<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended December 31, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from___________to___________
Commission File Number: 0-18976
CELTRIX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3121462
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3055 Patrick Henry Drive, Santa Clara, CA 95054-1815
(Address of principal executive offices and zip code)
Registrant's Telephone Number: (408) 988-2500
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of February 6, 1998, the Registrant had outstanding 21,061,053 shares of
Common Stock.
1
<PAGE> 2
CELTRIX PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1997
and March 31, 1997 ................................................... 3
Condensed Consolidated Statements of Operations for the three- and nine-
month periods ended December 31, 1997 and 1996 ....................... 4
Condensed Consolidated Statements of Cash Flows for the nine-
month periods ended December 31, 1997 and 1996 ....................... 5
Notes to Condensed Consolidated Financial Statements ................... 6
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 8
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K ....................................... 13
SIGNATURES ...................................................................... 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
--------- ---------
<S> <C> <C>
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,449 $ 2,734
Short-term investments 8,928 3,054
Receivables and other current assets 304 197
--------- ---------
Total current assets 10,681 5,985
Property and equipment, net 7,388 8,423
Intangible and other assets, net 2,615 2,548
--------- ---------
$ 20,684 $ 16,956
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 404 $ 486
Accrued compensation and other accrued liabilities 950 894
Short-term debt and lease obligations 50 328
--------- ---------
Total current liabilities 1,404 1,708
Deferred rent 927 1,038
Stockholders' equity:
Preferred stock -- --
Common stock 211 153
Additional paid-in capital 131,550 118,152
Accumulated deficit (113,408) (104,095)
--------- ---------
Total stockholders' equity 18,353 14,210
--------- ---------
$ 20,684 $ 16,956
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 16 $ 10 $ 49 $ 20
Other revenues 20 19 66 88
-------- -------- -------- --------
36 29 115 108
Costs and expenses:
Cost of sales -- 2 1 4
Research and development 3,248 3,084 9,313 8,988
General and administrative 468 422 1,415 1,308
-------- -------- -------- --------
3,716 3,508 10,729 10,300
-------- -------- -------- --------
Operating loss (3,680) (3,479) (10,614) (10,192)
Interest income, net 148 101 564 399
Gain on sale of investment in
Prograft Medical, Inc. -- -- 737 --
-------- -------- -------- --------
Net loss $ (3,532) $ (3,378) $ (9,313) $ (9,793)
======== ======== ======== ========
Net loss per share $ (0.17) $ (0.22) $ (0.44) $ (0.64)
======== ======== ======== ========
Shares used in per share computation 20,986 15,235 20,986 15,230
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
CELTRIX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,313) $ (9,793)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of investment in Prograft Medical, Inc. (737) --
Depreciation and amortization 1,270 1,491
Other adjustments related to changes in operating
accounts (133) (146)
-------- --------
Net cash used in operating activities (8,913) (8,448)
Cash flows from investing activities:
(Increase) decrease in available-for-sale securities (5,137) 2,843
Capital expenditures (154) (285)
Increase in intangible and other assets (259) (377)
-------- --------
Net cash provided by (used in) investing activities (5,550) 2,181
Cash flows from financing activities:
Proceeds from issuance of common stock, net 13,456 101
Principal payments under lease obligations (278) (419)
-------- --------
Net cash provided by (used in) financing activities 13,178 (318)
-------- --------
Net decrease in cash and cash equivalents (1,285) (6,585)
Cash and cash equivalents at beginning of period 2,734 10,183
-------- --------
Cash and cash equivalents at end of period $ 1,449 $ 3,598
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
CELTRIX PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Interim Financial Statements
The condensed consolidated balance sheet as of December 31, 1997, the
condensed consolidated statements of operations for the three- and nine-month
periods ended December 31, 1997 and 1996, and the condensed consolidated
statements of cash flows for the nine-month periods ended December 31, 1997 and
1996 have been prepared by the Company, without audit. In the opinion of
management, the accompanying unaudited interim condensed consolidated financial
statements include all adjustments, which include normal recurring adjustments,
necessary to present fairly the Company's financial position, results of its
operations and its cash flows. Interim results are not necessarily indicative of
results to be expected for a full fiscal year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto for the fiscal year ended March 31, 1997 in the
Company's 1997 Annual Report to Stockholders.
Certain reclassifications have been made to prior year financial
statements to conform with the current year presentation.
2. Stockholders' Equity
In April 1997, the Company completed a private placement of 5,721,876
shares of newly issued shares of common stock at $2.438 per share, resulting in
net proceeds to the Company of $13.3 million. For every two shares of stock
issued, the Company also issued a three-year warrant to purchase an additional
share of Celtrix common stock at $2.682 per share exercisable only if the shares
of stock are held for at least one year.
In September 1997, stockholders approved an additional 1.5 million
shares for issuance under the 1991 Stock Option Plan.
6
<PAGE> 7
3. Net Loss Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" ("SFAS 128"), which is required to be
adopted this fiscal quarter. Although SFAS 128 simplified the current earnings
per share ("EPS") calculation by excluding common stock equivalents from the
computation of basic EPS, adoption of SFAS 128 has no impact on the Company's
computation of net loss per share in the periods ended December 31, 1997 and
1996, or in previously disclosed periods as common stock equivalents have been
excluded due to their antidilutive effect.
4. Gain on Sale of Investment in Prograft Medical, Inc.
The $737,000 gain on investment reported was the result of the sale of
43,750 shares of Prograft Medical, Inc. ("Prograft") preferred stock in June
1997; these shares were held by the Company since 1993.
5. License Agreements
In December 1997, the Company entered into a new license agreement with
Genzyme Corporation ("Genzyme") granting Genzyme a worldwide exclusive
royalty-bearing license to TGF-beta antibodies, and license and sublicense
rights to TGF-beta receptor. Under the terms of the agreement, Genzyme will
assume the licensing and royalty obligations of Celtrix related to TGF-beta
receptor.
Additionally, under amended terms to a prior TGF-beta-2 license and
development agreement, Genzyme's territorial rights to develop and commercialize
TGF-beta-2 have been expanded to include Japan, China, Korea and Taiwan. In
exchange, Genzyme released Celtrix from certain service and royalty obligations
under the original agreement.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto included in Part I
- -- Item 1 of this Quarterly Report and the financial statements and notes
thereto in the Company's 1997 Annual Report to Stockholders.
OVERVIEW
Celtrix Pharmaceuticals, Inc. is a biopharmaceutical company developing
novel therapeutics for the treatment of seriously debilitating, degenerative
conditions primarily associated with severe trauma, chronic diseases or aging.
The Company's focus is on regenerating lost muscle, bone and other tissues
essential for the patient's health and quality of life. Ongoing product
development programs target acute traumatic injury, such as hip fracture surgery
in the elderly, and severe burns. Other potential indications include severe
osteoporosis and protein wasting diseases associated with cancer, AIDS and other
life-threatening conditions.
The Company's development focus is on SomatoKine, a naturally occurring
complex formed by the anabolic hormone insulin-like growth factor-I (IGF-I) and
its major binding protein, BP3, which shows therapeutic potential for patients
suffering from severe physical trauma and serious illness. IGF-I, a key anabolic
hormone, is known to play a major role in diverse biological processes,
including muscle and bone formation, and tissue repair. However, IGF-I does not
naturally exist in quantity free of its binding proteins, and limitations
associated with administering free IGF-I therapeutically have proven
significant, such as acute insulin effects (e.g. hypoglycemia,
hypophosphatemia). When IGF-I is bound to BP3, as it is in nature, it does not
display these acute limitations. Results from earlier Phase I studies provided
evidence that administration of SomatoKine safely delivers IGF-I at
substantially higher dosage levels than had been feasible before with free
IGF-I, and the elevated levels of SomatoKine also appeared to stimulate bone and
connective tissue metabolism.
