENSE TO GI. The GYJ hereby grants to GI and its Affiliates a
non-exclusive, royalty-free license, including the right to grant sublicenses,
under the Licensee Patent Rights and the Licensee Know-How for the sole and
exclusive purpose of manufacturing Licensed Products pursuant to the terms of
this Article V.
ARTICLE VI. INTELLECTUAL PROPERTY RIGHTS
-----------------------------------------
6.1. OWNERSHIP OF TECHNOLOGY. GI shall own the entire right, title
and interest in and to all technology relating to IL-12 developed solely by
employees or consultants of GI, whether developed prior to the date hereof or in
connection with this Agreement (hereinafter "GI Technology").
6.2. IMPROVEMENTS. The GYJ shall own the entire right, title and
interest in and to all Improvements. To the extent that the GYJ develops, or
otherwise acquires the right to grant a license covering any Improvement to the
Licensed Products, the GYJ hereby grants to GI a non-exclusive, royalty-free
license, including the right to grant sublicenses, to such Improvement to
develop, use, manufacture, fill and finish, distribute and/or sell Licensed
Products outside the Territory.
6.3. Responsibility for Patenting of GI Technology.
---------------------------------------------
(a) GI shall have the right and responsibility to decide
whether or not to seek or continue to seek or maintain patent
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protection on any GI Technology in the Territory, and shall have the right,
at its expense, to file for, procure and maintain patents on any GI Technology
in the Territory.
(b) If GI elects not to seek or continue to seek or maintain patent
protection on any GI Technology in the Territory, the GYJ shall have the right,
at its expense, to file, prosecute and maintain patents in the Territory on such
GI Technology. Any such patents shall be filed, prosecuted, issued and
maintained in the name designated by GI. GI agrees to advise the GYJ of all
decisions taken under subsection (a) above in a timely manner in order to allow
the GYJ to protect its rights under this subsection (b).
(c) Each Party shall provide the other Party with copies of all
substantive communications from the patent offices in the Territory regarding
applications or patents on any GI Technology promptly after the receipt
thereof. Each Party shall provide the other Party with copies of all proposed
substantive communications to such patent offices in the Territory in
sufficient time before the due date in order to enable the other Party an
opportunity to comment on the content thereof.
(d) Each Party shall make available to the other Party or its
authorized attorneys, agents or representatives, such of its employees whom the
other Party in its reasonable judgment deems necessary in order to assist it in
obtaining patent protection for the GI Technology. Each Party shall sign or use
its best efforts to have signed all legal documents necessary to
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file and prosecute patent applications or to obtain or maintain patents at no
charge to the other Party.
6.4. Infringement.
------------
(a) Each Party shall promptly report in writing to the other Party
during the term of this Agreement any (i) known infringement or suspected
infringement of any of the Patent Rights in the Territory, or (ii) unauthorized
use or misappropriation of Know-How or Confidential Information by a third party
in the Territory of which it becomes aware, and shall provide the other Party
with all available evidence supporting said infringement, suspected infringement
or unauthorized use or misappropriation.
(b) Except as provided in paragraph (d) below, GI shall have the right
to initiate an infringement or other appropriate suit anywhere in the Territory
against any third party who at any time has infringed, or is suspected of
infringing, any of the Patent Rights or of using without proper authorization
all or any portion of the Know-How. GI shall give the GYJ sufficient advance
notice of its intent to file said suit and the reasons therefor, and shall
provide the GYJ with an opportunity to make suggestions and comments regarding
such suit. GI shall keep the GYJ promptly informed, and shall from time to time
consult with the GYJ regarding the status of any such suit and shall provide the
GYJ with copies of all documents filed in, and all written communications
relating to, such suit.
