FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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: 0-19825
SCICLONE PHARMACEUTICALS, INC.
------------------------------
(Exact name of registrant as specified in its charter)
California 94-3116852
---------- -----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
901 Mariners Island Blvd., Suite 315, San Mateo, California 94404
- ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(415) 358-3456
(Registrant's telephone number, including area code)
Not Applicable
---------------
(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
------- -------
As of July 31, 1996, 17,593,742 shares of the registrant's Common
Stock, no par value, were issued and outstanding.
<PAGE>
The undersigned Registrant hereby amends the following exhibit to the
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996, as
set forth below:
At the Commission's request, the Registrant is refiling Exhibit 10.1 in
accordance with the Commission's granting of an order for confidential treatment
of certain portions of Exhibit 10.1.
SCICLONE PHARMACEUTICALS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations
Three and six months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995 5
Notes to 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 11
Signatures 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,090,453 $ 3,986,307
Short-term investments 9,196,281 15,467,685
Accounts receivable, net 85,800 108,410
Inventory 2,485,450 2,360,479
Prepaid expenses and other current assets 2,193,177 1,955,930
------------- -------------
Total current assets 20,051,161 23,878,811
Property and equipment, net 313,254 313,703
Other assets 66,722 58,381
Long-term investments 27,077,875 27,935,835
Notes receivable from officers 1,658,741 1,964,065
------------- -------------
Total assets $ 49,167,753 $ 54,150,795
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 564,106 $ 472,477
Accrued compensation and benefits 823,150 1,086,904
Accrued clinical trial expense 1,441,811 2,054,741
Accrued professional fees 1,761,500 765,000
Other accrued expenses 363,273 216,411
------------- -------------
Total current liabilities 4,953,840 4,595,533
------------- -------------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized ; no shares issued and outstanding -- --
Common stock, no par value; 75,000,000 shares
authorized; 17,470,198 and 16,807,257 shares
issued and outstanding 108,694,269 105,915,548
Net unrealized (loss) gain on available-for-sale
securities (405,878) 450,086
Accumulated deficit (64,074,478) (56,605,519)
Deferred compensation -- (204,853)
------------- -------------
Total shareholders' equity 44,213,913 49,555,262
------------- -------------
Total liabilities and shareholders' equity $ 49,167,753 $ 54,150,795
============= =============
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Product sales $ 122,037 $ 45,198 $ 248,345 $ 45,198
Cost of product sales 203,660 203,293 403,460 203,293
------------ ------------ ------------ ------------
Gross profit (81,623) (158,095) (155,115) (158,095)
Operating expenses:
Research and development 2,542,473 2,641,347 5,077,074 4,960,531
Marketing 1,030,296 893,512 2,101,113 2,039,901
General and administrative 787,636 707,939 1,563,334 1,497,903
------------ ------------ ------------ ------------
Total operating expenses 4,360,405 4,242,798 8,741,521 8,498,335
------------ ------------ ------------ ------------
Loss from operations (4,442,028) (4,400,893) (8,896,636) (8,656,430)
Interest and investment income, net 711,571 718,277 1,427,677 1,404,424
------------ ------------ ------------ ------------
Net loss $ (3,730,457) $ (3,682,616) $ (7,468,959) $ (7,252,006)
============ ============ ============ ============
Net loss per share $ (0.21) $ (0.22) $ (0.43) $ (0.43)
============ ============ ============ ============
Weighted average shares used in
computing per share amounts 17,441,228 16,876,593 17,246,676 16,981,106
============ ============ ============ ============
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SCICLONE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six months ended
June 30,
1996 1995
------------- -------------
<S> <C> <C>
Operating activities:
Net loss $ (7,468,959) $ (7,252,006)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 288,434 253,251
Changes in operating assets and liabilities:
Accounts receivable 22,610 (40,727)
Inventory (124,971) (1,028,312)
Prepaid expenses and other assets 59,736 (1,502,062)
Accounts payable and other accrued expenses 238,491 (206,744)
Accrued clinical trial expense (612,930) 208,815
Accrued professional fees 996,500 213,750
Accrued compensation and benefits (263,754) (516,972)
------------ ------------
Net cash used in operating activities (6,864,843) (9,871,007)
------------ ------------
Investing activities:
Purchase of property and equipment (83,132) (95,698)
Sale of short and long term investments, net 6,273,400 10,607,701
------------ ------------
Net cash provided by investing activities 6,190,268 10,512,003
------------ ------------
Financing activities:
Proceeds from issuance of common stock, net 2,778,721 63,338
Repurchase of common stock -- (1,924,897)
------------ ------------
Net cash provided by (used in) financing activities 2,778,721 (1,861,559)
------------ ------------
Net increase (decrease) in cash and cash equivalents 2,104,146 (1,220,563)
Cash and cash equivalents, beginning of period 3,986,307 8,292,888
------------ ------------
Cash and cash equivalents, end of period $ 6,090,453 $ 7,072,325
============ ============
Supplemental disclosures of noncash financing activities:
Net unrealized (loss) gain on available-for-sale securities (855,964) 2,045,461
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
5
<PAGE>
SCICLONE PHARMACEUTICALS, INC.
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
consistent with those applied in, and should be read in conjunction
with, the audited financial statements for the year ended December 31,
1995. The interim financial information reflects all normal recurring
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the interim and commencement to
date periods presented. The interim results are not necessarily
indicative of results for the full year.
2. Net loss per share has been computed using the weighted average number
of common shares outstanding during each period presented. Common
equivalent shares for outstanding options and warrants were not
included in the weighted average shares outstanding because the effect
of including them is antidilutive.
<TABLE>
3. The following is a summary of available-for sale securities at June 30,
1996:
<CAPTION>
Available-for-Sale Securities
-----------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
U.S. Government &
Agency obligations $ 24,995,308 $ 2,581 $ (347,534) $ 24,650,355
Corporate obligations 11,484,726 10,255 (79,682) 11,415,299
Corporate securities 200,000 24,102 (15,600) 208,502
------------ ------------ ------------ ------------
$ 36,680,034 $ 36,938 $ (442,816) $ 36,274,156
============ ============ ============ ============
</TABLE>
The amortized cost and estimated fair value of debt and marketable
securities at June 30, 1996 by contractual maturity are shown below.
Estimated
Fair
Cost Value
----------- -----------
Due in one year or less $ 9,016,529 $ 8,987,779
Due after one year through three years 21,122,138 20,855,060
Due after three years 6,341,367 6,222,815
----------- -----------
36,480,034 36,065,654
Corporate securities 200,000 208,502
----------- -----------
$36,680,034 $36,274,156
=========== ===========
4. The following is a summary of inventories at June 30, 1996:
Raw materials $2,445,038
Finished goods 40,412
----------
$2,485,450
==========
6
<PAGE>
5. In April 1996, the Company acquired an exclusive license for CPX, a
synthetic compound developed by the National Institutes of Health,
("NIH") as a potential treatment for cystic fibrosis. NIH will receive
certain milestone payments upon successful research and development
results in addition to royalties on net sales revenue.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for historical information contained herein, the following
material is a forward-looking statement that is subject to certain risks and
uncertainties. These risks and uncertainties include the Company's current
reliance on a single product, ZADAXIN(R) thymosin alpha 1, for its revenues, the
absence of regulatory approval for ZADAXIN in significant markets, uncertainties
regarding prospects for regulatory approvals based on existing clinical data,
risks associated with the manufacture and supply of ZADAXIN and relationships
with collaborative partners, and competition from competing therapies, as well
as other risks and uncertainties described herein and in the Company's Annual
Report on Form 10-K and its other reports filed with the Securities Exchange
Commission.
The Company is an international biopharmaceutical company involved in
the acquisition, development and commercialization of pharmaceuticals worldwide.
The Company's focus is on therapeutics for diseases that are chronic and
life-threatening, including hepatitis B and C, cancer and immune system
disorders. To date, the Company's principal focus has been the development and
commercialization of ZADAXIN.
From commencement of operations through June 30, 1996, the Company
incurred a cumulative net loss of approximately $64.1 million. The Company
expects its operating expenses to increase over the next several years as it
expands its research and development, clinical testing and marketing
capabilities. The Company's ability to achieve a profitable level of operations
currently is dependent in large part on securing regulatory approvals for
ZADAXIN in additional countries, successfully launching ZADAXIN once approved,
acquiring rights to additional drugs, and entering into and extending agreements
for product development and commercialization, where appropriate. There can be
no assurance that the Company will ever achieve a profitable level of
operations.
The Company's operating results may fluctuate from period to period as
a result of, among other things, the timing and costs associated with clinical
trials and the regulatory approval process, and the acquisition of additional
product rights. The Company participates in a highly dynamic industry, which
often results in significant volatility of the Company's common stock price. Any
setbacks in clinical trials, in the regulatory approval process or in
relationships with collaborative partners, and any shortfalls in revenue or
earnings from levels expected by securities analysts, among other developments,
have in the past had and could in the future have an immediate and significant
adverse effect on the trading price of the Company's common stock in any given
period.