Currently Phase II clinical feasibility studies are progressing in the
use of SomatoKine for hip fracture surgery in the elderly and severe burns.
Studies have shown that following hip fracture surgery, blood levels of IGF-I
drop significantly and patients begin losing lean body and bone mass rapidly.
The hip fracture study will investigate the ability of short-term treatment with
SomatoKine to build muscle and bone mass, restore mobility, and increase the
patient's
8
<PAGE> 9
functional independence following hip fracture surgery. In the area of severe
burns, studies have shown that patients typically suffer from destructive
metabolic processes (catabolism) which causes severe nutritional inefficiency
and retards healing. SomatoKine offers potential short-term treatment by
stimulating healthy metabolic processes (anabolism) that may speed tissue
repair. The severe burns study will evaluate patients through two graft cycles
with the primary endpoint being faster healing of the donor graft site which
could shorten the length of hospitalization. Results from both the hip fracture
surgery and severe burns studies will guide the design of future clinical
trials, including a potential severe osteoporosis feasibility trial with a
corporate partner. Celtrix manufactures SomatoKine according to current Good
Manufacturing Practices (GMP) at its Santa Clara, California facility.
The Company has a license agreement with The Green Cross Corporation, a
Japanese pharmaceutical company that recently merged with Yoshitomi
Pharmaceutical Industries Ltd., covering the development and commercialization
of SomatoKine for the treatment of osteoporosis in Japan. The Company also has a
product development, license and marketing agreement with Genzyme Corporation
("Genzyme") for TGF-beta-2, a potential pharmaceutical based on a naturally
occurring compound which appears to play an important role in regulating healthy
cell functions. In December 1997, under amended terms, the Company granted
Genzyme expanded territory rights to TGF-beta-2 to include Japan, China, Korea
and Taiwan. Additionally, under a separate license agreement, Genzyme was
granted a worldwide royalty- bearing license to TGF-beta antibodies and receptor
technology. The Company is not currently pursuing an in-house TGF-beta-2
program.
Celtrix has not earned substantial revenues from product sales and at
December 31, 1997 has an accumulated deficit of $113.4 million. The Company
expects to incur additional operating losses, which may fluctuate from quarter
to quarter, for at least the next several years as the Company expands its
development activities, including clinical trials and manufacturing.
There can be no assurance that Celtrix will ever achieve either
significant revenues from product sales or profitable operations. To achieve
profitable operations, the Company, alone or with others, must successfully
develop, obtain regulatory approval for and market its potential products. No
assurance can be given that the Company's product development efforts will be
successfully completed, that required regulatory approvals will be obtained, or
that any products, if developed and introduced, will be successfully marketed or
achieve market acceptance.
9
<PAGE> 10
RESULTS OF OPERATIONS
Celtrix incurred a net loss of $3.5 million and $9.3 million for the
three- and nine-months ended December 31, 1997, compared to $3.4 million and
$9.8 million for the same periods in 1996. Net loss per share decreased to $0.17
and $0.44 for the three- and nine-months ended December 31, 1997, from $0.22 and
$0.64 for the same periods in 1996, due primarily to an increase in shares
outstanding as a result of the April 1997 private placement.
Revenues increased to $36,000 and $115,000 for the three- and
nine-months ended December 31, 1997 from $29,000 and $108,000 for the same
periods in 1996 due mainly to the sale of material for research purposes.
Operating expenses increased 6% to $3.7 million for the three-months
ended December 31, 1997 from $3.5 million for the same period in 1996, and
increased 4% to $10.7 million for the nine-months ended December 31, 1997 from
$10.3 million for the same period in 1996. The increases were due primarily to
increased human clinical testing and the manufacture of SomatoKine.
Interest income, net of interest expense, increased 47% to $148,000 for
the three-months ended December 31, 1997 from $101,000 for the same period in
1996, and increased 41% to $564,000 for the nine-months ended December 31, 1997
from $399,000 for the same period in 1996. These increases were due primarily to
the higher average cash, cash equivalent and short-term investment balances as a
result of the April 1997 private placement. Interest expense was $7,000 and
$24,000 for the three- and nine-months ended December 31, 1997, respectively,
and $19,000 and $74,000 for the same periods in 1996, respectively.
The $737,000 gain on investment reported under nine-months ended
December 31, 1997 was the result of the sale of 43,750 shares of Prograft
preferred stock in June 1997.
LIQUIDITY AND CAPITAL RESOURCES
Celtrix has funded its activities with proceeds from public and private
offerings, advances from Collagen, research and development revenues from
collaborative arrangements, lease and debt financing arrangements, proceeds from
liquidating its equity investments and, to a lesser extent, other revenues and
product sales.
10
<PAGE> 11
At December 31, 1997, Celtrix's cash, cash equivalents and short-term
investments were $10.4 million compared to $5.8 million at March 31, 1997. The
net increase of $4.6 million was due primarily to net proceeds of $13.5 million
received from the issuance of common stock, $737,000 in realized gain from the
sale of Celtrix's investment in Prograft, partly offset by cash outlays
consisting of $8.9 million in net cash and investments used in operating
activities and $691,000 used for investing and financing activities.
The Company believes that its existing capital resources will be
adequate to satisfy its anticipated requirements through the middle of calendar
year 1998. The Company continues to pursue the possibility of securing corporate
partner arrangements that are consistent with the Company's product development
and commercialization strategies, raising additional capital by means of selling
equity or debt securities and evaluating other options including mergers and
acquisitions. The Company's future success may depend, in part, on its
relationships with third parties, their willingness to collaborate in the
development of any potential products under development, their strategic
interest in such products and, eventually, their success in marketing.
The Company anticipates that it will expend significant capital
resources in product research and development, which is typical in the
biopharmaceutical industry. Capital resources may also be used for the
acquisition of complementary businesses, products or technologies. The Company's
future capital requirements will depend on many factors, including scientific
progress in its research and development programs, progress with clinical
trials, the cost of scaling up manufacturing and establishing facilities, the
time and costs involved in obtaining regulatory approvals, the time and costs
involved in filing, prosecuting, enforcing and defending patent claims,
competition in technological and market developments, the establishment of and
changes in collaborative relationships and the cost of commercialization
activities and arrangements. The Company anticipates that it will be required to
raise substantial additional capital over a period of several years in order to
continue its research and development programs, including clinical trials, and
to prepare for commercialization by expanding manufacturing and marketing
capabilities. No assurance can be given that such additional capital will be
available on reasonable terms or at all. The unavailability of such financing
could delay or prevent the development and marketing of the Company's potential
products.
11
<PAGE> 12
FORWARD-LOOKING STATEMENTS
The Company notes that certain of the foregoing statements are forward
looking within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Actual results may differ materially from the statements made
due to a variety of factors including, but not limited to the ability to obtain
financing for the Company's working capital, the ability to enroll a sufficient
number of patients in clinical feasibility studies, as well as future company
research, clinical study results, the regulatory approval process, competitive
products, and other risk factors which are described in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997.
12
<PAGE> 13
PART II. OTHER INFORMATION
CELTRIX PHARMACEUTICALS, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.53 License Agreement dated December 18, 1997, between the Registrant
and Genzyme Corporation.(1)
10.54 Amendment dated December 31, 1997 to License and Development
Agreement dated June 24, 1994, betweeen the Registrant and Genzyme
Corporation.(1)
27.1 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K during the
quarter ended December 31, 1997:
Report Date: October 23, 1997
Item 5. Other Events
The Registrant announced its second quarter financial results.
- --------------
Report Date: November 5, 1997
Item 5. Other Events
The Registrant announced the appointment of Donald D. Huffman as Vice
President and Chief Financial Officer.
- --------------
Report Date: November 12, 1997
Item 5. Other Events
The Registrant announced it has received a key patent from the U.S.