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(c) GI shall have the sole and exclusive right to select counsel for
any suit referred to in subsection (b) above and shall, except as provided
below, pay all expenses of the suit, including without limitation attorneys'
fees and court costs. The GYJ, in its sole discretion, may elect, within 60
days after the commencement of such litigation, to contribute to the costs
incurred by GI in connection with such litigation and, if it so elects, any
damages, royalties, settlement fees or other consideration for past infringement
received by GI as a result of such litigation shall be shared by GI and the GYJ
pro rata based on their respective sharing of the costs of such litigation. In
the event that the GYJ elects not to contribute to the costs of such litigation,
GI shall be entitled to retain any damages, royalties, settlement fees or other
consideration for past infringement resulting therefrom. If necessary, the GYJ
shall join as a party to the suit but shall be under no obligation to
participate except to the extent that such participation is required as the
result of being a named party to the suit. The GYJ shall offer reasonable
assistance to GI in connection therewith at no charge to GI except for
reimbursement of reasonable out-of-pocket expenses, including salaries of the
GYJ personnel, incurred in rendering such assistance. The GYJ shall have the
right to participate and be represented in any such suit by its own counsel at
its own expense. GI shall not settle any such suit involving rights of the GYJ
without
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obtaining the prior written consent of the GYJ, which consent shall not be
unreasonably withheld.
(d) In the event that GI elects not to initiate an infringement or
other appropriate suit pursuant to subsection (b) above, GI shall promptly
advise the GYJ of its intent not to initiate such suit, and the GYJ shall have
the right, at the expense of the GYJ, of initiating an infringement or other
appropriate suit against any third party who at any time has infringed, or is
suspected of infringing, any of the Patent Rights or of using without proper
authorization all or any portion of the Know-How. In exercising its rights
pursuant to this subsection (d), the GYJ have the sole and exclusive right to
select counsel and shall, except as provided below, pay all expenses of the suit
including without limitation attorneys' fees and court costs. GI, in its sole
discretion, may elect, within 60 days after the commencement of such litigation,
to contribute to the costs incurred by the GYJ in connection with such
litigation and, if it so elects, any damages, royalties, settlement fees or
other consideration for past infringement received by the GYJ as a result of
such litigation shall be shared by the GYJ and GI pro rata based on their
respective sharing of the costs of such litigation. In the event that GI elects
not to contribute to the costs of such litigation, the GYJ shall be entitled to
retain any damages, royalties, settlement fees or other consideration for past
infringement resulting therefrom. If necessary, GI shall join as a party to the
suit but shall be under no obligation to participate except to the extent that
such participation is required as a result of being a named party to
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the suit. At the GYJ's request, GI shall offer reasonable assistance to the
GYJ in connection therewith at no charge to the GYJ except for reimbursement of
reasonable out-of-pocket expenses, including salaries of GI personnel, incurred
in rendering such assistance. GI shall have the right to participate and be
represented in any such suit by its own counsel at its own expense.
6.5. Claimed Infringement.
--------------------
(a) In the event that a third party at any time provides written
notice of a claim to, or brings an action, suit or proceeding against, either
Party or any of their respective Affiliates or sublicensees, claiming
infringement of its patent rights or unauthorized use or misappropriation of its
know-how, based upon an assertion or claim arising out of the development, use,
manufacture, distribution or sale of Licensed Products, such Party shall
promptly notify the other Party of the claim or the commencement of such action,
suit or proceeding, enclosing a copy of the claim and/or all papers served. GI
agrees to make available to the GYJ its advice and counsel regarding the
technical merits of any such claim.
(b) If the GYJ, in order to operate under or exploit the licenses
granted under Article III of this Agreement in the Territory, must make payments
(including without limitation royalties, option fees or license fees) to one or
more third
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Confidential Material Omitted and Filed Separately with the Securities and
Exchange Commission. Asterisks denote omissions.
parties to obtain a license or similar right in the absence of which GI
Technology could not legally be used in connection with the development, use,
manufacture, distribution or sale of Licensed Products in the Territory, the
GYJ may deduct from royalties thereafter payable to GI on Net Sales in such
country an amount equal to up to *** of such third party payments, provided
that the total royalties otherwise due to GI on Net Sales in such country in
any year shall not be reduced by more than *** as a result of such deduction.
(c) This Section 6.5 states the entire responsibility of GI in the
case of any claimed infringement or violation of any third party's patent rights
or unauthorized use or misappropriation of any third party's know-how.