Results of Operations
Product sales reached approximately $122,000 and $248,000 for the three
and six month periods ended June 30, 1996, respectively, as compared to
approximately $45,000 for each of the corresponding periods in 1995. The Company
commenced shipment of ZADAXIN in the second quarter of 1995 and has been
recording product sales under a named patient registration program. The Company
has filed for approval to market ZADAXIN in several countries and anticipates
additional filings in other countries. As a result, the Company expects product
sales to increase during the remainder of 1996 and beyond if additional ZADAXIN
marketing approvals are obtained. Although the Company remains optimistic
regarding the prospects of ZADAXIN, there can be no assurance that the Company
will ever achieve significant levels of product sales.
8
<PAGE>
Cost of product sales was approximately $204,000 and $403,000 for the
three and six month periods ended June 30, 1996, respectively, as compared to
approximately $203,000 for each of the corresponding periods in 1995. This
increase relates to the Company's increase in product sales and the fixed costs
associated with acquiring and warehousing product inventory. The Company expects
cost of product sales to vary from quarter to quarter, dependent upon the level
of product sales and the absorption of fixed product-related costs.
Research and development expenses were approximately $2,542,000 and
$5,077,000 for the three and six month periods ended June 30, 1996,
respectively, as compared to approximately $2,641,000 and $4,961,000 for the
corresponding periods in 1995. The decrease in the three month period is
primarily attributable to decreased clinical trials expenses offset by increased
professional fees. The change in the six month period is primarily attributable
to increased payroll costs and professional fees offset by decreased clinical
trials expenses. In April, 1996, the Company acquired an exclusive license for
CPX, a synthetic compound developed by the National Institutes of Health as a
potential treatment for cystic fibrosis. The Company has incurred additional
professional consulting service fees to initiate the development of this
compound. The decrease in clinical trial expenses was primarily a result of
completion of enrollment in the ZADAXIN U.S. Phase III Hepatitis C trial. The
Company is currently reviewing its U.S. and European ZADAXIN clinical trial
strategy and the results of this review will have a significant effect on the
Company's research and development expenses. In general,the Company expects
research and development expenses to increase over the next several years and to
vary quarter to quarter as the Company initiates additional clinical trials and
testing, acquires product rights, initiates additional trials, and expands
regulatory activities.
Marketing expenses were approximately $1,030,000 and $2,101,000 for the
three and six month periods ended June 30, 1996, respectively, as compared to
$894,000 and $2,040,000 for the corresponding periods in the prior year. This
increase is primarily attributable to increased professional services expenses
offset by decreased payroll costs related to an executive officer who left the
Company in 1995. The Company expects marketing expenses to increase
significantly in the next several years as it expands its commercialization and
marketing efforts and pursues other strategic relationships.
General and administrative expenses were approximately $788,000 and
$1,563,000 for the three and six month periods ended June 30, 1996,
respectively, as compared to approximately $708,000 and $1,498,000 for the
corresponding periods in the prior year. The increase is primarily attributable
to increased payroll costs offset by decreased expenses for professional
services, primarily legal services and consulting fees. In the near term, the
Company expects general and administrative expenses to vary quarter to quarter
as the Company augments its general and administrative activities to support
increased expenditures on clinical trials and testing, and regulatory,
pre-commercialization and marketing activities.
Net interest and investment income was approximately $712,000 and
$1,428,000 for the three and six month periods ended June 30, 1996,
respectively, as compared to approximately $718,000 and $1,404,000 in the same
periods in 1995. The changes in the three and six month periods primarily
resulted from decreased interest and investment income due to lower average
invested cash balances offset by overall increased rates and gains from the sale
of certain short-term investments.
9
<PAGE>
Liquidity and Capital Resources
At June 30, 1996, the Company had approximately $42,365,000 in cash,
cash equivalents and highly liquid short and long term investments.
Net cash used by the Company in operating activities amounted to
approximately $6,865,000 for the six month period ended June 30, 1996. Net cash
used in operating activities in the 1996 period is less than the Company's net
loss for such period primarily due to noncash charges associated with
depreciation and amortization, decreases in and prepayments of certain future
period expenses and increases in amounts owed for accounts payable and accrued
professional fees. These were offset by cash used for inventory purchases and
decreases in amounts owed to third parties for goods and services related to
clinical trial expenses and compensation and benefits. Net cash used in
operating activities amounted to approximately $9,871,000 for the six month
period ended June 30, 1995. Net cash used in operating activities in the 1995
period is greater than the Company's net loss for such period primarily due to
inventory purchases, the prepayment of certain future period expenses and
payments for accrued compensation and benefits and accounts payable. These uses
were offset by increases in amounts owed to third parties for clinical trial
expenses and professional fees, in addition to noncash charges associated with
depreciation and amortization.
Net cash provided by investing activities for the six month period
ended June 30, 1996 related to the net sale of approximately $6,273,000 of
marketable securities offset by the purchase of $83,000 in equipment and
furniture. Net cash provided in investing activities for the comparable 1995
period primarily resulted from the net sale of $10,608,000 of marketable
securities offset by the purchase of $96,000 of equipment and furniture.
Net cash provided by financing activities for the six month period
ending June 30, 1996 primarily consisted of approximately $2,779,000 in proceeds
received for the issuance of common stock under the Company's stock option plan.
Net cash used in financing activities for the six month period ending June 30,
1995 related to repurchases of the Company's common stock of approximately
$1,925,000 offset by approximately $63,000 in proceeds received from issuance of
common stock under the Company's stock option plan.
Management believes its existing capital resources and interest on
funds available are adequate to maintain its current and planned operations at
least through 1997. However, the Company's capital requirements may change
depending upon numerous factors, including the availability of complementary
products, technologies and businesses, the results of clinical trials and
testing, the timing of regulatory approvals, developments in relationships with
collaborative partners and the status of competitive products. If the Company
cannot eventually generate sufficient funds from operations, it will need to
raise additional financing. There can be no assurance that such financing will
be available on acceptable terms, or at all.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
-------- -----------
10.1 License Agreement effective April 19, 1996 between
the Registrant and the National Institutes of Health
Office of Technology Transfer*
27 Financial Data Schedule
(b) Reports on Form 8-K
None
* Confidential treatment requested.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SCICLONE PHARMACEUTICALS, INC.
(Registrant)
Date: August 14, 1996 Donald R. Sellers
--------------------------------------------
Donald R. Sellers
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1996 Mark A. Culhane
-------------------------------------------
Mark A. Culhane
Vice President, Finance and Administration
and Chief Financial Officer
(Principal Financial & Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10.1 License Agreement effective April 19, 1996 between the Registrant and
the National Institutes of Health Office of Technology Transfer*
27 Financial Data Schedule**
- ---------------
* Confidential treatment requested.
** This exhibit shall not be deemed filed for purposes of Section 11 of the
Securities Act, Section 18 of the Exchange Act, and Section 323 of the Trust
Indenture Act, or otherwise be subject to the liabilities of such sections.
PUBLIC HEALTH SERVICE
PATENT LICENSE AGREEMENT--EXCLUSIVE
COVER PAGE
For PHS internal use only:
Patent License Number: L-223-95
Serial Numbers of Licensed Patents: (1) U.S. Patent No. 5,366,977, issued
November 22, 1994 (U.S. Patent
Application Serial No. 07/952,965, filed
September 29, 1992), entitled "Methods
of Treating Cystic Fibrosis Using
8-Cyclopentyl-1, 3-Dipropylxanthine or
Xanthine Amino Congeners;" and (2) U.S.
Patent Application Serial No.
08/343,714, filed November 22, 1994,
entitled "A Method of Identifying
CFTR-Binding Compounds Useful for
Activating Chloride Conductance in
Animal Cells"
Licensee: SciClone Pharmaceuticals, Inc.
901 Mariner's Island Boulevard
San Mateo, California 94404
CRADA Number (if applicable): Not Applicable.
Additional Remarks: (1) For U.S. Patent No. 5,366,977, entitled "Methods of
Treating Cystic Fibrosis Using
8-Cyclopentyl-1,3-Dipropylxanthine or Xanthine Amino
Congeners": exclusively for the treatment of cystic
fibrosis and (2) For U.S. Patent Application Serial No.
08/343,714, filed November 22, 1994, entitled "A Method
of Identifying CFTR-Binding Compounds Useful for
Activating Chloride Conductance in Animal Cells": (i)
exclusively for the treatment and diagnosis of cystic
fibrosis in humans; (ii) exclusively for the class of
compounds claimed for therapeutic and diagnostic uses
for human diseases other than cystic fibrosis
conditionally for a period of twenty-four (24) months;
and (iii) nonexclusively for methods for identifying
CFTR-binding compounds.
This Patent License Agreement, hereinafter referred to as the
"Agreement," consists of this Cover Page, an attached Agreement, a Signature
Page, Appendix A (List of Patent(s) or Patent Application(s)), Appendix B
(Fields of Use and Territory), Appendix C (Royalties), Appendix D
(Modifications), Appendix E (Benchmarks), and Appendix F (Commercial Development
Plan). The Parties to this Agreement are:
<PAGE>
1) The National Institutes of Health ("NIH"), the Centers for Disease
Control and Prevention ("CDC"), or the Food and Drug Administration ("FDA"),
hereinafter singly or collectively referred to as "PHS," agencies of the United
States Public Health Service within the Department of Health and Human Services
("DHHS"); and
2) The person, corporation, or institution identified above and/or on
the Signature Page, having offices at the address indicated on the Signature
Page, hereinafter referred to as "Licensee."