Patent and Trademark Office for the treatment of osteoporosis and tissue
repair.
- --------------
Report Date: December 2, 1997
Item 5. Other Events
The Registrant announced the appointment of Dr. Barry M. Sherman to the
Celtrix Board of Directors.
- --------------
(1) Confidential treatment has been requested with respect to portions of these
exhibits.
13
<PAGE> 14
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.
CELTRIX PHARMACEUTICALS, INC. (Registrant)
Date: February 12, 1998 By: /s/ DONALD D. HUFFMAN
-------------------------------
Donald D. Huffman
Vice President, Finance and Administration and
Chief Financial Officer (Duly authorized
principal financial and accounting officer)
14
<PAGE> 15
CELTRIX PHARMACEUTICALS, INC.
INDEX TO EXHIBITS
10.53 (1) License Agreement dated December 18, 1997, between the Registrant
and Genzyme Corporation.
10.54 (1) Amendment dated December 31, 1997 to License and Development
Agreement dated June 24, 1994, betweeen the Registrant and Genzyme
Corporation.
(1) Confidential treatment has been requested with respect to portions of these
exhibits.
15
<PAGE> 1
[*] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH
THE SECURITIES AND EXCHANGE COMMISSION
Exhibit 10.53
LICENSE AGREEMENT
This Agreement is made and entered into this 18th day of December, 1997
(the "EFFECTIVE DATE") by and between Celtrix Pharmaceuticals, Inc. ("CELTRIX"),
a Delaware corporation having offices at 3055 Patrick Henry Drive, Santa Clara,
CA 95054, and Genzyme Corporation, a Massachusetts corporation ("GENZYME")
having its offices at One Kendall Square, Cambridge, MA 02139.
RECITALS
WHEREAS, CELTRIX is a biopharmaceutical company that is the owner of a certain
patent and patent applications and know how relating to monoclonal antibodies
that bind Transforming Growth Factor [beta] ("TGF-[beta]"), specifically
TGF-[beta]1 and TGF-[beta]2, wherein such patents and patent applications have
previously been non-exclusively licensed to Genentech, Inc. in settlement of an
interference with respect to such antibodies between the parties. Further,
CELTRIX is the owner of certain patent applications and know how that relate to
methods employing monoclonal antibodies that bind TGF-[beta] and employing
TGF-[beta] receptors, and fragments thereof. CELTRIX still further has acquired
an exclusive worldwide license with right of sublicense from Massachusetts
Institute of Technology with respect to certain patents and patent applications
relating to TGF-[beta] receptors, including TGF-[beta] type II and TGF-[beta]
type III receptors, cDNA of the respective receptors, and methods of use,
which license, dated December 4, 1991, continues in full force and effect.
CELTRIX has also developed know how related to said TGF-[beta] receptor patents
and patent applications;
WHEREAS, GENZYME is a biopharmaceutical company having experience in TGF-[beta]
related technology, and desires to develop and market products and methods
employing that technology;
WHEREAS, CELTRIX is willing to grant and GENZYME desires to receive,
for itself and its affiliates, a worldwide exclusive license with right of
<PAGE> 2
License Agreement
Page 2
sublicense to the non-exclusive patent rights held by CELTRIX with respect to
the TGF-[beta] binding monoclonal antibodies, and to the related know how, and a
worldwide exclusive license with right of sublicense to the patent rights held
by CELTRIX with respect to TGF-[beta] receptors, fragments thereof, and to the
related know how. CELTRIX is further willing to grant and GENZYME desires to
receive, for itself and its affiliates, a worldwide sublicense with right of
further sublicense with respect to the licensed patents and patent applications
obtained by CELTRIX with respect to the licensed TGF-[beta] receptor technology,
together with a worldwide license to related know how developed by CELTRIX, so
that GENZYME may be able to make, have made, use and sell TGF-[beta]antibodies
and receptors in accordance with the terms and conditions set forth in this
Agreement.
WHEREAS, GENZYME and CELTRIX entered into a License and Development Agreement as
of June 24, 1994 relating to therapeutic uses of TGF-[beta]2, which agreement
has been amended as of the date of execution hereof, and, as amended, continues
in full force and effect. As further grant of license rights with respect to the
TGF-[beta]2 related rights, CELTRIX is willing to grant, and GENZYME desires to
receive, for itself and its affiliates, a worldwide exclusive license with right
of sublicense to the patent rights held by CELTRIX with respect to the
TGF-[beta]2 protein for laboratory research and assay uses.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt of which
is acknowledged, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Affiliates or Subsidiaries of a party shall mean any present or future
companies organized under the laws of the United States with respect to which
(i) at least fifty percent (50%) in value or (ii) at least fifty percent (50%)
of the total combined voting power of all classes of shares entitled to vote is
directly or indirectly under the control of, or under common control with, such
party. Reference to CELTRIX and GENZYME herein shall be understood to include
any Subsidiaries and Affiliates of CELTRIX and GENZYME, respectively.
-2-
<PAGE> 3
License Agreement
Page 3
1.2 Biological Property shall mean any DNA materials, derivatives of such DNA
materials, cell lines and peptides containing the DNA materials or derivatives
thereof, that are related to the TGF-[beta] Antibody Patent Rights, and to the
TGF-[beta] Receptor Patent Rights, respectively, except for Biological Property
received by CELTRIX under the R&D Systems Agreement.
1.3 Field shall mean uses for any and all purposes with the following
exceptions: (i) opthamology, (ii) the TGF-[beta] Antibody Rights previously
licensed to Genentech, Inc., and (iii) with respect to the TGF-[beta] Receptor
Patent Rights Licensed from MIT only, those rights previously exclusively
sublicensed by CELTRIX to R&D Systems ("the R&D Systems Agreement").
1.4 First Commercial Sale shall mean the first sale by GENZYME and/or its
sublicensee(s) in an arms length transaction to a third party (not connected
with GENZYME or CELTRIX, its Affiliates and/or sublicensee(s)) of a Licensed
Product or use of a Licensed Method, and wherein, as applicable, the
manufacture, sale and use of which has been approved by the applicable
regulatory agency in the country in question.
1.5 Know-How shall mean all information, data, specifications, techniques,
software, procedures, methods of manufacture, technical data and clinical, as
well as diagnostic, information relating to the Patent Rights owned by or
licensed to CELTRIX which is known to CELTRIX (other than from GENZYME or from
R&D Systems) and which CELTRIX is free to disseminate without accounting to
others.
1.6 Licensed Product(s) shall mean any product or part thereof that embodies an
invention covered by a Valid Claim or which is specifically intended to be used
to practice a method or process covered by a Valid Claim and which is
manufactured by or for, and sold by or for, GENZYME or its sublicensee(s).
1.7 Licensed Method(s) shall mean a method of use that is covered in whole or in
part by a Valid Claim of the Patent Rights.
-3-
<PAGE> 4
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 4 HAS BEEN REQUESTED
1.8 Net Sales shall mean the gross amount billed, invoiced or received
on sales of Licensed Products, or TGF-[beta]2 Protein as set forth in Section
1.18 below, to or the practice of Licensed Methods or any other revenue
producing use of Patent Rights by an independent third party [*]. Net Sales
shall further include such sales or any other revenue producing use of Patent
Rights by Genzyme and/or its sublicensee(s).
1.9 Patent Rights shall mean and include any subject matter claimed in or
covered by the patents or pending patent applications listed in Appendix A, and
further including any patents that issue on the applications for said patents,
improvements, reissues, reexaminations, renewals, extensions, divisions,
continuations, and continuations-in-part of the foregoing and any foreign
counterparts and any other form of patent coverage directed to the inventions
covered by said patents and applications.