ARTICLE VII. CONFIDENTIAL INFORMATION
--------------------------------------
7.1. TREATMENT OF CONFIDENTIAL INFORMATION. Each Party hereto shall
maintain the Confidential Information of the other Party in confidence, and
shall not disclose, divulge or otherwise communicate such Confidential
Information to others, or use it for any purpose, except pursuant to, and in
order to carry out, the terms and objectives of this Agreement, and hereby
agrees to exercise every reasonable precaution to prevent and restrain the
unauthorized disclosure of such Confidential Information by any of its
directors, officers, employees, consultants, subcontractors, sublicensees or
agents.
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7.2. RELEASE FROM RESTRICTIONS. The provisions of Section 7.1 shall
not apply to any Confidential Information disclosed hereunder which:
(a) was known or used by the receiving Party or its Affiliates
prior to its date of disclosure to the receiving Party, as evidenced by
the prior written records of the receiving Party or its Affiliates; or
(b) either before or after the date of the disclosure to the
receiving Party is lawfully disclosed without restriction to the
receiving Party or its Affiliates by an independent, unaffiliated third
party rightfully in possession of the Confidential Information (but
only to the extent of the rights received from such third party); or
(c) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to the public
through no fault or omission on the part of the receiving Party or its
Affiliates; or
(d) is required to be disclosed by the receiving Party or its
Affiliates to comply with applicable laws, to defend or prosecute
litigation or to comply with governmental regulations, provided that
the receiving Party provides prior written notice of such disclosure to
the other Party and takes reasonable and lawful actions to avoid and/or
minimize the degree of such disclosure.
7.3. PUBLICATIONS. The following restrictions shall apply with respect
to the disclosure in scientific journals or publications by
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any Party or any employee or consultant of any Party relating to any scientific
work performed relating to IL-12:
(a) a Party (the "publishing Party") shall provide the other
Party with an advance copy of any proposed publication (which may be in
draft form) relating to IL-12, and such other Party shall have a
reasonable opportunity to recommend any changes it reasonably believes
are necessary to preserve patent rights or know-how licensed to or
owned in whole or in part by GI or the GYJ, or are otherwise necessary
to promote or protect the interests of GI or the GYJ, and the
incorporation of such recommended changes shall not be unreasonably
refused;
(b) if such other Party informs the publishing Party, within
30 days of receipt of an advance copy of a proposed publication, that
such publication in its reasonable judgment could be expected to have a
material adverse effect on any patent rights or know-how licensed to or
owned in whole or in part by GI or the GYJ, the publishing Party shall,
to the extent permitted by its agreements with its employees and
consultants, delay or prevent such publication as proposed. In the case
of inventions, the delay shall be sufficiently long to permit the
timely preparation and filing of a patent application(s) or
application(s) for a certificate of invention on the information
involved; and
(c) if such other Party informs the publishing Party, within
30 days of receipt of an advance copy of a proposed publication, that
such publication in its reasonable judgement
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could be expected to have a material adverse effect on the interests
of GI or the GYJ, the Parties shall discuss the publication and, if
mutually agreeable, the publishing Party shall, to the extent permitted
by its agreements with its employees and consultants, delay or prevent
such publication as agreed.
ARTICLE VIII. TERMINATION
--------------------------
8.1. TERM. This Agreement shall remain in effect until terminated in
accordance with the provisions of this Article VIII or until the last to expire
of the licenses granted pursuant to Article III hereof.
8.2. TERMINATION FOR BREACH. Each Party shall be entitled to terminate
this Agreement by written notice to the other Party in the event that the other
Party shall be in default of any of its obligations hereunder, and shall fail to
remedy any such default within 60 days after notice thereof by the non-breaching
Party. Any such notice shall specifically state that the non-breaching Party
intends to terminate this Agreement in the event that the breaching Party shall
fail to remedy the default. Upon termination of this Agreement pursuant to this
Section 8.2, neither Party shall be relieved of any obligations incurred prior
to such termination. In the event that GI terminates this Agreement pursuant to
this Section 8.2, GI shall be entitled to receive from the GYJ, at no cost to
GI, non-exclusive rights in and to all Improvements, all laboratory, animal,
clinical, production and other scientific data
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and such other information and documents in the GYJ's possession that GI may
require in order to apply for approval of applicable government regulatory
agencies to develop, use, manufacture, fill and finish, distribute and sell
Licensed Products in the Territory.