-2-
<PAGE>
PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
PHS and Licensee agree as follows:
1. BACKGROUND
1.01 In the course of conducting biomedical and behavioral research,
PHS investigators made inventions that may have commercial applicability.
1.02 By assignment of rights from PHS employees and other inventors,
DHHS, on behalf of the United States Government, owns intellectual property
rights claimed in any United States and foreign patent applications or patents
corresponding to the assigned inventions. DHHS also owns any tangible
embodiments of these inventions actually reduced to practice by PHS.
1.03 The Assistant Secretary for Health of DHHS has delegated to PHS
the authority to enter into this Agreement for the licensing of rights to these
inventions under 35 U.S.C. ss.ss.200-212, the Federal Technology Transfer Act of
1986, 15 U.S.C. ss.3710a, and/or the regulations governing the licensing of
Government-owned inventions, 37 CFR Part 404.
1.04 PHS desires to transfer these inventions to the private sector
through commercialization licenses to facilitate the commercial development of
products and processes for public use and benefit.
1.05 Licensee desires to acquire commercialization rights to certain
of these inventions in order to develop processes, methods, or marketable
products for public use and benefit.
2. DEFINITIONS
2.01 "Benchmarks" mean the performance milestones that are set forth
in Appendix E, as may be amended from time to time by mutual written consent.
2.02 "Commercial Development Plan" means the written commercialization
plan attached as Appendix F, as may be amended from time to time by mutual
written consent.
2.03 "First Commercial Sale" means the initial transfer by or on
behalf of Licensee or its sublicensees of Licensed Products or the initial
practice of a Licensed Process by or on behalf of Licensee or its sublicensees
in exchange for cash or some equivalent to which value can be assigned for the
purpose of determining Net Sales, provided, however, First Commercial Sale shall
not include transfers at or below cost by or on behalf of Licensee, its
Affiliates, or its Sublicensees of Licensed Products or the practice of Licensed
Processes in connection with compassionate use, emergency use, treatment
Investigational New Drug Applications (IND's), or the like authorized by the
U.S. Food and Drug Administration ("FDA") or corresponding foreign agencies.
2.04 "Government" means the Government of the United States of
America.
-3-
<PAGE>
2.05 "Licensed Fields of Use" means the fields of use identified in
Appendix B.
2.06 "Licensed Patent Rights" shall mean:
a) U.S., Patent Cooperation Treaty (PCT), and foreign patent
applications and patents listed in Appendix A, all divisions and continuations
of these applications, all patents issuing from such applications, divisions,
and continuations, and any reissues, reexaminations, reregistrations, and
extensions of all such patents;
b) to the extent that the following contain one or more claims
directed to the invention or inventions disclosed in a) above: i)
continuations-in-part of a) above; ii) all divisions and continuations of these
continuations-in-part; iii) all patents issuing from such continuations-in-part,
divisions, and continuations; and iv) any reissues, reexaminations,
reregistrations, and extensions of all such patents;
c) to the extent that the following contain one or more claims
directed to the invention or inventions disclosed in a): above all counterpart
foreign applications and patents to a) and b) above, including those listed in
Appendix A.
Licensed Patent Rights shall not include b) or c) above to the
extent that they contain one or more claims directed to new matter which is not
the subject matter disclosed in a) above.
2.07 "Licensed Process(es)" means processes which, in the course of
being practiced would, in the absence of this Agreement, infringe one or more
claims of the Licensed Patent Rights that have not been held invalid or
unenforceable by an unappealed or unappealable judgment of a court of competent
jurisdiction.
2.08 "Licensed Product(s)" means tangible materials which, in the
course of manufacture, use, or sale would, in the absence of this Agreement,
infringe one or more claims of the Licensed Patent Rights that have not been
held invalid or unenforceable by an unappealed or unappealable judgment of a
court of competent jurisdiction.
2.09 "Licensed Territory" means the geographical area identified in
Appendix B.
2.10 "Net Sales" means [REDACTED]* for sales of Licensed Products or
practice of Licensed Processes by or on behalf of Licensee or its sublicensees,
and from leasing, renting, or otherwise making Licensed Products available to
others without sale or other dispositions, whether invoiced or not, less
[REDACTED]*.
2.11 "Practical Application" means to manufacture in the case of a
composition or product, to practice in the case of a process or method, or to
operate in the case of a machine or system; and in each case, under such
conditions as to establish that the invention is being utilized and that its
benefits are to the extent permitted by law or Government regulations available
to the public on reasonable terms.
-4-
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
2.12 "Research License" means a nontransferable, nonexclusive license
to make and to use the Licensed Products or Licensed Processes as defined by the
Licensed Patent Rights solely for purposes of research and not for purposes of
commercial manufacture or distribution or in lieu of purchase.
2.13 "Affiliate" means any corporation or other business entity
controlling, controlled by, or under common control with Licensee. For this
purpose, "control" means direct or indirect beneficial ownership of at least
fifty percent (50%) interest in the income of such corporation or other
business.
2.14 "Combined Product" means a product that contains a Licensed
Product along with at least one other active component or active ingredient not
covered by the Licensed Patent Rights.
2.15 "Class of Compounds" means the class of compounds and
compositions claimed in U.S. Patent Application Serial No. 08/343,714, filed
November 22, 1994, listed in Appendix A, and any continuations, divisions,
continuations-in-part, and counterparts of this application as provided for in
Paragraph 2.06.
2.16 "Effective Date" means the date on when the last party to sign
has executed this Agreement.
3. GRANT OF RIGHTS
3.01 PHS hereby grants to Licensee and its Affiliate(s) and Licensee
and its Affiliate(s) accepts, subject to the terms and conditions of this
Agreement, an exclusive license as set forth in Appendix B:
for the therapeutic treatment of cystic fibrosis in humans as
claimed in U.S. Patent 5,366,977;
for the therapeutic and diagnostic applications for cystic
fibrosis in humans for the Class of Compounds claimed in U.S. Patent Application
Serial No. 08/343,714; and
conditionally for twenty-four (24) months from the Effective
Date, for the Class of Compounds as claimed in U.S. Patent Application Serial
No. 08/343,714 for therapeutic and diagnostic uses for human diseases other than
cystic fibrosis
under the Licensed Patent Rights in the Licensed Territory to
make and have made, to use and have used, to sell and have sold, to offer for
sale and import into the United States any Licensed Products in the Licensed
Fields of Use and to practice and have practiced any Licensed Processes in the
Licensed Fields of Use. Licensee shall notify PHS in writing of any Affiliate
included under this paragraph 3.01.
3.02 This Agreement confers no license or rights by implication,
estoppel, or otherwise to either party under any patent applications or patents
of PHS or of Licensee other
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than Licensed Patent Rights regardless of whether such patents are dominant
or subordinate to Licensed Patent Rights.
3.03 PHS hereby grants and Licensee accepts, subject to the terms and
conditions of this Agreement, a nonexclusive license as set forth in Appendix B
for methods for identifying CFTR-binding compounds under U.S. Patent Application
Serial No. 08/343,714 under the Licensed Patent Rights in the Licensed Territory
to use in Licensee's internal research program.
3.04 PHS grants Licensee the benefit of any patent term extensions and
reregistrations applicable to the Licensed Patent Rights and any Orphan Drug Act
registrations applicable to Licensed Products and Licensed Processes and
comparable extensions and registrations in foreign countries within the Licensed
Territory. PHS agrees to submit applications to appropriate governmental
agencies at the request and expense of Licensee or to otherwise cooperate, at
Licensee's expense, in connection with applying for and obtaining such
extensions and registrations.
3.05 To the extent permitted by law, governmental regulation, and PHS
policy, for purposes only of seeking regulatory approval to commercialize
Licensed Products and Licensed Processes, PHS agrees to make its preclinical and
clinical data, if any, relating to Licensed Products and Licensed Processes
available nonexclusively to Licensee.
3.06 This Agreement provides no rights to PHS to utilize rights to
Licensee's solely owned intellectual property, know-how, data, or regulatory
submissions or to disseminate such information to third parties, except with
Licensee's consent or as otherwise required by law.
4. SUBLICENSING
4.01 Upon written approval by PHS, which approval will not be
unreasonably withheld, Licensee may enter into sublicensing agreements under the
Licensed Patent Rights as set forth in Appendix B for the exclusive fields of
use:
for the therapeutic treatment of cystic fibrosis in humans as
claimed in U.S. Patent 5,366,977;
for the therapeutic and diagnostic applications for cystic
fibrosis in humans for the Class of Compounds claimed in U.S. Patent Application
Serial No. 08/343,714; and
conditionally for twenty-four (24) months from the Effective
Date, for the Class of Compounds as claimed in U.S. Patent Application Serial
No. 08/343,714 for therapeutic and diagnostic uses for human diseases other than
cystic fibrosis.
4.02 Licensee agrees that any sublicenses granted by it shall provide
that the obligations to PHS of Paragraphs 5.01-5.04, 8.01, 10.01, 10.02, 12.05
and 13.07-13.09 of this Agreement shall be binding upon the sublicensee as if it
were a party to this Agreement. Licensee further agrees to attach copies of
these Paragraphs to all sublicense agreements.