1.10 Territory shall mean all countries of the world.
1.11 TGF-b Antibody Patent Rights shall mean the Patent Rights that relate to
monoclonal antibodies that bind Transforming Growth Factor [beta]
("TGF-[beta]"), specifically TGF-[beta]1 and TGF-[beta]2.
1.12 TGF-[beta] Antibody Know How shall mean Know How that relates to the
TGF-[beta] Antibody Patent Rights.
1.13 TGF-[beta] Receptor Know How shall mean the Know How that relates to the
TGF-[beta] Receptor Patent Rights of CELTRIX or the TGF-[beta] Receptor
Patent Rights Licensed from MIT.
1.14 TGF-[beta] Receptor Patent Rights of CELTRIX shall mean the Patent Rights
that relate to TGF-[beta] receptors that are owned by CELTRIX.
-4-
<PAGE> 5
License Agreement
Page 5
1.15 TGF-[beta] Receptor Patent Rights Licensed from MIT shall mean the Patent
Rights that relate to TGF-[beta] receptors, including TGF-[beta] type II and
TGF-[beta] type III receptors, cDNA of the respective receptors, and methods
of use that CELTRIX licensed from Massachusetts Institute of Technology (MIT).
1.16 Therapeutic Use shall mean any use of a Licensed Product or Licensed Method
in vivo, in humans and animals, for the prevention, cure, amelioration or
modification of any disease, symptom, syndrome, or other medical condition.
1.17 Valid Claim shall mean an issued, unexpired claim included within the
Patent Rights, or within in the rights covering the TGF-[beta]2 Protein as set
forth in Section 1.18 below, which has not been held invalid by a decision
from a tribunal having jurisdiction thereover and from which no further appeal
has or can be taken.
1.18 TGF-[beta]2 Protein shall mean the TGF-[beta]2 composition otherwise
designated as "CIF-B" that is disclosed and claimed in U.S. Patent No.
4,774,322 (the `322 Patent), together with any improvements, reissues,
reexaminations, renewals, extensions, divisions, continuations, and
continuations-in-part of the foregoing and any foreign counterparts or any other
form of patent coverage directed to the TGF-[beta]2 composition disclosed in
the `322 Patent.
ARTICLE II - GRANT
2.1 Subject to the terms and conditions set forth herein, CELTRIX hereby
grants to GENZYME a worldwide exclusive royalty bearing license in the Field to
the non-exclusive rights held by CELTRIX with respect to the TGF-[beta]
Antibody Patent Rights to (i) use the TGF-[beta] Antibody Know How, and (ii)
to make, have made, use, offer to sell, sell or import into the United States
Licensed Product(s) or use Licensed Method(s) in the Territory in which the
TGF-[beta] Antibody Patent Rights are effective until the end of the full
term(s) for which these Patent Rights are issued, unless sooner terminated as
hereinafter provided.
2.2 Subject to the terms and conditions set forth herein, CELTRIX hereby grants
to GENZYME a worldwide exclusive royalty bearing license in the Field (i)
-5-
<PAGE> 6
License Agreement Page 6
to use the TGF-[beta] Receptor Know How (as applicable to the TGF-[beta]
Receptor Patent Rights of CELTRIX), and (ii) to make, have made, use, offer to
sell, sell or import into the United States Licensed Product(s) or use Licensed
Method(s) in the Territory in which the TGF-[beta] Receptor Patent Rights of
CELTRIX are effective until the end of the full term(s) for which these Patent
Rights are issued, unless sooner terminated as hereinafter provided.
2.3 Subject to the terms and conditions set forth herein, CELTRIX hereby grants
to GENZYME a worldwide exclusive royalty bearing sublicense in the Field to (i)
use the TGF-[beta] Receptor Know How, and (ii) to make, have made, use, offer
to sell, sell or import into the United States Licensed Product(s) or use
Licensed Method(s) in the Territory in which the TGF-[beta] Receptor Patent
Rights Licensed from MIT are effective until the end of the full term(s) for
which the Patent Rights are issued, unless sooner terminated as hereinafter
provided. Pursuant to Section 2.3 of the License Agreement between Massachusetts
Institute of Technology and CELTRIX dated December 4, 1991 (the "MIT
Agreement"), the period of exclusivity granted to CELTRIX terminates with the
first to occur of:
"(a) the expiration of Twelve (12) years after the first commercial
sale of a Licensed Product or first commercial use of a
Licensed Process; or
(b) the expiration of Fifteen (15) years after the Effective Date
[December 4, 1991] of this Agreement; provided, however, that
times spent by pending applications before the FDA for
permission for clinical tests and for premarket approval of
the first Licensed Product shall be added to this fifteen year
period."
It is understood and acknowledged that the sublicense rights granted by CELTRIX
to GENZYME under this Section 2.3 may extend after the expiration of the period
of exclusivity, but that the exclusivity to GENZYME expires upon the expiration
of CELTRIX's exclusivity. In compliance with Section 2.8 of the MIT Agreement, a
copy of Articles II, V, VII, VIII, IX, X, XII, XIII, and XV of the MIT
-6-
<PAGE> 7
License Agreement
Page 7
Agreement are appended hereto. It is further agreed that, in exchange for the
sublicense rights granted herein, GENZYME shall assume the obligations,
including all current obligations, of CELTRIX as licensee under the MIT
Agreement, including, without limitation, any and all patent prosecution costs,
royalties or license fees that have been invoiced to Celtrix, copies of such
invoices having been timely provided to Genzyme in advance of the execution date
of this Agreement.
2.4 CELTRIX hereby agrees to promptly grant to GENZYME an exclusive sublicense
to any and all rights CELTRIX obtains as a result of termination or modification
of the R&D Systems Agreement, including those rights excluded from the Field as
set forth in Section 1.3 herein by virtue of the R&D Systems Agreement.
2.5 If after the date of this Agreement CELTRIX files patent applications or
otherwise obtains rights to patents, patent applications, or know how that
relate to the TGF-[beta] Antibody Patent Rights and Know How, to the TGF-[beta]
Receptor Patent Rights of CELTRIX and Know How, and to the TGF-[beta] Receptor
Patent Rights Licensed from MIT and Know How, in the Field, such patents, patent
applications or know how shall be included in this Agreement, and GENZYME shall
have an exclusive worldwide license or sublicense, as appropriate, under the
terms and conditions as set forth in this Agreement.
2.6 GENZYME shall have the right to enter into sublicensing agreements with
respect to the rights, privileges and licenses granted hereunder, provided such
sublicenses are within the scope of and under the terms and conditions set forth
herein. Any sublicenses granted by GENZYME shall expire upon the expiration of
GENZYME's rights granted herein. GENZYME shall give written notice to CELTRIX of
the granting of sublicense rights, shall forward to CELTRIX a copy of any and
all fully executed sublicense agreement, including any amendments and
modifications thereof, and shall forward annually a copy of any reports received
by GENZYME from any sublicensee during the preceding twelve (12) month period
under the sublicense as shall be pertinent to an accounting of payments under
such sublicense agreement.
-7-
<PAGE> 8
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 8 HAS BEEN REQUESTED
2.7 CELTRIX further grants to GENZYME the right and license to use the
Biological Property for all purposes in the Field, subject to the terms of this
Agreement. CELTRIX shall, within a commercially reasonable period following
execution of this Agreement, and on such occasions as additional Biological
Property becomes available, deliver to GENZYME samples of the Biological
Property in reasonable quantities as requested by GENZYME that are in CELTRIX's
possession as of the execution date of this Agreement.
2.8 Subject to the terms and conditions set forth herein, CELTRIX hereby grants
to GENZYME a worldwide non-exclusive royalty bearing license, with right to
grant sublicenses, (i) to use the TGF-[beta]2 Protein for GENZYME's internal use
in laboratory research and assay uses only, and (ii) to make, have made, offer
to sell or sell TGF-[beta]2 Protein for use in laboratory research and assay
uses only.