8.3. DISPOSITION OF LICENSED PRODUCTS. Upon any expiration or
termination of this Agreement pursuant to Section 8.1 or 8.2, the GYJ shall
within 30 days of the effective date of such expiration or termination notify GI
in writing of the amount of Licensed Products which the GYJ and its sublicensees
then have completed on hand, the sale of which would, but for the termination,
be subject to royalty, and the GYJ and its sublicensees shall thereupon be
permitted during the six months following such expiration or termination to sell
that amount of Licensed Products, provided that the GYJ shall pay the aggregate
royalty thereon at the conclusion of the earlier of the last such sale or such
six months period. Except as provided above, all sublicenses granted by the GYJ
shall forthwith terminate upon the termination of this Agreement.
8.4. SURVIVAL OF OBLIGATIONS; RETURN OF CONFIDENTIAL INFORMATION.
Notwithstanding any termination of this Agreement, the obligations of the
Parties under Sections 6.5 and 9.1 and Article VII of this Agreement, as well
as under any other provisions which by their nature are intended to survive any
such termination, shall survive and continue to be enforceable. Upon any
expiration or termination of this Agreement pursuant to Sections 8.1 or 8.2,
each Party shall promptly return to the other
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Party all written Confidential Information, and all copies thereof, of the
other Party.
8.5. TERMINATION BY GYJ. The GYJ shall be entitled to terminate this
Agreement by delivery of one hundred eighty (180) days advance written notice to
GI in the event that Yamanouchi Pharmaceutical Co., Ltd. (a fifty percent owner
of the GYJ) notifies GI JJV, Inc. (also a fifty percent owner of the GYJ) in
writing that, in its sole opinion, the market for Licensed Products in the
Territory is insufficient to warrant further product development; provided,
however, that upon such termination (a) all rights the GYJ has under this
Agreement shall cease, (b) GI shall have all of the rights to develop, use,
distribute and sell Licensed Products in the Territory previously granted to the
GYJ prior to such termination, (c) the GYJ shall exclusively assign and transfer
to GI, at no cost, all Confidential Information, Improvements, Licensee
Know-How, Licensee Patent Rights, INDs and NDAs (to the extent transferrable)
and all other laboratory, animal, clinical, production and other scientific data
and such other information and documents in the GYJ's possession that GI may
require in order to apply for approval of applicable Japanese regulatory
agencies to develop, use, distribute and sell Licensed Products in the
Territory.
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ARTICLE IX. MISCELLANEOUS
--------------------------
9.1. Representation, Warranty and Indemnification.
--------------------------------------------
(a) The GYJ agrees to defend GI, its agents, directors,
officers and employees at the GYJ's cost and expense, and will
indemnify and hold harmless GI, its agents, directors, officers and
employees, from and against any and all losses, costs, damages, fees or
expenses ("Losses") arising out or in connection with the development,
use, filling and finishing, distribution or sale of any Licensed
Product, including, but not limited to, any actual or alleged injury,
damage, death or other consequence occurring to any person as a result,
directly or indirectly, of the possession, use or consumption of any
Licensed Product, whether claimed by reason of breach of warranty,
negligence, product defect or otherwise, and regardless of the form in
which any such claim is made, provided that the foregoing indemnity
shall not apply to the extent that any such Losses are due to the gross
negligence or willful misconduct of GI. In the event of any such claim
against GI or any agent, director, officer or employee, GI shall
promptly notify the GYJ in writing of the claim and the GYJ shall
manage and control, at its sole expense, the defense of the claim and
its settlement. GI shall cooperate with the GYJ and may, at its option
and expense, be represented in any such action or proceeding. The GYJ
shall not be liable for any litigation costs or expenses incurred by GI
without the GYJ's written authorization.