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4.03 Any sublicenses granted by Licensee shall provide for the
termination of the sublicense, or the conversion to a license directly between
such sublicensees and PHS, at the option of the sublicensee, upon termination of
this Agreement under Article 13. Such conversion is subject to PHS approval,
which approval will not unreasonably be withheld, and contingent upon acceptance
by the sublicensee of the remaining provisions of this Agreement. Any sublicense
granted by Licensee shall further provide for the termination of the sublicense
or the conversion to a license directly between such sublicensees and PHS, at
the option of the sublicensee, if PHS rescinds a Licensed Field of Use to
Licensee and said Licensed Field of Use was granted by the Licensee in said
sublicense. Such conversion is subject to PHS approval, which approval will not
unreasonably be withheld, and contingent upon acceptance by the sublicensee of
the remaining provisions of this Agreement.
4.04 Licensee agrees to forward to PHS a copy of each fully executed
sublicense agreement postmarked within thirty (30) days of the execution of such
agreement. To the extent permitted by law, PHS agrees to maintain each such
sublicense agreement in confidence.
4.05 Licensee has no right to grant sublicenses to the nonexclusive
fields of use set forth in Appendix B, except as otherwise agreed to by PHS.
5. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
5.01 PHS reserves on behalf of the Government an irrevocable,
nonexclusive, nontransferable, royalty-free license for the practice of all
inventions licensed under the Licensed Patent Rights throughout the world by or
on behalf of the Government and on behalf of any foreign government or
international organization pursuant to any existing or future treaty or
agreement to which the Government is a signatory. Prior to the First Commercial
Sale, Licensee agrees to reasonably consider requests by PHS to provide PHS
reasonable quantities of Licensed Products or materials made through the
Licensed Processes solely for PHS research use.
5.02 Licensee agrees that products used or sold in the United States
embodying Licensed Products or produced through use of Licensed Processes shall
be manufactured substantially in the United States, unless a written waiver is
obtained in advance from PHS.
5.03 Licensee acknowledges that PHS may enter into future Cooperative
Research and Development Agreements (CRADAs) under the Federal Technology
Transfer Act of 1986 that relate to the subject matter of this Agreement.
Licensee agrees not to unreasonably deny requests for a Research License from
such future collaborators with PHS when acquiring such rights is necessary in
order to make a CRADA project feasible. Licensee may request an opportunity to
join as a party to the proposed CRADA.
5.04 In addition to the reserved license of Paragraph 5.01 above, PHS
reserves the right to grant such nonexclusive Research Licenses directly or to
require Licensee to grant nonexclusive Research Licenses on reasonable terms.
The purpose of this Research License is to encourage basic research, whether
conducted at an academic or corporate facility. In order to
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safeguard the Licensed Patent Rights, however, PHS shall consult with Licensee
before granting to commercial entities a Research License or providing to them
research samples of the materials, provided, however, that PHS will not provide
materials obtained from Licensee under Paragraph 5.01 to third parties, except
with Licensee's consent.
6. ROYALTIES AND REIMBURSEMENT
6.01 Licensee agrees to pay to PHS a noncreditable, nonrefundable
license issue royalty as set forth in Appendix C.
6.02 Licensee agrees to pay to PHS a nonrefundable minimum annual
royalty as set forth in Appendix C. The minimum annual royalty is due and
payable on January 1 of each calendar year and may be credited against any
earned royalties due for sales made in that year. However, the first minimum
annual royalty shall be due and payable on June 30, 1997 covering the period
from January 1, 1997 to December 31, 1997.
6.03 Licensee agrees to pay PHS earned royalties as set forth in
Appendix C.
6.04 Licensee agrees to pay PHS benchmark royalties as set forth in
Appendix C.
6.05 Licensee agrees to pay PHS sublicensing royalties as set forth in
Appendix C.
6.06 A claim of a patent or patent application licensed under this
Agreement shall cease to fall within the Licensed Patent Rights for the purpose
of computing the minimum annual royalty and earned royalty payments in any given
country in the Licensed Territory on the earliest of the dates that a) the claim
has been abandoned but not continued, b) the patent expires or irrevocably
lapses, or c) the claim has been held to be invalid or unenforceable by an
unappealed or unappealable decision of a court of competent jurisdiction or
administrative agency.
6.07 No multiple royalties shall be payable because any Licensed
Products or Licensed Processes are covered by more than one of the Licensed
Patent Rights.
6.08 On sales of Licensed Products by Licensee to sublicensees or
affiliated parties or on sales made in other than an arm's-length transaction,
the value of the Net Sales attributed under this Article 6 to such a transaction
shall be that which would have been received in an arm's-length transaction,
based on sales of like quantity and quality products to similar entities on or
about the time of such transaction. Notwithstanding the foregoing, sales between
and among Licensee and its Sublicensees and/or Affiliates which are intended for
resale shall not be included in Net Sales. In such cases, royalties shall be
calculated on the basis of Net Sales of Licensed Product(s) by any such
Sublicensee or Affiliate to a non-Affiliate as provided in Section 6.03 hereof.
6.09 With regard to expenses associated with the preparation, filing,
prosecution, and maintenance of all patent applications and patents included
within the Licensed
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Patent Rights incurred by PHS prior to the effective date of this Agreement,
Licensee shall pay to PHS, as an additional royalty, within sixty (60) days of
PHS's submission of a statement and request for payment to Licensee, an amount
equivalent to such patent expenses previously incurred by PHS.
6.10 With regard to expenses associated with the preparation, filing,
prosecution, and maintenance of all patent applications and patents included
within the Licensed Patent Rights incurred by PHS on or after the effective date
of this Agreement, PHS, at its sole option, may require Licensee:
(a) to pay PHS on an annual basis, within sixty (60) days of
PHS's submission of a statement and request for payment, a royalty amount
equivalent to all such patent expenses incurred during the previous calendar
year(s); or
(b) to pay such expenses directly to the law firm employed by PHS
to handle such functions within thirty (30) days of Licensee's receipt of such
law firm's submission of a statement and request for payment. However, in such
event, PHS and not Licensee shall be the client of such law firm.
Under exceptional circumstances, Licensee may be given the right
to assume responsibility for the preparation, filing, prosecution, or
maintenance of any patent application or patent included with the Licensed
Patent Rights. In that event, Licensee shall directly pay the attorneys or
agents engaged to prepare, file, prosecute or maintain such patent applications
or patents and shall provide to PHS copies of each invoice associated with such
services as well as documentation that such invoices have been paid. Any patent
costs incurred after the Effective Date of this Agreement will be shared on a
pro rata basis by all licensees to the Licensed Patent Rights at the time when
said costs are incurred.
6.11 Licensee may elect to surrender its rights in any country of the
Licensed Territory under any Licensed Patent Rights upon sixty (60) days written
notice to PHS and owe no payment obligation under Article 6.10 for
patent-related expenses incurred in that country after the effective date of
such written notice.
6.12 If the Licensee, its Sublicensee, or Affiliate(s) sells a
Combined Product, the Net Sales price for purposes of earned royalty
determination under this Article 6 shall be calculated by multiplying the market
price of the Combined Product by the fraction of a/(a+b), where a is the total
market price of the Licensed Product if sold separately and b is the total
market price of any other product or component in the Combined Product if sold
separately. If the Licensed Product or any other component or product in the
Combined Product are not sold separately, the Net Sales price upon which a
royalty is paid shall be: (a) the market price at which the Licensed Product
reasonably could be sold as a separate item, which may be used as a in the above
fraction in this paragraph to calculate earned royalty if the Licensed Product
is the only component of the Combined Product not sold as a separate item; or
(b) Net Sales price of the Combined Product multiplied by a factor of I/x where
x is the number of active components or ingredients contained in the Combined
Product up to a maximum of x = 3.
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7. PATENT FILING, PROSECUTION, AND MAINTENANCE
7.01 Except as otherwise provided in this Article 7, PHS agrees to
take responsibility for, but to consult with, the Licensee in the preparation,
filing, prosecution, and maintenance of any and all patent applications or
patents included in the Licensed Patent Rights and shall furnish copies of all
patent-related documents to Licensee or PHS shall instruct its patent
representative to provide said copies directly to Licensee. At Licensee's
request and expense, PHS shall cooperate with Licensee in preparing, filing,
prosecuting, and maintaining such patent applications and patents included in
the Licensed Patent Rights as reasonably requested by Licensee from time to
time. Notwithstanding the foregoing, PHS will retain Principal Power of Attorney
and primary control over the preparation, filing, prosecution, and maintenance
of said patent applications and patents. PHS shall provide Licensee with
reasonable opportunity to comment on any document PHS intends to file or causes
to be filed with the relevant patent office.
7.02 Upon PHS's written request, Licensee shall assume the
responsibility for the preparation, filing, prosecution, and maintenance of any
and all patent applications or patents included in the Licensed Patent Rights
and shall on an ongoing basis promptly furnish copies of all patent-related
documents to PHS. In such event, Licensee shall, subject to the prior approval
of PHS, select registered patent attorneys or patent agents to provide such
services on behalf of Licensee and PHS. PHS shall provide appropriate powers of
attorney and other documents necessary to undertake such actions to the patent
attorneys or patent agents providing such services. Licensee and its attorneys
or agents shall consult with PHS in all aspects of the preparation, filing,
prosecution and maintenance of patent applications and patents included within
the Licensed Patent Rights and shall provide PHS sufficient opportunity to
comment on any document that Licensee intends to file or to cause to be filed
with the relevant intellectual property or patent office.