2.9 If GENZYME determines not to pursue commercialization, whether itself or
through a sublicensee(s), of a Licensed Product or Licensed Method in any
geographic market within the Territory or any clinical indication, it will [*].
ARTICLE III - ROYALTIES AND PAYMENTS
3.1 In consideration of the license and sublicense rights herein granted,
GENZYME shall pay to CELTRIX an earned royalty on Net Sales according to the
following schedule:
A. With respect to Licensed Products or Licensed Methods [*]:
(a) [*] Net Sales; then
(b) [*] Net Sales; then
-8-
<PAGE> 9
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 9 HAS BEEN REQUESTED
(c) [*] Net Sales [*].
B. With respect to Licensed Products or Licensed Methods [*]:
(a) [*] Net Sales.
C. With respect to Licensed Products or Licensed Methods [*]:
(a) [*] Net Sales.
D. With respect to Licensed Products or Licensed Methods [*]:
(a) [*] Net Sales.
E. With respect to commercial sales in an arm's length transaction to a
third party (not connected with GENZYME or CELTRIX, its Affiliates and/or
sublicensee(s)) of TGF-[beta]2 Protein covered by a Valid Claim [*]:
(a) [*] Net Sales.
3.2 Royalty payments in accordance with this Article shall be paid for a period
beginning with the First Commercial Sale of the applicable Licensed Product or
Licensed Method or commercial sale of TGF-[beta]2 Protein pursuant to this
agreement and ending upon the later of (i) [*] years thereafter, or (ii)
expiration of the last to expire patent within the Patent Rights or patent
rights as set forth in Section 1.18. Royalty payments shall cease if this
Agreement is terminated as hereinafter specified and provided.
-9-
<PAGE> 10
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 10 HAS BEEN REQUESTED
3.3 GENZYME will pay to CELTRIX the same royalties due to sales by sublicensees
of Licensed Products or Licensed Methods or TGF-[beta]2 Protein that GENZYME
would have owed pursuant to Section 3.1 had it engaged in the same licensed
conduct as said sublicensees.
3.4 Only one royalty shall be payable per Licensed Product or use of Licensed
Method or use of TGF-[beta]2 Protein, regardless of the number of patents or
patent applications under which, or the number of countries in which, such
Licensed Product or TGF-[beta]2 Protein has been manufactured, used or sold, or
the Licensed Method has been used. In those cases where a Licensed Product or
TGF-[beta]2 Protein is sold as a part of an article that includes additional
materials or components, the production of which does not use the inventions,
processes or methods of the licensed Patent Rights or rights as set forth in
Section 1.18, the Net Sales shall be based on the sales price at which GENZYME
or its sublicensee(s) would sell the Licensed Product or TGF-[beta]2 Protein
independently of such other materials or components in an arm's length
transaction.
3.5 GENZYME shall not be entitled to a reduction in royalty owing under this
Article due to royalties paid to any third party that is infringed by the
manufacture, use or sale of a Licensed Product or Licensed Method or TGF-[beta]2
Protein, [*].
3.6 GENZYME shall notify CELTRIX of the First Commercial Sale of a given
Licensed Product or Licensed Method, in writing, within thirty (30) days
thereafter. GENZYME agrees that beginning with the date of the First Commercial
Sale of such Licensed Product or Licensed Method, and as relevant to commercial
sales of TGF-[beta]2 Protein, CELTRIX shall receive within [*] (a) payment of
earned royalties; and (b)
-10-
<PAGE> 11
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 11 HAS BEEN REQUESTED
a report showing the information and basis on which the earned royalties have
been calculated.
3.7 GENZYME shall keep (or cause to be kept) and maintain complete and accurate
records of its sales of the Licensed Product(s), TGF-[beta]2 Protein, and/or
uses of Licensed Method(s) in accordance with generally accepted accounting
procedures. Such records shall be accessible to an authorized representative
selected and paid for by CELTRIX and acceptable to GENZYME, not more than [*] at
any reasonable time during business hours within [*] after the end of the
royalty period to which such records relate, for the purpose of verifying Net
Sales and any royalty due thereon. Such representative shall disclose to CELTRIX
only information relating to the accuracy of the records kept and the payments
made, and shall be under a duty to keep confidential any other information
gleaned from such records. Any adjustment in the amount of royalties due CELTRIX
on account of overpayment or underpayment of royalties shall be made at the next
date when royalty payments are to be made to CELTRIX under Section 3.6
hereinabove. If the verification on behalf of CELTRIX results in an upward
adjustment of greater than [*] of royalties due to CELTRIX for the period of
time in question, GENZYME shall pay the out-of-pocket expenses of CELTRIX
relating to such verification and a [*] surcharge on amount of royalties
underpaid.
3.8 All moneys to be paid to CELTRIX shall be made and computed in United States
Dollars.
3.9 Earned royalties on Net Sales of Licensed Products employing TGF-[beta]
Antibody Patent Rights, as described in Section 3.1.A herein and on Net Sales of
TGF-[beta]2 Protein shall be payable on all sales made after July 16, 1996 for
materials that, as of the effective date of this agreement, had not otherwise
been purchased or obtained from or manufactured on behalf of CELTRIX by GENZYME.
ARTICLE IV - WARRANTIES, LIMITATIONS, AND REGULATIONS
-11-
<PAGE> 12
License Agreement
Page 12
4.1 CELTRIX represents and warrants that it owns the rights to the TGF-[beta]2
Protein, as described in Section 1.18 (subject to those preexisting rights
granted to R&D Systems), that it owns the TGF-[beta] Antibody Patent Rights,
subject to the preexisting non-exclusive license granted to Genentech, Inc.,
that it owns the TGF-[beta] Receptor Patent Rights of CELTRIX, that (i) to the
best of its knowledge, it holds an exclusive license to the TGF-[beta] Receptor
Patent Rights Licensed from MIT (subject to the preexisting non-exclusive
license granted to R&D Systems and to the outcome of the interference proceeding
with Sloan Kettering Institute for Cancer Research), and (ii) that all the
aforementioned rights and licenses continue in full force and effect. CELTRIX
further represents and warrants that it has not made any commitments or offers
inconsistent or in derogation of the rights created by this Agreement.
4.2 Nothing herein contained shall be construed as:
(a) a warranty or representation by CELTRIX as to the validity or
scope of any licensed Patent Rights;
(b) a warranty or representation that anything sold, used,
produced or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of
patents, copyrights, and/or trademarks of third parties;
(c) an express or implied warranty of merchantability or fitness
for a particular purpose; or
(d) an express or implied license to any of Celtrix' patents,
trademarks, trade secrets, or other intellectual property not
explicitly licensed herein.
4.3 CELTRIX shall not be obligated to defend or hold harmless GENZYME or any
other person against any suit, damage, claim, or demand based on actual or
alleged infringement of any patent or other rights owned by a third party, or
any unfair trade practice resulting from the exercise or use of any right or
license granted hereunder.
-12-
<PAGE> 13
License Agreement
Page 13
4.4 CELTRIX MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESSED OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATEVER WITH RESPECT TO
THE USE, SALE OR OTHER DISPOSITION BY GENZYME OF LICENSED PRODUCT(S) or LICENSED
METHOD(S).