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(b) GI agrees to defend the GYJ, its agents, directors,
officers and employees at GI's cost and expense, and will indemnify and
hold harmless the GYJ, its agents, directors, officers and employees,
from and against any and all Losses due to the gross negligence or
willful misconduct of GI, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any
person as a result, directly or indirectly, of the possession, use or
consumption of any Licensed Product, whether claimed by reason of
breach of warranty, negligence, product defect or otherwise, and
regardless of the form in which any such claim is made. In the event
of any such claim against the GYJ or any agent, director, officer or
employee, the GYJ shall promptly notify GI in writing of the claim and
GI shall manage and control, at its sole expense, the defense of the
claim and its settlement. The GYJ shall cooperate with GI and may, at
its option and expense, be represented in any such action or
proceeding. GI shall not be liable for any litigation costs or
expenses incurred by the GYJ without GI's written authorization.
(c) REPRESENTATIONS AND WARRANTIES; INDEMNITY. GI represents
and warrants to the GYJ that it has and will continue to have the right
to grant (i) the licenses to the Patent Rights and Know-How set forth
in Section 3.1(a), above and (ii) the sublicenses to the Roche Patent
Rights and Roche Know-How set forth in Section 3.3 (a), above. GI
further represents and warrants to the GYJ that it is a designated GI
"Affiliate" under
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the Wistar License, and that it has and will continue to have a license
to the Wistar patent rights and Wistar know-how licensed to GI and its
"Affiliates" under the Wistar License. GI agrees to defend the GYJ, at
GI's cost and expense, and will indemnify and hold harmless the GYJ
from and against any and all liabilities claimed by or paid to a third
party attributable GI's breach of the representations and warranties
contained in this Section 9.1(c); provided that the GYJ cooperates with
GI to minimize any such liabilities and GI's corresponding indemnity
obligation; and further provided that GI is given prompt written notice
of the liability and is given information, reasonable assistance and
sole authority to defend and/or settle the claim. In the event of any
breach by GI of the representations and warranties contained in this
Section 9.1(c), if the GYJ, on account of such breach, is unable to
develop, use, distribute and sell Licensed Products in the Territory,
GI will refund to the GYJ any and all benchmark payments paid by
the GYJ to GI under Section 2.2 of this Agreement through the date GI
is judged to have breached such representations or warranties.
9.2. PUBLICITY. Neither Party (nor any Affiliate of either Party)
shall have the right to originate any publicity, news release or other public
announcement, written or oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written approval of the other
Party, which approval shall not be unreasonably withheld, except as otherwise
required by law.
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9.3. ASSIGNMENT. Except as otherwise provided in this Agreement,
neither this Agreement nor any of the rights or obligations hereunder may be
assigned by either Party without the prior written consent of the other Party,
except to a party who acquires all or substantially all of the business of the
assigning Party by merger, sale of assets or otherwise.
9.4. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
9.5. FORCE MAJEURE. In the event that either Party is prevented from
performing or is unable to perform any of its obligations under this Agreement
due to any act of God; fire; casualty; flood; war; strike; lockout; failure of
public utilities; injunction or any acts, exercise, assertion or requirement of
governmental authority; epidemic; destruction of production facilities; riots;
insurrection; inability to procure or use materials, labor, equipment,
transportation or energy; or any other cause beyond the reasonable control of
the Party invoking this Section 9.5 if such Party shall have used its best
efforts to avoid such occurrence, such Party shall give notice to the other
Party in writing promptly, and thereupon the affected Party's performance shall
be excused and the time for performance shall be extended for the period of
delay or inability to perform due to such occurrence.
9.6. WAIVER. The waiver by either Party of a breach or a default of
any provision of this Agreement by the other Party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part
40
<PAGE> 41
of either Party to exercise or avail itself of any right, power or privilege
that it has or may have hereunder operate as a waiver of any right, power or
privilege by such Party.
9.7. NOTICES. Any notice or other communication in connection with
this Agreement must be in writing and if by mail, by registered mail, return
receipt requested, and shall be effective when delivered to the addressee at the
address listed below or such other address as the addressee shall have specified
in a notice actually received by the addressor.
If to GI:
Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
with a copy to:
Attention: Legal Department
If to the GYJ:
GI-Yamanouchi, Inc.
c/o Genetics Institute, Inc. of Japan
Higashi Azabu Annex
1-10-13 Higashi Azabu
Minato-ku, Tokyo 106 Japan
Attention: Managing Director
GI-Yamanouchi, Inc.
c/o Yamanouchi Pharmaceutical Co., Ltd.