7.03 At any time, PHS may provide Licensee with written notice that
PHS wishes to assume control of the preparation, filing, prosecution, and
maintenance of any and all patent applications or patents included in the
Licensed Patent Rights. If PHS elects to assume such responsibilities, Licensee
agrees to cooperate fully with PHS, its attorneys and agents in the preparation,
filing, prosecution, and maintenance of any and all patent applications or
patents included in the Licensed Patent Rights and to provide PHS with complete
copies of any and all documents or other materials that PHS deems necessary to
undertake such responsibilities. Licensee shall be responsible for all costs
associated with transferring patent prosecution responsibilities to an attorney
or agent of PHS's choice.
7.04 Each party shall promptly inform the other as to all matters that
come to its attention that may affect the preparation, filing, prosecution, or
maintenance of the Licensed Patent Rights and permit each other to provide
comments and suggestions with respect to the preparation, filing, and
prosecution of Licensed Patent Rights, which comments and suggestions shall be
considered by the other party.
8. RECORD KEEPING
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8.01 Licensee agrees to keep accurate and correct records of Licensed
Products made, used, or sold and Licensed Processes practiced under this
Agreement appropriate to determine the amount of royalties due PHS. Such records
shall be retained for at least five (5) years following a given reporting
period. They shall be available during normal business hours for inspection at
the expense of PHS by an accountant or other designated auditor selected by PHS
for the sole purpose of verifying reports and payments hereunder. The accountant
or auditor shall only disclose to PHS information relating to the accuracy of
reports and payments made under this Agreement. If an inspection shows an
underreporting or underpayment in excess of five percent (5%) for any twelve
(12) month period, then Licensee shall reimburse PHS for the cost of the
inspection at the time Licensee pays the unreported royalties, including any
late charges as required by Paragraph 9.08 of this Agreement. All payments
required under this Paragraph shall be due within thirty (30) days of the date
PHS provides Licensee notice of the payment due.
8.02 Licensee agrees to conduct an independent audit of sales and
royalties at least every two years if annual sales of the Licensed Product or
Licensed Processes are equal to or greater than two (2) million dollars. The
audit shall address, at a minimum, the amount of gross sales by or on behalf of
Licensee during the audit period, the amount of funds owed to the Government
under this Agreement, and whether the amount owed has been paid to the
Government and is reflected in the records of the Licensee. A report by the
auditor shall be submitted promptly to PHS on completion. Licensee shall pay for
the entire cost of the audit.
9. REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS
9.01 Prior to Signing this Agreement, Licensee has provided to PHS the
Commercial Development Plan at Appendix F, under which Licensee intends to bring
the subject matter of the Licensed Patent Rights to the point of Practical
Application. This Commercial Development Plan is hereby incorporated by
reference into this Agreement. Based on this plan, performance Benchmarks are
determined as specified in Appendix E.
9.02 Licensee shall provide written annual reports on its product
development progress or efforts to commercialize under the Commercial
Development Plan for each of the Licensed Fields of Use within sixty (60) days
after December 31 of each calendar year. These progress reports shall include,
but not be limited to: progress on research and development, status of
applications for regulatory approvals, manufacturing, sublicensing, marketing,
and sales during the preceding calendar year, as well as plans for the present
calendar year. PHS also encourages these reports to include information on any
of Licensee's public service activities that relate to the Licensed Patent
Rights. If reported progress differs from that projected in the Commercial
Development Plan and Benchmarks, Licensee shall explain the reasons for such
differences. To the extent such differences are not the result of Licensee's
failure to perform in accordance with the requirements of Paragraph 10.01
hereunder, Licensee may request to amend the Commercial Development Plan
accordingly, approval of which by PHS may not unreasonably be denied. The
parties recognize and acknowledge that the Commercial Development Plan is an
estimate of the time frames and steps necessary for development of the Licensed
Product(s). As the profiles of the Licensed Product(s)and the Licensed
Process(es) become more fully understood by the parties hereto, including
without limitation, the emerging pharmacologic/toxicologic profile in human
subjects and technical issues relating to the
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manufacture of Licensed Product(s), adjustments and modifications to the
Commercial Development Plan may be necessary. In addition, preclinical and
clinical work in addition to that noted in the Commercial Development Plan may
be reasonable or necessary in order to satisfy the FDA or other regulatory
requirements, requests, or concerns regarding the Licensed Product(s) or
Licensed Process(es). In any such annual report, Licensee may propose amendments
to the Commercial Development Plan, acceptance of which by PHS may not be denied
unreasonably. Licensee agrees to provide any additional information reasonably
required by PHS to evaluate Licensee's performance under this Agreement.
Licensee may amend the Benchmarks at any time upon written consent by PHS. PHS
shall not unreasonably withhold approval of any request of Licensee to extend
the time periods of this schedule if such request is supported by a reasonable
showing by Licensee of diligence in its performance under the Commercial
Development Plan and toward bringing the Licensed Products to the point of
practical application as defined in 37 CFR 404.3(d). Licensee shall amend the
Commercial Development Plan and Benchmarks at the request of PHS to address any
Licensed Fields of Use not specifically addressed in the plan originally
submitted.
9.03 Licensee shall report to PHS the date of the First Commercial
Sale in each country in the Licensed Territory within thirty (30) days of such
occurrence.
9.04 Licensee shall submit to PHS within sixty (60) days after each
calendar half-year ending June 30 and December 31 a royalty report setting forth
for the preceding half-year period the amount of the Licensed Products sold or
Licensed Processes practiced by or on behalf of Licensee in each country within
the Licensed Territory, the Net Sales, and the amount of royalty accordingly
due. With each such royalty report, Licensee shall submit payment of the earned
royalties due. If no earned royalties are due to PHS for any reporting period,
the written report shall so state. The royalty report shall be certified as
correct by an authorized officer of Licensee and shall include a detailed
listing of all deductions made under Paragraph 2.10 to determine Net Sales made
under Article 6 to determine royalties due.
9.05 Licensee agrees to forward semi-annually to PHS a copy of such
reports received by Licensee from its sublicensees during the preceding
half-year period as shall be pertinent to a royalty accounting to PHS by
Licensee for activities under the sublicense.
9.06 Royalties due under Article 6 shall be paid in U.S. dollars. For
conversion of foreign currency to U.S. dollars, the conversion rate shall be the
New York foreign exchange rate quoted in The Wall Street Journal on the day that
the payment is due. All checks and bank drafts shall be drawn on United States
banks and shall be payable, as appropriate, for FDA or NIH licenses to the
National Institutes of Health, P.O. Box 360120, Pittsburgh, Pennsylvania
15251-6120 or for CDC licenses to the Centers for Disease Control and
Prevention, CDC Financial Management Office, 255 East Paces Ferry Road, NE
(MS-E12), Atlanta, Georgia 30305. Any loss of exchange, value, taxes, or other
expenses incurred in the transfer or conversion to U.S. dollars shall be paid
entirely by Licensee. The royalty report required by Paragraph 9.04 of this
Agreement shall accompany each such payment and a copy of such report shall also
be mailed to PHS at its address for notices indicated on the Signature Page of
this Agreement.
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9.07 Licensee shall be solely responsible for determining if any tax
on royalty income is owed outside the United States and shall pay any such tax
and be responsible for all filings with appropriate agencies of foreign
governments.
9.08 Late charges will be assessed by PHS as additional royalties on
any overdue payments at a rate of [REDACTED]* per month compounded monthly. The
payment of such late charges shall not prevent PHS from exercising any other
rights it may have as a consequence of the lateness of any payment.
9.09 All plans and reports required by this Article 9 and marked
"confidential" by Licensee shall, to the extent permitted by law, be treated by
PHS as commercial and financial information obtained from a person and as
privileged and confidential and any proposed disclosure of such records by the
PHS under the Freedom of Information Act, 5 U.S.C. ss.552 shall be subject to
the predisclosure notification requirements of 45 CFR ss.5.65(d).
9.10 To the extent permitted by law, government regulation, and PHS
policy, upon Licensee's request, PHS agrees to provide Licensee with reasonable
documentation requested by Licensee in PHS's possession regarding Licensed
Patent Rights in Licensed Fields of Use. To the extent permitted by law,
government regulation, and PHS policy, PHS agrees to provide Licensee with
copies of and full access to any Investigational New Drug Application ("IND")
PHS files with the FDA for clinical studies utilizing Licensed Product(s) and
Licensed Process(es) within the Licensee's Licensed Fields of Use as well as the
fight to cross-reference any IND that PHS files with the FDA for Licensed
Product(s) and Licensed Process(es) as appropriate. To the extent permitted by
law, government regulation, and PHS policy, PHS agrees to provide Licensee with
reasonable documentation, if any, requested by Licensee to allow Licensee such
access or cross-filing as appropriate. If PHS reasonably incurs substantial
expenses in producing such documents, Licensee agrees to reimburse such
expenses.
9.11 To the extent permitted by law, government regulation, and PHS
policy, PHS agrees to provide Licensee with copies, if any, of relevant (1)
Safety Reports for Serious and Unexpected Adverse Events (as defined in 21 CFR
312.32(a)) submitted by PHS to FDA in compliance with 21 CFR 312.32 for any IND
that PHS files with respect to Licensed Product(s) and Licensed Process(es)
(collectively referred to as "PHS Licensed Products IND"); and (2) PHS Licensed
Product IND Annual Reports submitted by PHS to the FDA pursuant to 21 CFR
312.33.