4.5 GENZYME shall defend, indemnify and hold harmless CELTRIX, and its trustees,
directors, officers, employees and agents and their respective successors, heirs
and assigns (the "Indemnitees"), against any and all liability, damage, loss or
expense (including reasonable attorneys' fees and expenses of
litigation)(together, "losses") that may be incurred by or imposed upon the
Indemnitees, or any of them, in connection with any claim, suit, demand, action
or judgment arising out of the following:
(a) the design, production, manufacture, testing, sale, use in
commerce, lease or promotion by GENZYME or by an Affiliate
(other than CELTRIX) or sublicensee of GENZYME of any product,
process or service that employs the licensed Patent Rights
pursuant to this Agreement, including without limitation the
licensing, sale or other distribution of Licensed Product(s)
and/or use of Licensed Method(s) including, without
limitation, any actual or alleged bodily injury, death or
property damage as a result of any of the foregoing; or
(b) any other activities of GENZYME or by an Affiliate or
sublicensee(s) to be carried out employing the Patent Rights
pursuant to this Agreement.
GENZYME's indemnity under this Section shall not apply to any liability, damage,
loss or expense that is attributable to the gross negligent activities or
willful misconduct of the Indemnitees. GENZYME agrees to require its
sublicensee(s) to provide identical indemnification protection, as is set forth
in this Section, to CELTRIX, and to the extent such indemnification is not
identical, GENZYME shall provide identical indemnification for any losses
attributable to its licensees.
-13-
<PAGE> 14
License Agreement
Page 14
4.6 GENZYME agrees to comply, and to require its Affiliates and sublicensee(s)
to comply, with all applicable laws, regulations, and safety standards relative
to the manufacture, use or sale of Licensed Product(s) and Licensed Method(s)
and TGF-[beta]2 Protein.
4.7 In the event CELTRIX intends to claim indemnification under this Article IV,
CELTRIX shall promptly notify GENZYME of any claim, in respect of which CELTRIX
intends to claim such indemnification, and GENZYME shall assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that CELTRIX shall have the right to retain its own counsel, at GENZYME's
expense, provided such expense is reasonable, if representation of CELTRIX by
the counsel retained by GENZYME would be inappropriate to actual or potential
differing interests between CELTRIX and any other party represented by such
counsel in such proceedings. The indemnity agreement in this Article IV shall
not apply to amounts paid in settlement of any loss, claim, liability or action
if such settlement is effected without the consent of GENZYME, which consent
shall not be withheld unreasonably. The failure to deliver notice to GENZYME
within a reasonable time after the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve GENZYME of any
liability to CELTRIX under this Article IV, but not any liability that it may
have to CELTRIX other than under this Article IV. CELTRIX and its employees and
agents shall cooperate fully with GENZYME and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
ARTICLE V - PATENT RIGHTS MAINTENANCE
5.1 CELTRIX will file, prosecute and maintain the Patent Rights, and its
licenses to Patent Rights, as applicable to the Patent Rights as enumerated
herein, and the rights covering the TGF-[beta]2 Protein as described in Section
1.18, at its sole discretion, and shall bear all costs associated therewith,
subject to Section 2.3. Celtrix shall furnish Genzyme with copies of any patent
application concerning Patent Rights and such TGF-[beta]2 Protein rights as
described in Section 1.18, sufficiently in advance of the anticipated filing
date so as to give GENZYME a reasonable opportunity to review and comment.
CELTRIX shall also furnish copies to GENZYME of all substantive communications
to and from the United States and foreign patent offices regarding
-14-
<PAGE> 15
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 15 HAS BEEN REQUESTED
patents or patent applications relating to this Agreement within a reasonable
time prior to filing such communication or promptly following the receipt
thereof. CELTRIX shall reasonably consider any comments GENZYME may have related
to such patent applications or communications. In the event CELTRIX decides to
no longer maintain all or a portion of its license rights to the Patent Rights,
or to maintain the Patent Rights, or the TGF-[beta]2 Protein rights as described
in Section 1.18, including failure to pay any annuity, tax or other maintenance
fee with respect to a patent or patent application owned by or licensed to
CELTRIX, GENZYME shall be given timely notice and opportunity to make such
payment and to assume ownership or license rights to such patent or patent
application.
ARTICLE VI - PATENT INFRINGEMENT
6.1 In the event that any of GENZYME, its Affiliates or sublicensee(s) learns of
the infringement of a third party of any patent licensed under this Agreement,
GENZYME shall promptly advise CELTRIX in writing and shall provide CELTRIX with
reasonable evidence of such infringement. In such circumstances, GENZYME shall
have at all times the right to immediately cease commercialization and the right
either to:
(a) [*]; or
(b) [*]; or
-15-
<PAGE> 16
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 15 HAS BEEN REQUESTED
(c) [*]
6.2 CELTRIX is neither obligated to enter into negotiations with a third party
to obtain rights for GENZYME under the third party patent nor obligated to
defend any suit or action. If CELTRIX, at its sole discretion, elects to enter
into negotiations with such third party to obtain rights for GENZYME under the
third party patent, or if CELTRIX, at its sole discretion, elects to undertake
at its own expense the defense of any such suit or action to the extent that the
alleged infringement is based on such use hereunder of the Patent Rights,
GENZYME shall render CELTRIX all reasonable assistance that may be required by
CELTRIX in the negotiations or in the defense of such suit or action. CELTRIX
has the primary right to control the defense of any such suit or action by
counsel of its choice, and GENZYME shall have the right, at its own expense, to
be represented in any such suit or action in respect of which GENZYME is a
defendant by counsel of its own choice. The parties agree to cooperate
reasonably in any such defense.
ARTICLE VII - TERM AND TERMINATION
7.1 The term of this Agreement shall be for a period beginning with the
Effective Date and ending upon the later of (i) [*] years after the First
Commercial Sale of the last Licensed Product or Licensed Method to achieve a
first Commercial Sale or (ii) expiration of the last to expire patent within the
Patent Rights or patent rights as set forth in Section 1.18, unless sooner
terminated as herein provided. It is understood and acknowledged that any of the
license rights granted in each of the Sections of Article II with respect to the
Patent Rights and Know How may be terminated independently of the other
Sections, and that the license rights granted with respect to the remaining
non-terminated Sections shall continue in full force and effect for the term
defined in this Section 7.1 or until earlier terminated in accordance with this
Article.
7.2 If GENZYME shall determine that it intends to declare itself insolvent or
file for bankruptcy or reorganization it shall give ten (10) days written notice
to CELTRIX. Notwithstanding the above, if GENZYME shall become bankrupt or
insolvent, if the business or any assets or property of GENZYME shall be placed
in the hands of a receiver, assignee or trustee, whether by the voluntary act of
GENZYME or otherwise, if
-16-
<PAGE> 17
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 17 HAS BEEN REQUESTED
GENZYME institutes or suffers to be instituted any procedure in bankruptcy court
for reorganization or rearrangement of its financial affairs; or if GENZYME
makes a general assignment for the benefit of creditors, this license and
sublicense shall immediately terminate unless such bankruptcy, insolvency,
receivership or assignment for the benefit of creditors shall have been cured
within thirty (30) days of such event occurring. Upon occurrence of any
foregoing events, GENZYME shall give immediate written notice thereof to
CELTRIX.
7.3 Upon any breach or default under this Agreement by GENZYME, CELTRIX may give
written notice thereof to GENZYME, and GENZYME shall have [*] days thereafter to
cure such breach or default. If such breach or default is not so cured, CELTRIX
may then in its sole discretion and option (i) terminate this Agreement and the
licenses granted by it, and/or (ii) seek such other relief as may be provided by
law in such circumstances by giving written notice thereof to GENZYME.
7.4 Upon termination of this Agreement for any cause, nothing herein shall be
construed to release either party of any obligation matured prior to the
effective date of such termination, including payments of accrued royalties, and
GENZYME and, as applicable, its Affiliates and/or sublicensee(s), may after the
effective date of such termination sell all Licensed Product(s) that it may have
on hand at the date of termination provided that it pays earned royalties
therein as provided in this Agreement. Upon termination hereof for any reason,
all license rights to Patent Rights shall immediately terminate. The provisions
of Sections 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 8.1, and Articles X and XI shall
survive any termination of this Agreement.