3-11 Nihonbashi-Honcho
2-chome, Chuo-ku
Tokyo 103, Japan
Attention: Director of the Board
9.8. NO AGENCY. Nothing herein shall be deemed to constitute either
Party as the agent or representative of the other Party, or both Parties as
joint venturers or partners for any purpose. The GYJ shall be an independent
contractor, not an employee or partner
41
<PAGE> 42
of GI, and the manner in which the GYJ renders its services under this
Agreement shall be within the GYJ's sole discretion. Neither Party shall be
responsible for the acts or omissions of the other Party, and neither Party
will have authority to speak for, represent or obligate the other Party in any
way without prior written authority from the other Party.
9.9. Exports.
-------
(a) The Parties acknowledge that the export of technical data,
materials or products is subject to the exporting Party receiving the
necessary export licenses and that the Parties cannot be responsible
for any delays attributable to export controls which are beyond the
reasonable control of either Party. The Parties agree that regardless
of any disclosure made by the Party receiving an export of an ultimate
destination of any technical data, materials or products, the receiving
Party will not reexport either directly or indirectly, any technical
data, material or products without first obtaining the applicable
validated or general license from the United States Department of
Commerce, United States Food and Drug Administration and/or any other
agency or department of the United States Government, as required. The
receiving Party shall provide the exporting Party with any information,
certifications or other documents which may be reasonably required in
connection with such exports under the Export Administration Act of
1979, as amended, its rules and
42
<PAGE> 43
regulations, the Federal Food, Drug and Cosmetic Act and other
applicable export laws.
(b) Without limitation of the foregoing, and in support of
maintaining a general license for the export of technical data under
this Agreement, a Party receiving an export agrees to not knowingly
export or reexport any technical data or materials furnished to such
Party under this Agreement, any part thereof or any product thereof,
directly or indirectly, without first obtaining a license to do so from
the United States Department of Commerce, the United States Food and
Drug Administration and/or other appropriate United States governmental
agencies, into Afghanistan, the People's Republic of China, South
African Military and police entities, Syria, Iran, Iraq, the People's
Democratic Republic of Yemen, the Federal Republic of Yugoslavia
(Serbia & Montenegro) or any of those countries listed from time to
time in supplements to Part 770 to Title 15 of the Code of Federal
Regulations in Country Groups Q, S, W, Y or Z (collectively, the
"Prohibited Countries"), which, as of April 1993 are as follows: Group
Q (Romania), Group S (Libya), Group W (Czechoslovakia, Poland), Group Y
(Albania, Bulgaria, Cambodia, Estonia, Laos, Latvia, Lithuania,
Mongolian People's Republic and the geographic area formerly known as
the Union of Soviet Socialist Republics) and Group Z (Cuba, North Korea
and Vietnam) or any other destinations which may be identified in the
U.S. Dept. of Commerce Export Administration Regulations.
43
<PAGE> 44
9.10. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto (which
Exhibits are deemed to be a part of this Agreement for all purposes) contains
the full understanding of the Parties with respect to the subject matter hereof
and supersede all prior understandings and writings relating thereto. No
waiver, alteration or modification of any of the provisions hereof shall be
binding unless made in writing and signed by the Parties by their respective
officers thereunto duly authorized.
9.11. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
9.12. SEVERABILITY. In the event that any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity
of the remaining provisions shall not be affected, and the rights and
obligations of the Parties shall be construed and enforced as if the Agreement
did not contain the particular provisions held to be unenforceable.
9.13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their successors and permitted
assigns.
9.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
44
<PAGE> 45
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives as of the date first above written.
Date: _________________ GENETICS INSTITUTE, INC.
By: ___________________________
Name: __________________________
Title: _________________________
Date: _________________ GI-YAMANOUCHI, INC.