9.12 Upon request of PHS, Licensee agrees to provide the appropriate
PHS clinical unit copies, if any, of: (1) Safety Reports for Serious and
Unexpected Adverse Events (as defined in 21 CFR 312.32(a)) submitted by Licensee
to FDA in compliance with 21 CFR 312.32 for any IND that Licensee files with
respect Licensed Product(s) and Licensed Process(es) (collectively referred to
as "Licensee Licensed Product IND"); and (2) Licensee Licensed Product IND
Annual Reports submitted by Licensee to the FDA pursuant to 21 CFR 312.33.
10. PERFORMANCE
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COMMISSION.
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10.01 Licensee shall use its reasonable best efforts to bring the
Licensed Products and Licensed Processes to Practical Application. "Reasonable
best efforts" for the purposes of this provision shall include adherence to the
Commercial Development Plan at Appendix F and performance of the Benchmarks at
Appendix E as may be amended from time to time by mutual written consent. The
efforts of Sublicensees and Affiliates shall be considered the efforts of
Licensee. To the extent that the Benchmarks or development obligations set forth
in Appendix E differ from or conflict with those set forth in the Commercial
Development Plan in Appendix F, Appendix E shall be considered to supersede
Appendix F and the Plan to be so amended.
10.02 Upon the First Commercial Sale, until the expiration of this
Agreement, Licensee shall use its reasonable best efforts to make Licensed
Products and Licensed Processes reasonably accessible to the United States
public.
11. INFRINGEMENT AND PATENT ENFORCEMENT
11.01 PHS and Licensee agree to notify each other promptly of each
infringement or possible infringement of the Licensed Patent Rights, as well as
any facts which may affect the validity, scope, or enforceability of the
Licensed Patent Rights of which either Party becomes aware.
11.02 Pursuant to this Agreement and the provisions of Chapter 29 of
title 35, United States Code, Licensee may a) bring suit in its own name, at its
own expense, and on its own behalf for infringement of presumably valid claims
in the Licensed Patent Rights; b) in any such suit, enjoin infringement and
collect for its use, damages, profits, and awards of whatever nature recoverable
for such infringement; and c) settle any claim or suit for infringement of the
Licensed Patent Rights provided, however, that PHS and appropriate Government
authorities shall have the first right to take such actions. If Licensee desires
to initiate a suit for patent infringement, Licensee shall notify PHS in
writing. If PHS does not notify Licensee of its intent to pursue legal action
within ninety (90) days, Licensee will be free to initiate suit. PHS shall have
a continuing right to intervene in such suit. Licensee shall take no action to
compel the Government either to initiate or to join in any such suit for patent
infringement. Licensee may request the Government to initiate or join in any
such suit if necessary to avoid dismissal of the suit. Should the Government be
made a party to any such suit, Licensee shall reimburse the Government for any
costs, expenses, or fees which the Government incurs as a result of such motion
or other action, including any and all costs incurred by the Government in
opposing any such motion or other action. Upon Licensee's payment of all costs
incurred by the Government as a result of Licensee's joinder motion or other
action, these actions by Licensee will not be considered a default in the
performance of any material obligation under this Agreement. In all cases,
Licensee agrees to keep PHS reasonably apprised of the status and progress of
any litigation. Before Licensee commences an infringement action, Licensee shall
notify PHS and give careful consideration to the views of PHS and to any
potential effects of the litigation on the public health in deciding whether to
bring suit. Should the Government be made a party to any such suit by motion or
any other action of Licensee, Licensee shall reimburse the Government for any
costs, expenses, or fees which the Government incurs as a result of such motion
or other action.
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11.03 In the event that a declaratory judgment action alleging
invalidity/or non-infringement of any of the Licensed Patent Rights shall be
brought against Licensee or raised by way of counterclaim or affirmative defense
in an infringement suit brought by Licensee under Paragraph 11.02, pursuant to
this Agreement and the provisions of Chapter 29 of Title 35, United States Code
or other statutes, Licensee may a) defend the suit in its own name, at its own
expense, and on its own behalf for presumably valid claims in the Licensed
Patent Rights; b) in any such suit, ultimately to enjoin infringement and to
collect for its use, damages, profits, and awards of whatever nature recoverable
for such infringement; and c) settle any claim or suit for declaratory judgment
involving the Licensed Patent Rights-provided, however, that PHS and appropriate
Government authorities shall have the first right to take such actions and shall
have a continuing right to intervene in such suit. If PHS does not notify
Licensee of its intent to respond to the legal action within a reasonable time,
Licensee will be free to do so. Licensee shall take no action to compel the
Government either to initiate or to join in any such declaratory judgment
action. Licensee may request the Government to initiate or to join any such suit
if necessary to avoid dismissal of the suit. Should the Government be made a
party to any such suit by motion or any other action of Licensee, Licensee shall
reimburse the Government for any costs, expenses, or fees which the Government
incurs as a result of such motion or other action. Upon Licensee's payment of
all costs incurred by the Government as a result of Licensee's joinder motion or
other action, these actions by Licensee will not be considered a default in the
performance of any material obligation under this Agreement. If Licensee elects
not to defend against such declaratory judgment action, PHS, at its option, may
do so at its own expense. In all cases, Licensee agrees to keep PHS reasonably
apprised of the status and progress of any litigation. Before Licensee commences
an infringement action, Licensee shall notify PHS and give careful consideration
to the views of PHS and to any potential effects of the litigation on the public
health in deciding whether to bring suit.
11.04 In any action under Paragraphs 11.02 or 11.03, the expenses
including costs, fees, attorney fees, and disbursements, shall be paid by
Licensee. Up to [REDACTED]* of such expenses may be credited against the
royalties payable to PHS under Paragraph 6.03 under the Licensed Patent Rights
in the country in which such a suit is filed. In the event that [REDACTED]* of
such expenses exceed the amount of royalties payable by Licensee in any calendar
year, the expenses in excess may be carried over as a credit on the same basis
into succeeding calendar years. A credit against litigation expenses, however,
may not reduce the royalties due in any calendar year to less than the minimum
annual royalty. Any recovery made by Licensee, through court judgment or
settlement, first shall be applied to reimburse PHS for royalties withheld as a
credit against litigation expenses and then to reimburse Licensee for its
litigation expense. [REDACTED]*.
11.05 PHS shall cooperate fully with Licensee in connection with any
action under Paragraphs 11.02 or 11.03. PHS agrees promptly to provide access to
all necessary documents and to render reasonable assistance in response to a
request by Licensee.
12. NEGATION OF WARRANTIES AND INDEMNIFICATION
12.01 PHS offers no warranties other than those specified in Article
1.
-15-
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
12.02 PHS does not warrant the validity of the Licensed Patent Rights
and makes no representations whatsoever with regard to the scope of the Licensed
Patent Rights, or that the Licensed Patent Rights may be exploited without
infringing other patents or other intellectual property rights of third parties.
12.03 PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER
DEFINED BY THE CLAIMS OF THE LICENSED PATENT RIGHTS.
12.04 PHS does not represent that it will commence legal actions
against third parties infringing the Licensed Patent Rights.
12.05 Licensee shall indemnify and hold PHS, its employees, students,
fellows, agents, and consultants (the "Indemnified Parties") harmless from and
against all liability, demands, damages, expenses, and losses, including but not
limited to death, personal injury, illness, or property damage (the "indemnified
Losses") suffered by an Indemnified Party in connection with or arising out of
a) the use by or on behalf of Licensee, its Affiliates, its sublicensees,
directors, employees, or third parties of any Licensed Patent Rights, or b) the
design, manufacture, distribution, or use of any Licensed Products, Licensed
Processes or materials by Licensee, or other products or processes developed in
connection with or arising out of the Licensed Patent Rights. Licensee agrees to
maintain a liability insurance program consistent with sound business practice.
Notwithstanding any other provision to the contrary, Licensee shall have no
obligation to indemnify and hold the Indemnified Parties harmless from
Indemnified Losses in connection with or arising out of: a) the use by or on
behalf of the indemnified Parties of any Licensed Product(s) or Licensed
Process(es), or b) the design, manufacture, distribution or use of any Licensed
Products or Licensed Processes by or on behalf of the Indemnified Parties.
13. TERM, TERMINATION, AND MODIFICATION OF RIGHTS
13.01 This Agreement is effective when signed by all parties and shall
extend on a country by country basis to the expiration of the last to expire of
the Licensed Patent Rights in each respective country unless sooner terminated
as provided in this Article 13.
13.02 In the event that Licensee is in default in the performance of
any material obligations under this Agreement, including but not limited to the
obligations listed in Article 13.05, and if the default has not been remedied
within ninety (90) days after the date of notice in writing of such default, PHS
may terminate this Agreement by written notice.
13.03 in the event that Licensee becomes insolvent, files a petition
in bankruptcy, has such a petition filed against it, determines to file a
petition in bankruptcy, or receives notice of a third party's intention to file
an involuntary petition in bankruptcy, Licensee shall immediately notify PHS in
writing.
13.04 Licensee shall have a unilateral right to terminate this
Agreement and/or any licenses in any country by giving PHS sixty (60) days
written notice to that effect.