7.5 [*]
-17-
<PAGE> 18
License Agreement
Page 18
ARTICLE VIII - NOTICE
8.1 Any notice or communication authorized or required to be given hereunder
shall be in writing and be served by depositing the same in the United States
mail, postage prepaid, addressed to the parties, respectively, at the following
addresses:
To Celtrix Pharmaceuticals, Inc.:
3055 Patrick Henry Drive
Santa Clara, CA 95054-1815
ATTN: President
To Genzyme Corporation:
One Kendall Square
Cambridge, MA 02139
ATTN: General Counsel
ARTICLE IX - FORCE MAJEURE
9.1 The parties to this Agreement shall be excused from any performance required
hereunder if such performance is rendered impossible or unfeasible due to any
catastrophes or other major events beyond their reasonable control, including,
without limitation, war, riot, and insurrection; laws, proclamations, edicts,
ordinances or regulations; strikes, lock-outs or other serious labor disputes;
and floods, fires, explosions, or other natural disasters. When such events have
abated, the parties' respective obligation hereunder shall resume.
ARTICLE X - NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 All confidential scientific and technical information communicated by one
party to the other party under this Agreement, including information contained
in patent applications, shall be kept confidential by such other party. All
obligations of confidentiality hereunder shall be
-18-
<PAGE> 19
License Agreement [*] INDICATES THAT CONFIDENTIAL TREATMENT
Page 19 HAS BEEN REQUESTED
equally applicable to the Affiliates and any sublicensee(s) of GENZYME.
Notwithstanding the foregoing, either party shall be relieved of the
confidentiality obligations herein and not be prevented by this Agreement from
utilizing any such information if:
(a) The information was previously known to such party as may be
demonstrated by its prior written records;
(b) The information is or becomes generally available to the
public through no fault of the receiving party, including as a
result of publications and/or laying open to inspection of any
patent applications that may be filed other than by such
receiving party corresponding to such U.S. or foreign patent
applications;
(c) The information is acquired in good faith in the future by
such party from a third party who is not under an obligation
of confidence to the disclosing party in respect to such
information;
(d) The disclosure of such information by GENZYME is essential for
the commercialization by GENZYME of the Patent Rights under
this Agreement, provided prior notice is given and consent is
obtained from CELTRIX to such disclosure, said consent not to
be unreasonably withheld; and
(e) The information (which is not confidential information of
GENZYME) is outside the Field.
10.2 The obligations of confidentiality under this Article shall survive
termination of this Agreement for a period of [*] years, regardless of the
reason for its termination.
ARTICLE XI- MISCELLANEOUS
11.1 This Agreement, in whole or part, shall not be assignable by GENZYME
without the written consent of CELTRIX which consent shall not be unreasonably
withheld; provided, however, that GENZYME, without such consent, may assign or
sell the same in connection with the transfer or sale of all of substantially
all of
-19-
<PAGE> 20
License Agreement
Page 20
its business or in the event of its merger, consolidation, or joint venture with
another company. Each assignee shall assume all obligations of its assignor
under this Agreement. No assignment shall relieve GENZYME of responsibility for
the performance of any accrued obligations which such party then has hereunder.
CELTRIX may assign this Agreement at any time upon written notice to GENZYME
prior to such assignment. Subject to the foregoing, this Agreement shall inure
to the benefit of and be binding upon GENZYME, CELTRIX, and their respective
successors and assigns.
11.2 This Agreement embodies the entire understanding between the parties and
may not be varied except by a document in writing signed by an officer of
GENZYME and an officer of CELTRIX.
11.3 This Agreement shall be construed, governed, interpreted, and applied in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
its conflict of laws provisions, except that questions affecting the validity,
construction, and effect of any patent shall be determined by the laws of the
country in which the patents were granted.
11.4 The provisions of this Agreement are severable, and in the event that any
of the provisions of this Agreement are determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof, provided the remaining provisions conform with
the spirit and purposes of this Agreement.
11.5 GENZYME shall mark, or shall require its Affiliate and/or sublicensee(s)to
mark, the Licensed Product(s) sold in the United States with all applicable
patent numbers, and to indicate to users, as appropriate, the patent numbers for
relevant Licensed Method(s). All Licensed Product(s) shipped and/or sold in
other countries shall be marked in such a manner as to conform with all of the
laws of the country where the Licensed Product(s) are shipped to and/or sold.
11.6 The captions herein are for convenience only and shall not be deemed to
limit or otherwise affect the construction hereof.
-20-
<PAGE> 21
License Agreement
Page 21
11.7 The failure of either party to enforce at any time the provisions of this
Agreement, or any rights in respect thereto, or to exercise any election herein
provided, shall in no way be considered to be a waiver of such provisions,
rights, or elections, or in any way to affect the validity of this Agreement.
The exercise by either party of any of its rights herein or any of its elections
under the terms or covenants herein shall not preclude either party from
exercising the same or any other rights it may have under this Agreement,
irrespective of any previous action or proceeding taken by either party
hereunder.
11.8 All disputes under this Agreement shall be settled, if possible, through
good faith negotiations between the parties and ultimately presented to the
parties' Chief Executive Officers for resolution. In the event such good faith
negotiations are unsuccessful, either party may, after thirty (30) days written
notice to the other, submit the matter in dispute to the American Arbitration
Association ("AAA") to be settled by arbitration before a single arbitrator
appointed by the AAA in Boston, Massachusetts, if CELTRIX is the initiating
party, and in Santa Clara, California, if GENZYME is the initiating party, in
accordance with the commercial arbitration rules of the AAA. The arbitrator
shall have authority to grant specific performance and to allocate between the
parties the costs of arbitration in such equitable manner as the arbitrator may
determine. Upon reasonable notice and prior to any hearing, the parties will
allow document discovery and will disclose all material relevant to the subject
matter of the dispute within sixty (60) days following appointment of the
arbitrator. The arbitrator shall make final determinations as to any discovery
disputes. A hearing on the matter in dispute shall commence within ninety (90)
days following appointment of the arbitrator and the decision of the arbitrator
shall be rendered no later than sixty (60) days after commencement of such
hearing. The determination of the arbitrator shall be conclusive and binding
upon the parties and judgment may be entered thereon and enforced by any court
of competent jurisdiction, and each party hereby irrevocably consents to the
jurisdiction of such courts for such purpose.
-21-
<PAGE> 22
License Agreement
Page 22
IN WITNESS WHEREOF, the parties hereto hereunder set their hands and
seals and duly executed this License Agreement the day and year first written
above.
CELTRIX PHARMACEUTICALS, INC. GENZYME CORPORATION
By: /s/ Andreas Sommer By: /s/ Richard Douglas
------------------------- -----------------------------
Title: President and CEO Title: V.P. Corporate Development
---------------------- ---------------------------
Date: 12/31/97 Date: 12/18/97
---------------------- -----------------------------
-22-
<PAGE> 23
Appendix A
I. Patents relating to TGF-[beta] Antibodies:
A. Assigned to and Owned by Celtrix Pharmaceuticals, Inc.:
1. Dasch et al. U.S. Patent No. 5,571,714, entitled
"Monoclonal Antibodies Which Bind Both Transforming Growth
Factors [beta]1 and [beta]2 and Methods of Use"
2. U.S. Patent Application Serial No. 08/434,977
3. U.S. Patent Application Serial No. 08/434,976
II. Patent Applications relating to TGF-[beta] Antibodies and TGF-[beta]
Receptors:
A. Assigned to and Owned by Celtrix Pharmaceuticals, Inc.:
-23-
<PAGE> 24
[*] INDICATES THAT CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED
1. U.S. Patent Application Serial No. 08/019,556 prepared and
filed by Celtrix Pharmaceuticals, Inc. as of February 19,
1993, [*], including all divisions, continuations and
continuations-in-part based thereon, and any foreign
counterparts. [*].