By:_____________________________
By:_____________________________
45
<PAGE> 46
<TABLE>
EXHIBIT A
---------
IL-12 Patent Rights
-------------------
GI
--
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 11/9/89 46673/89 638430
Canada 11/9/89 2,002,607-3
Europe a*) 11/9/89 90901161.1
b**) 9/4/91 91918119.8
Japan a) 11/9/89 501209/90
b) 9/4/91 516686/91
Mexico 6/5/92 92/3294
PCT a) 11/9/89 PCT/US89/05027
b) 9/4/91 PCT/US91/06332
USA a) 11/10/88 269,945/88
b) 2/7/89 307,817/89
c) 9/18/90 584,941/90
</TABLE>
<TABLE>
ROCHE
-----
<CAPTION>
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- - ------- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 12/20/90 68349/90
Canada 12/19/90 2032653-1
Europe*** 12/09/90 90123670.3
Ireland 12/21/90 4694/90
Japan 12/22/90 413259/90
New Zealand 12/19/90 236545
Philippines 12/19/90 41751
South Africa 12/19/90 10237/90 10237/90
USA a) 12/22/89 455708/89
b) 05/09/90 520935/90
c) 08/27/90 572284/90
d) 03/24/92 957023/92
<FN>
* Designated countries: AT, BE, CH, DE, FR, GB, IT, LU, NL, SE
** Designated countries: AT, BE CH, DE, DK, ES, FR, GB, GR, IT, LU, NL, SE
*** Designated countries: AT, BE, CH, DE, DK, FR, GB, IT, LU, NL, SE
</TABLE>
<PAGE> 47
EXHIBIT B
---------
WISTAR LICENSE
(attached)
47
<PAGE> 1
<TABLE>
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
EXHIBIT 11
Computation of Earnings Per Share
(unaudited-in thousands, except per share amounts)
Primary earnings (loss) per common share is computed by dividing net income (loss), after deducting applicable preferred stock
dividends, by the weighted average number of shares of common stock and common stock equivalents outstanding.
Common stock equivalents consist of stock options and warrants and are not included in the calculation of loss per share
because their effect is considered antidilutive.
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 1994 August 31, 1993 September 30, 1994 August 31, 1993
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
- - --------------------------
Weighted average number of shares
outstanding 26,474 25,320 26,401 24,728
Shares deemed outstanding from the
assumed exercise of stock options
and warrants reduced by the number
of shares purchased with proceeds 1,077 - - -
--------- --------- --------- ---------
Total 27,551 25,320 26,401 24,728
--------- --------- --------- ---------
Net income (loss) $ 12,643 $ (5,548) $ (6,951) $ (16,560)
Preferred stock dividends - (1,144) - (3,436)
--------- --------- --------- ---------
Net income (loss) applicable to
common shares $ 12,643 $ (6,692) $ (6,951) $ (19,996)
--------- --------- --------- ---------
Primary earnings (loss) per common
share $ .46 $ (.26) $ (.26) $ (.81)
========= ========= ========= =========
Fully Diluted Earnings Per Share (A)
- - ------------------------------------
Weighed average number of shares
outstanding 26,474 - - -
Shares deemed outstanding from the
assumed exercise of stock options
and warrants reduced by the number
of shares purchased with proceeds 1,732 - - -
--------- --------- --------- ---------
Total 28,206 - - -
--------- --------- --------- ---------
Net income $ 12,643 $ - $ - $ -
--------- --------- --------- ---------
Fully diluted earnings per common share $ .45 $ - $ - $ -
========= ========= ========= ==========
<FN>
(A) Fully diluted earnings per share of Common Stock has not been presented for loss periods as the effect would be antidilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GENETICS INSTITUTE, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 18,235
<SECURITIES> 253,704
<RECEIVABLES> 22,382
<ALLOWANCES> 0
<INVENTORY> 16,781
<CURRENT-ASSETS> 316,187
<PP&E> 162,493
<DEPRECIATION> 51,961
<TOTAL-ASSETS> 432,227
<CURRENT-LIABILITIES> 31,952
<BONDS> 0
<COMMON> 265
0
0
<OTHER-SE> 400,010
<TOTAL-LIABILITY-AND-EQUITY> 432,227
<SALES> 34,452
<TOTAL-REVENUES> 102,927
<CGS> 22,066
<TOTAL-COSTS> 22,066
<OTHER-EXPENSES> 87,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,951)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,951)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,951)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> 0
</TABLE>