-16-
<PAGE>
13.05 PHS shall specifically have the right to terminate or modify, at
its option, this Agreement, if PHS determines that the Licensee acting on its
own or through its agents: 1) is not executing the Commercial Development Plan
submitted with its request for a license and the Licensee cannot otherwise
demonstrate to PHS's reasonable satisfaction that the Licensee has taken, or can
be expected to take within a reasonable time, effective steps to achieve
Practical Application of the Licensed Products or Licensed Processes; 2) has not
achieved the Benchmarks as may be modified under Paragraph 9.02; 3) has
willfully made a false statement of, or willfully omitted, a material fact in
the license application or in any report required by the license agreement; 4)
has committed a material breach of a covenant or agreement contained in the
license; 5) is not keeping Licensed Products or Licensed Processes reasonably
available to the public after commercial use commences; 6) cannot reasonably
satisfy unmet health and safety needs; or 7) cannot reasonably justify a failure
to comply with the domestic production requirement of Paragraph 5.02 unless
waived. In making this determination, PIE will take into account the normal
course of such commercial development programs conducted with sound and
reasonable business practices and judgment and the annual reports submitted by
Licensee under Paragraph 9.02. Prior to invoking this right, PHS shall give
written notice to Licensee providing Licensee specific notice of, and a ninety
(90) day opportunity to respond to, PHS's concerns as to the previous items 1)
to 7). If Licensee fails to alleviate PHS's concerns as to the previous items 1)
to 7) or fails to initiate corrective action to PHS's reasonable satisfaction,
PIE may terminate this Agreement.
13.06 When the public health and safety so require, and after written
notice to Licensee providing Licensee a sixty (60) day opportunity to respond,
PHS shall have the right to require Licensee to grant sublicenses to responsible
applicants, on reasonable terms, in any Licensed Fields of Use under the
Licensed Patent Rights, unless Licensee can reasonably demonstrate that the
granting of the sublicense would not materially increase the availability to the
public of the subject matter of the Licensed Patent Rights. PHS will not require
the granting of a sublicense unless the responsible applicant has first
negotiated in good faith with Licensee.
13.07 PHS reserves the right according to 35 U.S.C. ss.209(f)(4) to
terminate or modify this Agreement if it is determined that such action is
necessary to meet requirements for public use specified by federal regulations
issued after the date of the license and such requirements are not reasonably
satisfied by Licensee.
13.08 Within thirty (30) days of receipt of written notice of PHS'
unilateral decision to modify or terminate this Agreement, Licensee may,
consistent with the provisions of 37 CFR 404.11, appeal the decision by written
submission to the designated PHS official. The decision of the designated PHS
official shall be the final agency decision. Licensee may thereafter exercise
any and all administrative or judicial remedies that may be available.
13.09 Within ninety (90) days of termination of this Agreement under
this Article 13 or expiration under Paragraph 3.02, a final report shall be
submitted by Licensee. Any royalty payments, including those related to patent
expense, due to PHS shall become immediately due and payable upon termination or
expiration. If terminated under this Article 13, sublicensees may elect to
convert their sublicenses to direct licenses with PHS pursuant to Paragraph
4.03.
-17-
<PAGE>
14. GENERAL PROVISIONS
14.01 Neither Party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of either Licensee or
the Government to assert a right hereunder or to insist upon compliance with any
term or condition of this Agreement shall not constitute a waiver of that right
by either party or excuse a similar subsequent failure to perform any such term
or condition by either party.
14.02 This Agreement constitutes the entire agreement between the
Parties relating to the subject matter of the Licensed Patent Rights, and all
prior negotiations, representations, agreements, and understandings are merged
into, extinguished by, and completely expressed by this Agreement.
14.03 The provisions of this Agreement are severable, and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law such determination shall not in
any way affect the validity or enforceability of the remaining provisions of
this Agreement.
14.04 If either Party desires a modification to this Agreement, the
Parties shall, upon reasonable notice of the proposed modification by the Party
desiring the change, confer in good faith to determine the desirability of such
modification. No modification will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.
14.05 The construction, validity, performance, and effect of this
Agreement shall be governed by Federal law as applied by the Federal courts in
the District of Columbia.
14.06 All notices required or permitted by this Agreement shall be
given by prepaid, first class, registered or certified mail, or by a recognized
express/overnight delivery service provider, properly addressed to the other
Party at the address designated on the following Signature Page, or to such
other address as may be designated in writing by such other Party, and shall be
effective as of the date of the postmark or verifiable dispatch of such notice.
14.07 This Agreement shall not be assigned by Licensee except a) with
the prior written consent of PHS, such consent not to be withheld unreasonably;
or b) as part of a sale or transfer of substantially the entire business of
Licensee relating to operations which concern this Agreement which assignment
shall not require the prior consent of PHS. Licensee shall notify PHS within ten
(10) days of any assignment of this Agreement by Licensee.
14.08 Licensee agrees in its use of any PHS-supplied materials to
comply with all applicable statutes, regulations, and guidelines, including
Public Health Service and National Institutes of Health regulations and
guidelines. Licensee agrees not to use the materials for research involving
human subjects or clinical trials in the United States without complying with 21
CFR Part 50 and 45 CFR Part 46. Licensee agrees not to use the materials for
research involving human subjects or clinical trials outside of the United
States without notifying PHS, in writing, of such research or trials and
complying with the applicable regulations of the appropriate national control
authorities. Written notification to PHS of research involving human subjects or
clinical
-18-
<PAGE>
trials outside of the United States shall be given no later than sixty (60) days
prior to commencement of such research or trials.
14.09 Licensee acknowledges that it is subject to and agrees to abide
by the United States laws and regulations (including the Export Administration
Act of 1979 and Arms Export Control Act) controlling the export of technical
data, computer software, laboratory prototypes, biological material, and other
commodities. The transfer of such items may require a license from the cognizant
Agency of the U.S. Government or written assurances by Licensee that it shall
not export such items to certain foreign countries without prior approval of
such agency. PHS neither represents that a license is or is not required or
that, if required, it shall be issued.
14.10 Licensee agrees to mark the Licensed Products or their packaging
sold in the United States with all applicable U.S. patent numbers and similarly
to indicate "Patent Pending" status. All Licensed Products manufactured in,
shipped to, or sold in other countries shall be marked in such a manner as to
preserve PHS patent rights in such countries, if any.
14.11 By entering into this Agreement, PHS does not directly or
indirectly endorse any product or service provided, or to be provided, by
Licensee whether directly or indirectly related to this Agreement. Licensee
shall not state or imply that this Agreement is an endorsement by the
Government, PHS, any other Government organizational unit, or any Government
employee. Additionally, Licensee shall not use the names of NHI, CDC, PHS, or
DHS or the Government or their employees in any advertising, promotional, or
sales literature without the prior written consent of PHS, except that Licensee
may publicly identify the existence of this Agreement and is not prohibited from
using publicly available factual information regarding the Licensed Patent
Rights, Licensed Products, and Licensed Processes specifically including, but
not limited to, the names of the inventors as appears on the Licensed Patent
Rights and their associated NIH institutes, without such consent.
14.12 The Parties agree to attempt to settle amicably any controversy
or claim arising under this Agreement or a breach of this Agreement, except for
appeals of modifications or termination decisions provided for in Article 13.
Licensee agrees first to appeal any such unsettled claims or controversies to
the designated PHS official, or designee, whose decision shall be considered the
final agency decision. Thereafter, Licensee may exercise any administrative or
judicial remedies that may be available.
14.13 Nothing relating to the grant of a license, nor the grant
itself, shall be construed to confer upon any person any immunity from or
defenses under the antitrust laws or from a charge of patent misuse, and the
acquisition and use of rights pursuant to 37 CFR Part 404 shall not be immunized
from the operation of state or Federal law by reason of the source of the grant.
14.14 Paragraphs 4.03, 8.01, 9.06-9.08, 12.01-12.05, 13.08, 13.09, and
14.12 of this Agreement shall survive termination of this Agreement.
14.15 Upon termination or expiration of this Agreement by Licensee,
Licensee and any Sublicensee or Affiliate shall be entitled to sell any Licensed
Products manufactured prior
-19-
<PAGE>
to the date of such termination or expiration for up to an additional six (6)
month period subject to the obligations of Article 6, 8, and 9.
14.16 To the extent permitted by law, government regulation, and PHS
policy, PHS agrees to maintain in confidence and not disclose any confidential
information provided by Licensee to PHS under this Agreement or the terms and
conditions of this Agreement. Licensee will mark such information as
confidential.
SIGNATURES BEGIN ON NEXT PAGE
-20-
<PAGE>
PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
SIGNATURE PAGE
For PHS:
/s/ BARBARA MCGAREY 4/19/96
- ----------------------------------------------- ---------------
Barbara McGarey, J.D. Date
Deputy Director, Office of Technology Transfer
National Institutes of Health
Mailing Address for Notices:
Office of Technology Transfer
National Institutes of Health
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852
Fax: (301) 402-0220
For Licensee (Upon, information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of Licensee made or referred to
in this document are truthful and accurate.):
by:
/s/ MARK A. CULHANE 4/9/96
- ----------------------------------------------- ---------------
Signature of Authorized Official Date
Mark A. Culhane
- -----------------------------------------------
Printed Name
Chief Financial Officer
- ----------------------------------------------- ---------------
Title
Mailing Address for Notices:
SciClone Pharmaceuticals
901 Mariners Island Blvd.
San Mateo, CA 94404
-21-
<PAGE>
APPENDIX A-Patent(s) or Patent Application(s)
Patent(s) or Patent Application(s):
For U.S. Patent No. 5,366,977, issued on November 22, 1994, entitled `Methods of
Treating Cystic Fibrosis Using 8-Cyclopentyl-l,3-Dipropylxanthine or Xanthine
Amino Congeners".