III. Patent Applications relating to TGF-[beta] Receptors:
A. Licensed to Celtrix Pharmaceuticals, Inc. from Massachusetts
Institute of Technology:
1. U.S. Patent Application Serial No. 07/836,063 prepared and
filed by Massachusetts Institute of Technology Case 5690W,
Docket No. WHI 91-09, entitled "TGF-[beta] Type Receptor
cDNAs, Encoded Products and Uses Therefor" and having
inventors Herbert Y. Lin, Dr. Harvey F. Lodish, Dr. Robert A.
Weinberg, and Dr. Xiao-Fan Wang, including all divisions,
continuations and continuations-in-part based thereon, and any
foreign counterparts.
B. Assigned to and Owned by Celtrix Pharmaceuticals, Inc.:
1. U.S. Patent Application Serial No. 08/361,873 prepared and
filed by Celtrix Pharmaceuticals, Inc. on October 29, 1993,
entitled [*], including all divisions, continuations and
continuations-in part based thereon, and any foreign
counterparts.
-24-
<PAGE> 1
[*] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION
Exhibit 10.54
AMENDMENT No. 1
TO LICENSE AND DEVELOPMENT AGREEMENT
BETWEEN CELTRIX PHARMACEUTICALS, INC.
AND GENZYME CORPORATION
As of June 24, 1994, Celtrix Pharmaceuticals, Inc.
(hereinafter "Celtrix") and Genzyme Corporation (hereinafter "Genzyme") entered
into a License and Development Agreement (hereinafter "the Agreement"). Subject
to the modifications contained in this Amendment No. 1, the Agreement shall
continue in full force and effect.
In order to resolve any issues outstanding between Celtrix and
Genzyme with respect to the Agreement and its subject matter, with the exception
of transfer of any rights in Licensed Technology as defined in the Agreement,
and in accordance with Section 12.6, Celtrix and Genzyme now wish to amend the
Agreement as follows. The effective date of this amendment shall be the latest
date of execution hereof by the parties, with all other terms of the Agreement
continuing in full force and effect.
I. Revision of Article 1, Section 1.26.
Section 1.26 shall be deleted and replaced with the following:
1.26. "Territory" means worldwide including Japan, China,
Korea and Taiwan (the "Asian countries").
II. Revision of Article 2, Sections 2.1 and 2.2.
Section 2.1 shall be deleted and replaced with the following:
2.1 Exclusive License. Subject to the terms and conditions of
this Agreement and rights granted to Genentech, Inc., pursuant to the License
Agreement dated April 1, 1993 between Celtrix and Genentech, Inc., Celtrix
hereby grants to Genzyme an exclusive (against Celtrix and all others) right and
license (including the right to grant sublicenses) to Celtrix's rights in the
Territory to make, have made, (including by Celtrix hereunder), use and sell any
Product in the Field (a) the use, manufacture or sale of which is covered by one
or more claims of the Patents or (b)
<PAGE> 2
Amendment No. 1
Page 2
incorporating or manufactured using Licensed Technology. Any Celtrix rights
not specifically licensed hereunder shall continue to be vested exclusively in
Celtrix, and Celtrix shall have the sole authority and discretion to exercise or
refrain from exercising such rights.
Section 2.2 shall be deleted and replaced with the following:
2.2. Acquisition of Third Party Rights. Genzyme shall use all
commercially reasonable efforts to obtain any rights, at its cost, from any
Third Party that are necessary for the manufacture, use or sale of the Product
in accordance with this Agreement. Genzyme shall bear and pay all costs and
royalties due by Celtrix under Sections 3.2, 3.3, 3.4, and 3.5 of the License
Agreement effective as of April 1, 1993 between Celtrix and Genentech, Inc.
("the "Genentech Agreement"), in accordance with the provisions contained in
Section 7.0 of the Genentech Agreement, and Genzyme shall further have the right
to seek and obtain reduction of such royalty provisions, to its sole benefit.
III. Addition to Article 3, Section 3.2.(c)
Section 3.2(c) shall be amended to add the following at the
end of that Section 3.2:
Genzyme hereby waives and releases Celtrix from any obligation
to provide, or pay the dollar equivalent of, any services required to be
provided pursuant to this Section 3.2(c), including without limitation, all
services required to be provided by Celtrix for the years 1994 through 1997 that
are undelivered as of the effective date of this Amendment No. 1.
IV. Revision of Article 4, Section 4.3(a)
Section 4.3(a) shall be deleted and replaced with the
following:
(a) Royalty Rates. On a per Product (e.g., all wound repair
Products regardless of dosage or formulation comprise a Product) and annual
basis and subject to decrease pursuant to Section 4.3(b), Genzyme shall pay
Celtrix royalties based on one of the following percentages of Net Sales of
Products sold by Genzyme and its Affiliates in a country where the respective
Product is covered by any Valid Claim, beginning with the First Commercial Sale
in such country and continuing until all such Valid Claims have expired:
For Initial and Additional Products:
-2-
<PAGE> 3
Amendment No. 1 [*] INDICATES THAT CONFIDENTIAL
Page 3 TREATMENT HAS BEEN REQUESTED
(x) [*] on Net Sales [*]; and
(y) [*] on Net Sales [*].
V. Revision of Article 4, Section 4.3(e):
Section 4.3(e) shall be deleted and replaced with the
following:
(e) Third Party Royalties. If any Third Party is entitled to
receive royalties based on Product sales by Genzyme or its Affiliates or
sublicensees, such royalty obligations shall be allocated to Genzyme and shall
be paid directly by Genzyme.
VI. Revision of Article 5, Section 5.1:
Section 5.1 shall be deleted and replaced with the following:
5.1 Pre-Clinical and Clinical Manufacture. Subject to
Genzyme's rights under Section 5.3, Celtrix shall be responsible for the
manufacturing of all of Genzyme's requirements for Product for the conduct of
pre-clinical and Phase I/II clinical testing of Initial Products prior to June
1, 1997, provided that Celtrix possesses the capability to perform such
manufacturing under applicable regulatory standards and that it shall have
adequate capacity to provide the necessary quality and quantity of Product in
the time frames required by Genzyme. The parties shall agree to and implement
customary forecast and order procedures with respect to such Product to be
manufactured by Celtrix. With regard to such Product manufacture, Celtrix's
responsibilities shall include all aspects of the manufacturing process,
including maintenance of manufactured inventory, quality control and shipment of
Product in accordance with orders placed by Genzyme. As compensation for such
manufacturing services, Celtrix shall be entitled to receive payments of its
manufacturing costs, subject to reduction pursuant to Section 3.2(c). Genzyme
acknowledges that Celtrix has fulfilled all of its manufacturing requirements
for Product under this Section 5.1.
ACCEPTED AND AGREED,
Celtrix Pharmaceuticals, Inc. Genzyme Corporation
By: /s/ Andreas Sommer By: /s/ Richard Douglas
----------------------------- ----------------------------------
Title: President & CEO Title: V.P. Corporate Development
Date: 12/31/97 Date: 12/18/97
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-Q FOR THE FISCAL QUARTER
ENDED DECEMBER 31, 1997 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> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,449
<SECURITIES> 8,928
<RECEIVABLES> 58
<ALLOWANCES> 46
<INVENTORY> 0
<CURRENT-ASSETS> 10,681
<PP&E> 20,074
<DEPRECIATION> 12,686
<TOTAL-ASSETS> 20,684
<CURRENT-LIABILITIES> 1,404
<BONDS> 0
0
0
<COMMON> 211
<OTHER-SE> 18,142
<TOTAL-LIABILITY-AND-EQUITY> 20,684
<SALES> 49
<TOTAL-REVENUES> 66
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,313)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,313)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