For U.S. Patent Application Serial No. 08/343,714, filed November 22, 1994,
entitled "A Method of Identifying CFTR-Binding Compounds Useful for Activating
Chloride Conductance in Animal Cells", including its PCT counterpart PCT
International Application No. PCT/US95/14345.
<PAGE>
APPENDIX B-Licensed Fields of Use and Territory
Licensed Fields of Use:
For U.S. Patent No. 5,366,977, exclusively for the treatment of cystic fibrosis
in humans comprising the administration of 8-cyclopentyl-1, 3-clipropylxanthine
or xanthine amino congeners.
For U.S. Patent Application Serial No. 08/343,714, exclusively for therapeutic
and diagnostic uses for the Class of Compounds claimed for cystic fibrosis in
humans.
For U.S. Patent Application Serial No. 08/343,714, exclusively for therapeutic
and diagnostic uses for the Class of Compounds claimed for human diseases other
than cystic fibrosis, conditionally for twenty-four (24) months from the
Effective Date, as set forth in Appendix E. Excluded fields include
noncommercial internal research uses, such as screening, and research reagents.
For U.S. Patent Application Serial No. 08/343,714, nonexclusively for methods
for identifying CFFR-binding compounds.
Licensed Territory:
For U.S. Patent No. 5,366,977, the United States of America and its territories,
possessions, and commonwealths.
For U.S. Patent Application Serial No. 08/343,714, the United States of America
and its territories, possessions, and commonwealths, and the examining
authorities and countries identified in the filing papers of the corresponding
Patent Cooperation Treaty International Application No. PCT/US95/14345 filed by
PHS in November 1995, as well as any additional territories where patent
protection is made available to PHS and sought by PHS for this application.
<PAGE>
APPENDIX C-Royalties
Royalties:
Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue
royalty in the amount of [REDACTED]* according to the following payment
schedule;
A. [REDACTED]* within [REDACTED]* from the Effective Date;
B. [REDACTED]* within [REDACTED]* from the Effective Date; and
C. [REDACTED]* within [REDACTED]* from the Effective Date.
Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the
amount of [REDACTED]*.
The first minimum annual royalty shall be due and payable on [REDACTED]* for the
[REDACTED]*. Subsequent minimal annual royalty payments shall be due and payable
as set forth in Paragraph 6.02. Once a Licensed Product becomes commercially
available, Licensee agrees to pay to PHS a nonrefundable minimum annual royalty
in the amount of [REDACTED]*.
Licensee agrees to pay PHS earned royalties on Net sales as follows:
A) [REDACTED]* of Net Sales by Licensee or an Affiliate on all
Licensed Products manufactured and sold in the Licensed Territory; and
B) Licensee shall be entitled to a [REDACTED]* credit against the
earned royalty rate for each [REDACTED]* of royalty in excess of [REDACTED]*
Licensee must pay to other unaffiliated licensors for the manufacture and sale
of Licensed Products. Said reduction, however, shall not reduce the royalty rate
for Licensed Products below [REDACTED]* the rate provided for under Paragraph A
above.
C) With respect to U.S. Patent No. 5,356,977, no royalty shall be
due for products sold for use outside the United States, its territories,
possessions, and commonwealths and not reintroduced into the United States, its
territories, possessions, and commonwealths.
Licensee agrees to pay PHS Sublicensing Royalties as follows:
Licensee agrees to pay PHS [REDACTED]* of any cash consideration received
by Licensee from each sublicensee, including, without limitation, Licensee's
sublicensee royalty revenue and consideration received in granting a sublicense,
but excluding net proceeds of sublicensee equity purchases.
With respect to U.S. Patent No. 5,355,977, no royalty shall be due for
products sold for use outside the United States, its territories, possessions,
and commonwealths and not reintroduced into the United States, its territories,
possessions, and commonwealths.
Licensee agrees to pay PHS benchmark royalties:
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
- [REDACTED]* within [REDACTED]* upon Licensee's submission to the U.S.
Food and Drug Administration (FDA) of each New Drug Application (NDA) to the
Licensed Products in the Licensed Fields of Use.
- [REDACTED]* within [REDACTED]* after each FDA approval of each NDA
submitted to the FDA for the Licensed Products in the Licensed Fields of Use.
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
APPENDIX D-Modifications
Modifications to the Articles and Paragraphs of this Agreement, as agreed to by
PHS and Licensee, have been incorporated into the text of this Agreement.
<PAGE>
APPENDIX E-Benchmarks and Performance
Licensee agrees to the following Benchmarks for its performance under this
Agreement and, within [REDACTED]* of achieving a Benchmark, shall notify PHS
that the Benchmark has been achieved.
For U.S. Patent No. 5,366,977, entitled "Methods of Treating Cystic Fibrosis
Using 8-Cyclopentyl-1,3-Dipropylxanthine or Xanthine Amino Congeners'
exclusively for the treatment of cystic fibrosis:
1. Initiate [REDACTED]* for [REDACTED]* within [REDACTED]* of the
Effective Date.
2. Initiate [REDACTED]* for [REDACTED]* within [REDACTED]* of the
Effective Date.
3. Initiate [REDACTED]* for [REDACTED]* within [REDACTED]* of the
Effective Date.
4. [REDACTED]* approved by the FDA within [REDACTED]* of the Effective
Date.
For U.S. Patent Application Serial No. 08/343,714, filed November 22, 1994,
entitled "A Method of Identifying CFTR-Binding Compounds Useful for Activating
Chloride Conductance in Animal Cells" exclusively for the treatment and
diagnosis of cystic fibrosis in humans:
A [REDACTED]* for [REDACTED]* under this patent application [REDACTED]*
(which may be amended by the mutual consent of PHS and Licensee), otherwise the
[REDACTED]* under U.S. Patent Application Serial No. 08/343,714 is [REDACTED]*;
and [REDACTED]* for a [REDACTED]* under this patent application [REDACTED]*
(which may be amended by the mutual consent of PHS and Licensee), otherwise
[REDACTED]* under U.S. Patent Application Serial No. 08/343,714 is [REDACTED]*.
For U.S. Patent Application Serial No. 08/343,714, filed November 22, 1994,
entitled "A Method of Identifying CFTR-Binding Compounds Useful for Activating
Chloride Conductance in Cells" exclusively for the Class of Compounds disclosed
for therapeutic and diagnostic uses for human diseases other than cystic
fibrosis conditionally for a period of twenty-four (24) months from the
Effective Date, subject to the benchmarks recited below:
1. A [REDACTED]* must be submitted to PHS within [REDACTED]* from the
Effective Date, PHS will notify Licensee in writing within [REDACTED]* of
receipt as to whether the [REDACTED]* submitted is satisfactory. In the event
that PHS does not notify Licensee within said [REDACTED]* period, Licensee's
[REDACTED]* will be deemed satisfactory. If PHS determines this [REDACTED]* to
be unsatisfactory, Licensee will be notified in writing of any deficiencies
(hereinafter "first notice') and Licensee will have one continuous [REDACTED]*
period from said first notice to remedy any deficiencies. This [REDACTED]*
period is nonextendable.
2. A [REDACTED]* which Licensee elects to pursue, which applications have
not yet been addressed by then-current [REDACTED]*, must be received by PHS
within [REDACTED]* from the Effective Date, subject to the provisions of
paragraphs 4 and 5 below. PHS will notify Licensee in writing as to whether the
[REDACTED]* submitted are acceptable satisfactory or unsatisfactory. If the
[REDACTED]* submitted are
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
unsatisfactory, Licensee will have a [REDACTED]* period from the date of such
notification to remedy any deficiencies. In the event that no agreement can be
reached between PHS and Licensee within this [REDACTED]* period (or as otherwise
agreed between PHS and Licensee), [REDACTED]*.
3. Within [REDACTED]* of the Effective Date of this agreement, if PHS
[REDACTED]*, and [REDACTED]* within [REDACTED]* of being notified of
[REDACTED]*, Licensee agrees to negotiate in good faith with [REDACTED]*. In the
event that no agreement can be reached between Licensee and [REDACTED]* within
this [REDACTED]* period (or as otherwise agreed between PHS and Licensee),
[REDACTED]*.
4. Within [REDACTED]* of the Effective Date of this agreement, if PHS
[REDACTED]*, PHS may notify Licensee in writing of its belief, documenting the
scientific basis for its belief and that [REDACTED]*. If Licensee [REDACTED]*
within [REDACTED]* of PHS's notice in a manner acceptable to PHS to [REDACTED]*.
For U.S. Patent Application Serial No. 08/343,714, filed November 22, 1994,
entitled "A Method of Identifying CFTR-Binding Compounds Useful for Activating
Chloride Conductance in Cells", under the nonexclusive terms of this agreement
for U.S. Patent Application Serial No. 08/343,714, Licensee will screen
[REDACTED]*, as agreed to by PHS and Licensee, per [REDACTED]*.
*CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTION FILED SEPARATELY WITH THE
COMMISSION.
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